Finance Committee on May 28th, 2018

[Voices]

Oh, oh!

[Lucie Tedesco]

I would say that the relationships that the millennials are developing with their banks are very different from what we perhaps have been used to.

[Raj Grewal, Liberal, Brampton East, ON]

Yes, I agree. My friends don't go into a branch. Everything's done online.

[Lucie Tedesco]

They don't go into a branch. My son doesn't go into a bank either.

[The Chair, Liberal, Wayne Easter]

Thank you.

Mr. Albas.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Thank you, Mr. Chair.

Ms. Tedesco, earlier you mentioned to my colleague MP Kelly that there was a clear case where the banks had crossed the line. I go back to my earlier comments that it's very interesting that we have to ask you the questions for you to point out when a line is crossed, when in your report it doesn't seem to illustrate that as strongly.

We're obviously in the 21st century, not the 20th century, so I would imagine that consumer protection is not a new concept whatsoever. You recommend as one of your enhancements to the banks' management of sales practices risk to “prioritize financial consumer protection, fairness and product suitability”. To me, that's a simple given.

There is the issue of agency. Who does someone work for? The chair raised this earlier. What's happened in other fields, for example, whether it be a lawyer or doctor, mortgage professional in some provinces, or a CPA?

You mentioned in this report that one of the challenges of tracking problem persons who may have caused harm is that if there's an investigation by the bank, they leave and the investigation is closed. In these other industries, it doesn't matter if a lawyer or a doctor or a CPA leaves a company, if they violate their professional standards, there is a way for consumers to hold them to account.

Mr. Kelly also raised that certain provinces have certain requirements for education and ongoing professional development that are largely exempted in the banks through the Bank Act.

We seem to know what some of the challenges are. They're just not being voiced. Do you think we, as a committee, need to investigate these practices further? What's your recommendation?

[Lucie Tedesco]

In terms of sales practices, the committee will decide what the committee would like to do. I'm not sure I'm in a position to recommend what the committee should or should not do.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

A committee member has asked you what you think, and you've told us that there are cases where there has been a line crossed. You told us that there are some issues in here.

[Lucie Tedesco]

Yes.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

But you've given us general—I would say sanitized—bullet statements of what should be happening. We've heard from people who say that is not always happening.

[Lucie Tedesco]

These are matters that are under investigation. When matters are under investigation, I don't know about—

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Can't you recommend that these are things we may want to recommend to the Minister of Finance?

[Lucie Tedesco]

I'm sure that I have a very able team here with Richard. If any potential breaches have been identified during the review, he's looking after them.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Okay.

Earlier you said to Mr. Kelly that there was a report you've written to the Minister of Finance outlining steps that could be taken. Is that report public?

[Lucie Tedesco]

Yes.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Okay. That's very helpful to us. I'd like to see it, and perhaps you could pass it on to the clerk—

[Lucie Tedesco]

Yes, of course.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

—because I think there are some issues.

I talked about transparency of sales practices of the banks. I'd like to ask a few questions about the FCAC.

Since November 2016, how many breaches of market conduct has the FCAC investigated? How many of those breaches have been verified, and what fines or punitive actions have been levied as a result?

[Richard Bilodeau]

I don't have the exact numbers since November 2016. I can tell you that in fiscal year 2017-18, so April 2017 to this past March, we investigated over 130 incidents of potential breaches to the Bank Act. Sometimes investigations overlap in two fiscal years. In 2017-18, there were eight violations that were essentially upheld by the commissioner through three decisions.

In addition, there were a number that were addressed through other means. For example, we have a number of administrative tools outlined in our compliance framework. Depending on the significance of the breach, we can issue letters of concern, which is an administrative tool. We can use action plans. For example, if we identify a specific issue with a control that caused the breach to happen, then we can work with the institution, telling them that we expect them to do x, y, and z to rectify a control to avoid these breaches. These are reduced to paper. We track those, and we work with the institution to ensure they fix the issues. When that's done, we close the action plan.

We use a variety of tools when we are faced with investigating breaches. Not all of them go to what we call a notice of violation, a notice of decision. That said, throughout all the various tools we use, the commissioner referenced earlier that over the last two fiscal years, through the supervision work and enforcement we've done, consumers have been reimbursed over $21 million.

The work we've been able to do, the way we've used our tools, has generated that result for Canadians.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

I appreciate the straightforward answer. If you wouldn't mind also sending to the committee, to the chair, the last two verified years that you can that are on record so that we have a good idea of year over year, that would be most welcome.

[Richard Bilodeau]

Absolutely.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

We go back to the issue of bundling or mis-selling. In the report, there's a specific reference to young people when they're getting a credit card, that it comes with credit protection, but that they're not always informed that that's an extra service. First of all, why wouldn't there be some sort of recommendation from you? That, to me, seems to be a problem. Why would there not be a recommendation that this be looked at?

Why are there no specific recommendations? You have specific cases where there are issues. We're supposed to write a report on this. If we don't have recommendations from the experts, it's going to be very difficult to make good recommendations to the policy-makers.

[The Chair, Liberal, Wayne Easter]

Go ahead, Mr. Bilodeau.

[Richard Bilodeau]

Thank you.

With regard to credit insurance, because I think that's what your question was about, I think one of the issues that we've identified in the report is that it's a product that's usually sold rather than bought. It's not a product for which a customer will particularly call in to the bank and say, “I'd like credit insurance for my credit card.” When that happens, I think that in the context of that consumer being in a position where he's being offered this product in addition to getting a credit card, it's important that the information that the bank communicates to the consumer about the product be clear, simple, and not misleading. That is a legislated requirement. It's in the regulations. The banks have to be transparent when they're trying to secure the person's consent.

We've identified some issues in the report about being clear that if you're getting what they refer to in the sector as a free look period, where the first 30 days are essentially free, you're not charged if you don't keep the product. That needs to be communicated in a way that's clear, simple, and not misleading.

The recommendation is really that that's the legislation. Banks need to abide by those requirements.

[The Chair, Liberal, Wayne Easter]

Thank you.