Evidence of meeting #159 for Finance in the 42nd Parliament, 1st session. (The original version is on Parliament’s site, as are the minutes.) The winning word was bank.
A video is available from Parliament.
Commissioner, Executive Services, Financial Consumer Agency of Canada
There were some gaps. Some protections were stronger in the federal regime, but some were not, so there were some gaps in those. They've been highlighted for the minister in our report and we suspect that those are being taken into consideration in the new consumer protection framework.
Conservative
Pat Kelly Conservative Calgary Rocky Ridge, AB
I'm running out of time and I certainly don't want to go over, Mr. Chair.
In your findings, the area of creditor insurance is a big one when it comes to the cross-sell with financial institutions. It even spills over when delivery models, such as mortgage brokers for example, are also compensated in the sale of insurance, in some cases. The commissions and the profits on creditor insurance can exceed the profits and compensation for individuals to the actual credit product that it deals with. Does this concern you, as far as how that affects motivation in sales is concerned?
Commissioner, Executive Services, Financial Consumer Agency of Canada
Yes, absolutely.
Commissioner, Executive Services, Financial Consumer Agency of Canada
This is definitely one of the products that we identified as problematic. It's a high risk to consumers. We are actually looking into complaints and will be looking into this product more deeply. This product might be good in some circumstances, but it's often sold without the appropriate explanation as to how it works or its products or services. Sometimes people think that they're getting it for free. For us, they cross the line when they don't obtain the consumer's express consent when purchasing this product and they cross the line if they don't provide the level of disclosure that is required by the regulation and the legislation. They cross the line if they're not giving—
Conservative
Pat Kelly Conservative Calgary Rocky Ridge, AB
The bank is exempt from some of that. The bank will have a different bar from what provincial insurance regulation would have. They are exempt. The Bank Act exempts financial institutions.
Director, Supervision and Promotion, Financial Consumer Agency of Canada
Sure. There is a regulation that flows from the Bank Act that requires a bank, when selling an optional product—for example, if you're selling creditor insurance as an optional product to a credit card—that you do so in a way when you're trying to get express consent from a consumer that you do get proper consent from the consumer, but that you get it in a way that's clear, simple, and not misleading. Those apply to banks selling creditor insurance, as an optional product to another main product.
Conservative
Pat Kelly Conservative Calgary Rocky Ridge, AB
They are exempt from provincial insurance brokerage law, which they would otherwise be required to—
Director, Supervision and Promotion, Financial Consumer Agency of Canada
For example, for hypothetical purposes, if a bank that we regulate sells a product and doesn't abide by one of those criteria—there are a few of them—then they are in breach of those regulations. Any exemptions don't apply to that bank, if they're selling an optional product.
Liberal
Raj Grewal Liberal Brampton East, ON
Thank you, Mr. Chair.
Thank you to our witnesses for coming today.
We've had this discussion before at this committee in terms of consumer protection at banks. I know people who work at the big five banks. I've had a lot of discussions with them. This is not to pick on a certain green bank, but if you walk into their bank and you want to simply deposit something, the second question will always be, “Are you thinking about investments? Are you thinking about a mortgage? Are you thinking about refinancing your debt?” I always found that inexcusable because I've gone to the bank to do something specific and then I get bombarded with all this other information.
I'm okay as a consumer because I am somewhat educated and I know what I'm talking about, but I can only imagine if my father or my mother went in. I represent a community where 86% belong to a visible minority. There is a big immigrant population and a lot of seniors who can be taken advantage of. I don't think we're doing enough in terms of the banks. The banks are obviously going to push the sales activity because that helps their bottom line. We need to do more from an agency perspective to rope them in or to get them to be accountable for their behaviour.
Commissioner, Executive Services, Financial Consumer Agency of Canada
Again, to the extent that they cross the line and violate the legislation and the regulations that are currently in place, we take the appropriate enforcement action. There are things outside the scope of what we do that the banks do that we cannot enforce or note them in violation for.
Liberal
Raj Grewal Liberal Brampton East, ON
Yes, and I think that's part of the frustration.
I'll give you this small example that annoys me every time I go to the bank. You go to the bank to ask for a certified cheque, and they charge you $7.50 for the certified cheque. The purpose of a certified cheque is to say that the money's been withdrawn from your account, and it's certified, so there shouldn't be a hold when you deposit it into a trust account to buy a house or use it as a down payment, or deposit it into another account, or if you're paying somebody back. Yet, the other bank, or even the same bank, will place a five-day hold on it, even though the funds are certified. What's the point of paying $7.50 for a certified cheque if the funds aren't actually certified? I could write a personal cheque for the exact same process.
I bring this up every time I meet a teller and they charge me $7.50. It is absolutely wrong. They are charging fees for no reason. They say I have an unlimited banking account, yet I get charged $14.95 every single month, and I do x number of transactions and I get charged a bonus. It's absolutely ridiculous. The banks are robbing consumers blind. More needs to be done.
Liberal
Raj Grewal Liberal Brampton East, ON
I've done the competition thing, except for the fact that the big five banks dominate the competition by branch level. They also have a monopoly because in Brampton East the big five are everywhere. You're going to go to a bank that you can walk to, that you have a personal relationship with. The banks are super clever. Do you know why? When I go into my branch, I can speak Punjabi. I can speak Hindi. I can speak English. It's really easy. If I were a teller and a senior came in and I was being paid based on bonuses, do you know how great my bonus would be because my Punjabi is so good? It would be phenomenal. That is something on which we need to do a better job.
Liberal
The Chair Liberal Wayne Easter
I don't know, Ms. Tedesco, if there's anything you can answer there or not, but the floor is open.
Commissioner, Executive Services, Financial Consumer Agency of Canada
I was just going to say that the bank fees are not regulated.
Director, Supervision and Promotion, Financial Consumer Agency of Canada
The FCAC has a great account selector tool that can help consumers select the right account for their needs. It's a very useful tool.
Liberal
The Chair Liberal Wayne Easter
Go to that website and you're away.
Do you have any further questions, Mr. Grewal?
Liberal
Raj Grewal Liberal Brampton East, ON
No. My fiancée works at one of these banks. I'm going to ruin her career if I keep going.