Finance Committee on May 28th, 2018

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

The Prime Minister said that sunshine is the greatest disinfectant. Do you think schedule I banks should be pressured to inform customers about sales targets and incentives presented to employees so as to increase transparency of the motives and sales tactics used by financial employees and their advisers?

[Lucie Tedesco]

My role as commissioner of the FCAC is really to administer and apply the legislation. That would be an opinion and a policy matter, and that is best answered by my colleagues at the Department of Finance.

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

Again, I go back to your role as helping to protect consumers. Would that help protect consumers by having more transparent information about sales processes they enter?

Madam, you have no issue talking about the importance of getting more information and having boards of directors receive information about their sales practices, so it doesn't seem you have any issue talking about the use of information within your organization. Why not just allow Canadians to know more about exactly whom they're banking with and what their sales practices are in an institution? It seems to me you should have an opinion on that. You're there to defend those interests, aren't you?

[Lucie Tedesco]

I'm there to apply the legislation, so our sales practices report does just that. It advises consumers of the risks that are involved with the various sales practices that can be adopted by the financial institutions.

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

Well, Madam, I do appreciate that you run an organization that is a creature of legislation. However, I'm a little disappointed as to the tone of the report. I would have expected there to be a little less focus on your own individual workings and a little more on the banks, because that's actually where people are having these issues. I'm going to be asking questions in an upcoming round that are a little more specific about some things that can be improved upon. To me as a parliamentarian, it's hard to make good recommendations on how we can improve the system, Mr. Chair, if there's only a general direction that, yes, things aren't great, but we're getting better. That, I don't think, is necessarily going to address the concerns we were articulating.

[Lucie Tedesco]

But the banks have to get better as well, and we mentioned that quite strongly in the report.

[The Chair, Liberal, Wayne Easter]

Okay. That's the round for Mr. Albas, I take it.

Mr. Dusseault.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Thank you, Mr. Chair.

I would like to thank the witnesses for being here and for their work on this matter, a job that must not have been easy because it always comes back to the dilemma that a bank employee faces, as we have seen in various testimonies.

In fact, employees must sell financial products and, for several clients, these employees are experts in the field. So you trust your bank advisor. These same people are also under pressure from their employers to sell these products. They must achieve results and, at the same time, they must advise their clients independently or in the most informed way possible. So it mustn't have been easy to try to resolve this situation, which completely opposes two interests.

I understand that, among everything you've examined, there were 4,000 testimonies.

[Lucie Tedesco]

We reviewed 4,500 complaints and conducted over 600 interviews with employees.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Of these 4,500 testimonies, or complaints, and 600 interviews, did you detect any serious misconduct or failure on the part of a bank, either in its practices or in the specific case of an employee who failed to meet his or her obligations?

[Lucie Tedesco]

If we discovered any potential violations such as the ones you just mentioned, these cases are currently under investigation. However, I'm not aware of what happens in the investigations because of my quasi-judicial role.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Do you know how many cases have been investigated?

[Lucie Tedesco]

I don't.

Actually, this isn't information I should know about because of my quasi-judicial role. I will have to render decisions if those files end up on my desk.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

In recent years, before you undertook this review, how many cases were subject to penalties, fines or disciplinary measures? How many cases have gone through the investigation stage and reached you?

[Richard Bilodeau, Director, Supervision and Promotion, Financial Consumer Agency of Canada]

To answer your specific question, during the last fiscal year, eight violations were noted by the agency, leading to three commissioner's decisions. However, this doesn't include various investigations we conducted during the year, which were resolved through other mechanisms available in our compliance framework.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

What penalties were imposed for these three decisions?

[Richard Bilodeau]

Well, according to the statistics, over the past year it has been about $650,000. I believe that, over the past five years, the total penalties have reached $1.6 million.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Is it all related to mis-selling practices or does it include everything else?

[Richard Bilodeau]

This relates to all possible contraventions of the consumer provisions in the Bank Act.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Were any of them really about the banks' mis-selling practices?

[Richard Bilodeau]

There is no concept of mis-selling practices in the Bank Act. Instead, it contains very specific provisions, such as provisions relating to disclosure with respect to a consumer or information that would not have been clearly communicated in a manner that would not be misleading. There is therefore no concept of mis-selling in the act, but specific provisions.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Right.

Do you know which banks were the subject of the last three decisions totalling $650,000?

[Richard Bilodeau]

The bank's identity wasn't given in the context of these decisions.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Okay. Why?

[Lucie Tedesco]

Section 31 of the Financial Consumer Agency of Canada Act leaves it to the commissioner to publish the name of the financial institution, the nature of the violation and the amount of the penalty imposed. This is a very important tool for FCAC's flexible approach to promoting and ensuring compliance with consumer provisions.

Several factors are taken into account when considering whether to implement this discretion. Is this a very serious case? Did the bank cooperate with us in the investigation? Is there an impact on consumers or on their confidence? What is the deterrent effect? Has the bank made a commitment to quickly remedy violations of the act? Does it take responsibility for its actions? Did it provide a remedy for consumers?

Since our regime isn't punitive, I don't use this discretion to punish the bank—