Evidence of meeting #184 for Finance in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was proposed.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

Manuel Dussault  Senior Director, Framework Policy, Financial Sector Policy Branch, Department of Finance
Justin Brown  Director, Financial Stability, Financial Sector Policy Branch, Department of Finance
Peter Fragiskatos  London North Centre, Lib.
Yuki Bourdeau  Senior Advisor, Capital Markets Division, Financial Sector Policy Branch, Department of Finance
Eleanor Ryan  Director General, Financial Institutions Division, Financial Sector Policy Branch, Department of Finance
Jean-François Girard  Director, Consumer Affairs, Financial Institutions Division, Financial Sector Policy Branch, Department of Finance
Brigitte Goulard  Deputy Commissionner, Financial Consumer Agency of Canada
Kim Rudd  Northumberland—Peterborough South, Lib.
Mark Schaan  Director General, Marketplace Framework Policy Branch, Innovation, Science and Economic Development Canada
Ian Wright  Director, Financial Crimes Governance and Operations, Department of Finance
Darryl C. Patterson  Director, Corporate, Insolvency and Competition Policy Directorate, Marketplace Framework Policy Branch, Department of Industry
Martin Simard  Director, Copyright and Trademark Policy, Marketplace Framework Policy Branch, Department of Industry
Andrea Flewelling  Senior Policy Advisor, Marketplace Framework Policy Branch, Department of Industry
Patrick Blanar  Senior Policy Analyst, Patent Policy Directorate, Department of Industry
Dale MacMillan  Vice-President, Corporate Services and Chief Financial Officer, National Research Council of Canada
Christopher Johnstone  Director General, National Programs and Business Services, National Research Council of Canada
Eric Grant  Director, Community Lands Development, Lands and Environmental Management, Lands and Economic Development, Department of Indian Affairs and Northern Development
Leane Walsh  Director, Fiscal Policy and Investment Readiness, Economic Policy Development, Lands and Economic Development, Department of Indian Affairs and Northern Development
Susan Waters  Director General, Lands and Environmental Management Branch, Lands and Economic Development, Department of Indian Affairs and Northern Development
Michèle Govier  Senior Director, Trade Rules, International Trade and Finance Branch, Department of Finance
Katharine Funtek  Executive Director, Trade Controls Policy, Department of Foreign Affairs, Trade and Development
Bev Shipley  Lambton—Kent—Middlesex, CPC
Nicole Giles  Director, International Trade and Finance, Assistant Deputy Minister's Office, Department of Finance
Deirdre Kent  Director General, International Assistance Policy, Department of Foreign Affairs, Trade and Development
Mark Lusignan  Director General, Grants and contributions Management, Department of Foreign Affairs and International Trade (International Trade)
Michelle Kaminski  Director, Office of Innovative Finance, Grants and Contributions Management, Department of Foreign Affairs, Trade and Development
Chantal Larocque  Deputy Director, Development Finance, Grants and Contributions Financial Policy, Foreign Affairs Canada
Danielle Bélanger  Director, Gender-Based Analysis Plus and Strategic Policy, Policy and External Relations Directorate, Status of Women Canada
Alison McDermott  General Director, Economic and Fiscal Policy Branch, Department of Finance
Derek Armstrong  Executive Director, Results Division, Expenditure Management Sector, Treasury Board Secretariat
Lori Straznicky  Executive Director, Pay Equity Task Team, Strategic Policy, Analysis and Workplace Information, Labour Program, Department of Employment and Social Development
Don Graham  Senior Advisor to the Assistant Deputy Minister, Compensation and Labour Relations Sector, Treasury Board Secretariat
Bruce Kennedy  Manager, Pay Equity Task Team, Labour Program, Department of Employment and Social Development
Richard Stuart  Executive Director, Expenditure Analysis and Compensation Planning, Expenditure Management Sector, Treasury Board Secretariat
Colin Spencer James  Senior Director, Social Development Policy, Strategic and Service Policy Branch, Department of Employment and Social Development
Andrew Brown  Director General, Employment Insurance Policy Directorate, Skills and Employment Branch, Department of Employment and Social Development
Barbara Moran  Director General, Strategic Policy, Analysis and Workplace, Labour Program, Department of Employment and Social Development
Rutha Astravas  Director, Employment Insurance Policy, Special Benefits Policy, Department of Employment and Social Development
Charles Philippe Rochon  Senior Policy Analyst, Labour Standards and Wage Earner Protection Program, Workplace Directorate, Department of Employment and Social Development

3:45 p.m.

Liberal

The Chair Liberal Wayne Easter

Does anyone else want in on this area?

On the calculation of the CDIC borrowing limit, under the Financial Administration Act, can you tell me the process there? How do you determine that limit? What is the process?

November 5th, 2018 / 3:45 p.m.

Director, Financial Stability, Financial Sector Policy Branch, Department of Finance

Justin Brown

The limit is specified under the CDIC Act. It's currently around $23 billion. It is indexed to the growth of insured deposits, so it does increase over time.

Then, there's the Financial Administration Act, which has separate powers related to the minister's ability, for example, to lend money where he considers it necessary to promote financial stability or to maintain the efficiency of the financial system.

Currently the minister could lend money under those existing powers to CDIC. However, that money would count towards CDIC's borrowing limit. There may be circumstances where, with sums of money going from the minister to CDIC, the government may not want that money to go towards CDIC's limit, or there may be large amounts of funds.

CDIC's mandate includes paying out deposit insurance and also being the resolution authority for its members. It can use its powers and its money to fulfill those functions. This would allow more flexible, more timely, money to flow from the government to the CDIC if the minister and the Governor in Council deem it appropriate.

3:45 p.m.

Liberal

The Chair Liberal Wayne Easter

With the minister's authority, can they go over their limit?

3:45 p.m.

Director, Financial Stability, Financial Sector Policy Branch, Department of Finance

Justin Brown

Currently, any money lent by the government to the CDIC under section 60.2 of the FAA would count towards CDIC's borrowing limit as specified under the law. The change proposes that any money that goes through section 60.2 of the FAA to the CDIC does not count towards its borrowing limit.

3:45 p.m.

Liberal

The Chair Liberal Wayne Easter

In laymen's terms, say they're at their limit and the minister uses other means to say another amount of money, in effect, they could go over their limit with the minister's authority.

3:45 p.m.

Director, Financial Stability, Financial Sector Policy Branch, Department of Finance

Justin Brown

Put in other words, yes. The legal language is more that the money does not count towards that limit. If their limit is $23 billion and they have already borrowed $23 billion, and the minister would like to lend money to CDIC in addition to that $23 billion, this would allow the government to do so.

3:45 p.m.

Liberal

The Chair Liberal Wayne Easter

Can you give me an example of why the minister would want to do that? We have these limits in place for a reason. Why would we want to go over them?

3:45 p.m.

Director, Financial Stability, Financial Sector Policy Branch, Department of Finance

Justin Brown

Section 60.2 of the FAA is considering extraordinary measures. The financial sector's framework as a whole—including CDIC's powers, but also looking at the Bank of Canada and the Office of the Superintendent of Financial Institutions—is sufficient for the normal course of business. Section 60.2 is deemed for extraordinary use, where the minister deems it necessary to promote financial stability or to maintain market efficiency.

An example of that would be an unlikely event where there is a large Canadian bank that would be failing. Paying out deposits on a large Canadian bank would likely exceed CDIC's borrowing limit. The funds needed to help provide some sort of liquidity assistance to that bank to help make sure it does not fail may surpass CDIC's current borrowing limit. The minister may determine that it's in the better interest of the efficiency of the Canadian financial system, or for financial stability, to lend CDIC that additional money.

3:50 p.m.

Liberal

The Chair Liberal Wayne Easter

I have one last question.

I can understand the reasoning behind that, but are there any checks or balances on the minister in terms of wanting to do so? Does he or she have to go to Parliament, or what?

3:50 p.m.

Director, Financial Stability, Financial Sector Policy Branch, Department of Finance

Justin Brown

In the current framework, it has to meet the parameters of promoting financial stability or maintaining efficiency. In terms of process, it has to go to the Governor in Council.

3:50 p.m.

Liberal

The Chair Liberal Wayne Easter

Are there any further questions here?

Thank you to all three.

Oh yes, you do have another section. I'm trying to get rid of you in a hurry.

Go ahead.

3:50 p.m.

Director, Financial Stability, Financial Sector Policy Branch, Department of Finance

Justin Brown

We are also here for part 4, division 3, subdivision C. This relates to legally privileged information provided to the Office of the Superintendent of Financial Institutions, OSFI.

3:50 p.m.

NDP

Peter Julian NDP New Westminster—Burnaby, BC

Because of the way the material is organized.... Is that different from the bill?

Would you please mention the clauses right up front so we can refer to the right part of the bill?

3:50 p.m.

Director, Financial Stability, Financial Sector Policy Branch, Department of Finance

Justin Brown

Yes, pardon me. I missed it for this one. It's clauses 167 to 173.

It's amendments to different financial sector statutes. They would clarify that where a financial institution provides privileged information to OSFI, it does not waive any privilege with respect to this information. These amendments would support continued access to financial institution information to OSFI, which is important for OSFI to be able to fulfill its supervisory mandate.

3:50 p.m.

Liberal

The Chair Liberal Wayne Easter

People have the notes in front of them, I assume.

Are there any questions?

Hearing none, I thank you very much.

We're calling up part 4, division 10. We're going out of order here at the request of officials, so we'll go to part 4, division 10, financial consumer protection framework. The witnesses will give us the clauses we need to look for in the bill.

Ms. Ryan is director general, financial institutions division, financial sector policy branch. Mr. Girard is the Director, Consumer Affairs, Financial Institutions Division. Mr. Saeedi is the Economist, Consumer Affairs, Financial Institutions Division. Ms. Goulard is the Deputy Commissioner, Financial Consumer Agency of Canada.

Welcome, all. The floor is yours.

3:50 p.m.

Eleanor Ryan Director General, Financial Institutions Division, Financial Sector Policy Branch, Department of Finance

Thank you, Mr. Chair.

My name is Eleanor Ryan. I'm here with my colleagues from the Department of Finance and with Brigitte Goulard, Deputy Commissioner of the Financial Consumer Agency of Canada. We're honoured to have the opportunity to present this legislation to you.

Division 10 of Part 4 of Bill C-86, entitled “Financial Consumer Protection Framework”, follows upon the government's commitment made in Budget 2018 to continue to advance consumers' rights and interests when they deal with their bank, and to strengthen the tools at the disposal of the Financial Consumer Agency of Canada.

Division 10 represents a consolidation of the existing legislation and regulatory provisions applying to the relationship between banks and their customers, and new measures intended to address the issues identified in two reports published by the Financial Consumer Agency of Canada in the spring of 2018.

The first report was a comprehensive review of bank sale practices. This report identified a number of risks relating to how bank products are sold to customers. The second report examined best practices for supervision of financial consumer protection.

3:55 p.m.

Liberal

The Chair Liberal Wayne Easter

Ms. Ryan, I don't want to interrupt you, but I see some members shuffling paper. Could you give us the clauses that this relates to in the bill? We have a little difficulty, in that we're dealing with the bill that we have.

3:55 p.m.

Director General, Financial Institutions Division, Financial Sector Policy Branch, Department of Finance

Eleanor Ryan

Yes. It starts at clause 315.

and it finishes with clause 351, so clauses 315 to 351.

3:55 p.m.

Liberal

The Chair Liberal Wayne Easter

Thank you.

Go ahead.

Sorry to have interrupted you.

3:55 p.m.

Director General, Financial Institutions Division, Financial Sector Policy Branch, Department of Finance

Eleanor Ryan

No, I very much appreciate that.

Thank you.

Before discussing specific points in division 10, I want to point out that the bill does not explicitly affirm an exclusive federal jurisdiction over bank clients.

The proposed bill does not affect the provinces' capacity to enact regulations to protect consumers, and does not replace the existing rights consumers have under provincial legislation.

In addition to relying on the evidence collected in the two FCAC reports, the Department of Finance consulted extensively on the policy proposals that are reflected in the bill before you. We engaged 100 representatives from the provinces and territories, consumer groups, banks and external complaint bodies. Overall, the proposals were viewed as significantly improving protection for bank consumers.

The proposed amendments to the Bank Act and the Financial Consumer Agency of Canada focus around three themes: to require banks to have new internal bank practices to further strengthen outcomes for consumers; to provide the Financial Consumer Agency of Canada with additional tools to implement supervisory best practices; and to further empower and protect consumers.

If I may, I would like to just go through and explain how each of these themes are reflected in division 10.

First, division 10, as I said, indicates that there are new modifications required for internal bank practices. Perhaps I could start with clause 317. This new measure would require a bank to designate a committee of its board of directors to oversee the bank's obligations to its customers. The committee would report annually to the commissioner of the FCAC on what the committee did in performing its duties. This measure is intended to ensure that the most senior management of the bank assumes responsibility for the protection of consumers in their customers' dealings with the bank.

Another measure is to be found in proposed section 627.06, and there are two related provisions that I will highlight: proposed sections 627.07 and 627.02. These new measures together would require banks to have policies and procedures to ensure that the products and services offered to a person are appropriate, having regard to the person's circumstances and financial needs. In addition, banks would be required to ensure that remuneration practices, including benefits, do not interfere with the ability of employees or agents to comply with the suitability procedures. As well, employees of the bank would need to be trained on the institution's procedures for complying with the consumer provisions. Taken together, these measures are intended to ensure that consumers receive the products and services that are right for them.

I would like to highlight another group of proposed sections: proposed sections 979.1 to 979.4. These measures, taken together, would require banks to establish a whistle-blowing program. The legislation would also protect employees from reprisal by their employers, whether they report on information on suspected wrongdoings through the bank's internal whistle-blowing program or report this information to an appropriate authority. Effective whistle-blowing programs can help to foster transparency, promote integrity and detect misconduct that would otherwise have gone unnoticed.

On the second theme, new tools for the Financial Consumer Agency of Canada, the legislation also, as indicated earlier, provides new tools so as to better align the agency with supervision best practices and promote compliance with the consumer protection framework.

I would highlight the change proposed by section 661.1. In this provision, the commissioner would have the power to direct a bank to take actions to remediate non-compliance by a bank with their legal obligations towards their customer under the consumer protection framework. There is a complementary provision in proposed section 627.997 and this power would extend to ordering restitution to consumers where a bank has collected charges improperly.

A second set of amendments are around subsection 19(1) of the Financial Consumer Agency Act of Canada. That is in clause 344. These proposed amendments to the Financial Consumer Agency of Canada Act would increase from $500,000 to $10 million per violation the maximum penalty that can be imposed on banks that are found by the commissioner to have breached their legal obligation under the framework.

There is a further complementary provision in clause 347, proposed subsection 31(1) of the FCAC Act, which would require the name of the bank that has been subject to a penalty to be publicly identified in the commissioner's decision.

Higher penalties and public naming of banks subject to penalties are intended to increase the incentives for banks to comply with the consumer provisions.

The Financial Consumer Agency of Canada Act would also be amended to add an “object” provision. Financial institutions governed by the act would be regulated by a Canadian government organization, in order to contribute to the financial protection of Canadian consumers, notably by strengthening financial literacy.

In addition, the objects of the FCAC would be modified to expressly include that the agency should strive to protect the rights and interests of consumers. That is in clause 338.

Finally, I'll highlight a couple of new measures that would be empowering to consumers.

First, banks would be required to offer consumers the opportunity to receive electronic alerts when their account reaches or exceeds a low-balance threshold on deposit products, or approaches or exceeds a limit on credit products. That's in clause 329, proposed section 627.13. The provision of timely information to consumers is intended to help them better manage the fees they pay.

As well, in proposed section 627.03, the legislation proposes new prohibitions on providing consumers with misleading information, and in proposed section 627.04, applying undue pressure or taking advantage of consumers under any circumstances.

I'll highlight a couple of other provisions.

There are a number of improvements made to the way banks handle complaints from consumers. While banks are expected to address complaints directly with consumers, safeguards are still required to ensure the process is fair and transparent. To this end, banks are already required in the current framework to be a member of an independent external complaint body that must provide its services free of charge and in both official languages.

The proposed legislation would bring improvements to the complaint-handling process. It is proposed that banks keep a record of all complaints, making this information available to the commissioner of the FCAC. That's in proposed sections 627.44 to 627.46. “Establish”—complaint handling—“procedures that are satisfactory to the Commissioner” is in proposed paragraph 627.43(1)(a). A prohibition on using misleading terms, including “ombudsman” to describe the banks' internal complaint handling procedures is in clause 329, proposed subsection 627.43(2).

With respect to improved external complaints bodies, new requirements are being proposed to increase the transparency of the complaint handling process. These include, in proposed paragraph 627.49(i), a requirement for external complaints bodies to publish a summary of each final recommendation regarding a complaint, including the reasons for the recommendation.

Again in proposed paragraphs section 627.49(j) and (k)—

4:05 p.m.

Liberal

The Chair Liberal Wayne Easter

Hang on a second, Ms. Ryan.

Go ahead.

4:05 p.m.

Liberal

Greg Fergus Liberal Hull—Aylmer, QC

Sorry, Ms. Ryan. It's just because you're going back and forth. We're flipping through the pages to try to catch up to the clauses that you're mentioning. You're going back to 627.01 then to 629.44(1)(a).

It makes it a little tricky, so....

4:05 p.m.

Director General, Financial Institutions Division, Financial Sector Policy Branch, Department of Finance

Eleanor Ryan

Right. Go slower.

4:05 p.m.

Liberal

The Chair Liberal Wayne Easter

I think what he's saying is to slow down.

4:05 p.m.

Director General, Financial Institutions Division, Financial Sector Policy Branch, Department of Finance

Eleanor Ryan

All good. Thank you very much for that. I appreciate it.