Thank you, Mr. Chairman.
Good morning to the members of the committee. FAIR Canada is a national charitable organization dedicated to putting financial consumers first. As a voice for financial consumers, FAIR Canada is committed to advocating for stronger consumer protections and advancing investors' and financial consumers' rights.
We are here today to speak briefly to some of the provisions in division 10 of Bill C-86, the proposed financial consumer protection framework.
As the members of this committee are well aware, banks hold a trusted position among Canadians because of the role they play in the savings, mortgages, loans and investments of all Canadians. Our banks are in a unique position to have a significant impact on the long-term financial security of most Canadians.
Today, financial products are complex, whether they're mortgages, investments or even deposits, such as market-linked guaranteed investment certificates. This means that people go to the bank, not just to conduct transactions, but with the expectation that they will be provided with advice that helps them meet their financial goals and the banks market themselves and their services in this manner.
Trust in banks is vital. It is important.
As you're aware, in 2017 the CBC Go Public series on bank employees and the FCAC's domestic bank sales practices report, which was published earlier this spring, found numerous risks of “mis-selling” by banks of products and services to customers.
The FCAC report showed that the retail banking culture is predominantly focused on selling products and services and that consumers' interests were made secondary to those of the bank and their employees and contractors. The report demonstrated the need for strengthened consumer protection for Canadians and their bank dealings.
In our June 9, 2017, letter to this committee, FAIR Canada urged the adoption of a best interest standard for those engaged in providing financial advice to banking clients.
Bill C-86, at section 627.06, introduces a requirement that banks establish and implement policies and procedures to ensure that products and services are “appropriate for the person having regard to their circumstances, including their financial needs”.
Among our concerns about this standard is that strict adherence to the proposed consumer protection provision set out in Bill C-86, on consent, no undue pressure, coercion and disclosure, will be seen as being sufficient to meet Bill C-86's appropriate requirement, while the product or service being sold may still not be in the consumer's best interest, given its cost, net return or other factors.
A product or service may be appropriate, but it may still be suboptimal for the bank's customer. We are concerned that this appropriate standard will not advance consumer protection, beyond that found by the CBC Go Public series and the FCAC report.
As you may be aware, for more than six years, the security sector has been engaged in trying to strengthen the standard owed to clients beyond that of suitability, given that the suitability standard has not worked in the interests of consumers and clients of securities dealers.
We do not want to spend several years determining what is appropriate for clients of banks, when a clear standard of best interests could be introduced and work for the benefit of bank consumers.
A second area of acute concern to FAIR Canada is the existing consumer dispute resolution system for banking complaints.
Simply put, the consumer dispute resolution system is flawed, both the banks' internal dispute complaint handling systems and the external mechanisms. The FCAC report earlier this year found that:
Weaknesses in policies, procedures and systems for handling complaints limit the ability of banks to adequately monitor, identify and report complaints to management, boards and FCAC.
Externally, as you're aware, the Bank Act's regulatory oversight of external complaint bodies permits multiple external complaint bodies and results in one-sided competition. The banks are able to choose their referee of choice in order to handle customer complaints outside of the bank.
In light of the above, the Bill C-86 updating of the consumer-related provisions in the Bank Act is a critical first step in strengthening consumer protection for Canadians in dealing with their banks. We are optimistic that the government will continue to look at this area in light of the evidence produced by the CBC Go Public series and the content of the FCAC domestic retail sales practices report and that further reforms will be considered in the future.
We do want to acknowledge a number of provisions in the existing—