Thank you, Mr. Chair.
Honourable members, my name is John Lawford, and I am executive director and general counsel at the Public Interest Advocacy Centre, on behalf of which I am appearing today. With me is Jacques St-Amant, who teaches consumer law at the Université du Québec à Montréal and acts as a consultant to PIAC regarding financial services.
We're focusing today exclusively on division 5, part 4 of the bill. Our main message is that the bill's financial consumer protection framework will not improve the protection of banks' customers and may, in fact, make things worse.
In his 2013 budget, the then Minister of Finance announced the government's intention “to develop a comprehensive financial consumer code to better protect consumers of financial products”. This was followed by further announcements on this topic in every single budget, including the 2016 budget, which promised “a comprehensive, consolidated framework and include targeted and more flexible consumer protection rules to better respond to Canadians’ changing needs.”
We were cautiously hopeful that needed change was coming.
The current rules are deeply unsatisfactory. The FCAC—or Financial Consumer Agency of Canada—website lists over 50 provisions of the Bank Act, 28 regulations under the act, six voluntary codes of conduct, and over a half a dozen public commitments claiming to protect consumers. Very few consumers know these rules or understand what they mean. Many of them are not strong enough and they are not legally enforceable by a consumer. Often there is no rule, beyond a general legal principle to protect the consumer.
What Bill C-29 does is moves around the existing rules between the act and regulations, making the framework more rigid at a time when swift market evolution would require a more flexible set of rules. It does add five new principles, the legal impact of which is unclear, and some small changes regarding other issues, but it adds provisions that are clearly also unhelpful to consumers.
Bill C-29 does not address the real problems, such as banks unilaterally changing provisions in their terms and conditions, or disclaiming in their terms and conditions any liability for mistakes or negligence. As an example, we provide in the annex to these remarks a provision from CIBC's current terms and conditions. There is nothing in the Bank Act, or in Bill C-29, that prohibits such provisions. Contrast that with the consumer protection code established by the Central Bank of Ireland, which requires banks to act with skill, care, and diligence in the best interests of their consumers, and which prohibits, in principle, exclusionary clauses, such as I referred to.
Complaint resolution is not addressed by BillC-29, even though the current regime allows a bank to choose its external ombudsman—an obvious conflict of interest. FCAC remains the watchdog under Bill C-29. However, it was given very limited powers in 2001, which have not been significantly increased over time, simply compared with the U.S.'s Consumer Financial Protection Bureau.
This is a weak framework. It is full of gaps. We are therefore worried by Bill C-29's apparent attempt to confine the protection of banks' consumers to this regime, as we understand that the intent behind proposed new section 627.03 is to thwart the application of provincial consumer protection legislation in banking. This is not a good idea.
First, consumers of banks would then be less well protected in some provinces than if they did business with, say, a local credit union, which would be subject to provincial rules. In effect, Parliament would be creating a disincentive for consumers to do business with banks.
Second, consumers of all provinces may not be treated equally. It is settled law that federal legislation is not paramount to common law, so the absence of any provision regarding unfair transactions in the Bank Act may have no impact on, say, the application of common law unconscionability rules in nine provinces. In Quebec, where similar rules are legislated in the provincial civil code and the Consumer Protection Act, those provincial laws could be found to be inoperative under this constitutional theory propounded in the bill. More simply stated, Bill C-29 invites constitutional wrangling instead of promoting legal certainty, which will harm consumers and banks.
However, we have an even more fundamental issue with what the minister proposes. In effect, he is inviting Parliament to declare that in Canada the convenience of bankers is more important than the protection of consumers. We believe that is mistaken and will not be popular.
Financial service consumers would gain by the implementation of a strong, coherent, and comprehensive set of legally enforceable rules that would be consistent with the Canadian constitutional framework established through an open consultative process. This set of federal rules could act as a floor, and if the floor were built high enough, provinces likely would not feel the need to offer additional protection to their residents, which would further the goal of consistency. This is not, however, what Bill C-29 currently does.
In conclusion, we suggest that this committee recommend to the minister that he take stock of these issues, withdraw the division from the bill, and consult again in order to implement, in the context of the upcoming global review of the Bank Act, a truly effective financial consumer protection regime.