Evidence of meeting #98 for Finance in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was banks.

A video is available from Parliament.

On the agenda

MPs speaking

Also speaking

Lucie Tedesco  Commissioner, Executive Services, Financial Consumer Agency of Canada
Darren Hannah  Vice-President, Finance, Risk and Prudential Policy, Canadian Bankers Association
Sandy Stephens  Assistant Legal Counsel, Canadian Bankers Association
Richard Bilodeau  Director, Supervision and Promotion, Financial Consumer Agency of Canada
Jérémie Ryan  Director, Financial Literacy, Financial Consumer Agency of Canada

5:55 p.m.

Liberal

The Chair Liberal Wayne Easter

You are over your time, Pierre.

Ms. Tedesco, do you want to add anything?

5:55 p.m.

Commissioner, Executive Services, Financial Consumer Agency of Canada

Lucie Tedesco

Thank you. I am more familiar with the wording in English, so I'll speak English if you allow me.

Under our act, the commissioner has the authority to publish or not publish the name of the institution, the nature of the violation, and any penalty that is imposed. That's a very important aspect of FCAC's flexible approach to encouraging and enforcing compliance and changing institutional behaviour. I think that's precisely what's contemplated by our act: to bring the institutions back into compliance and change their behaviour, while obtaining the best potential outcome for consumers.

Our regime is not a punitive one, so when I am looking at whether to name or not name an institution, I have to look at each case on its own merits individually. I look at things and consider factors such as the egregiousness of the actions of the institution, its willingness to take responsibility for its actions, the deterrent impact that naming might have, the impact it can have on consumers and consumer confidence, the level of collaboration and co-operation during the investigative process, and the institution's commitment to take any and all actions to prevent any future breaches and correct the ones they've already committed.

I would say that notices of violations and decisions, and the discretion afforded by section 31, are only part of the picture. When I am deciding whether or not to name an institution, I am looking at what exactly will change the behaviour of the institution, what will bring it into compliance, and, more importantly, whether the best outcome for consumers will result from the naming, and that involves reimbursement to consumers.

5:55 p.m.

Liberal

The Chair Liberal Wayne Easter

We'll have to leave it there. We are well over time.

Ms. O'Connell, go ahead.

5:55 p.m.

Liberal

Jennifer O'Connell Liberal Pickering—Uxbridge, ON

Thank you, Mr. Chair.

Thank you, all, for being here. I have several questions, so I'll get right to it.

For me, the big elephant in the room, what we haven't talked about.... Some of the information in a lot of the media reports that came out was in regard to sales tactics around mutual funds. I know this is not part of the FCAC's oversight. However, I am wondering if there is a significant gap in your oversight. Perhaps when these offices were established, and the distribution of oversight....

I remember that, not that long ago, when you wanted to make investments, it wasn't always through your bank; it was somewhat of a separate investment institution. Now, when the two are so uniquely commingled, and you go in and want to sign up for a credit card or do your regular banking.... Mr. Hannah, you said that banks are in the relationship business. You said that several times. I can speak to that. In my community, I know my bankers, people I've dealt with for almost my entire life. When you are in the business of building relationships, you go in and all of sudden...“Hey, I see you have a lot of money in this savings account.” That would be regulated under FCAC, as well as any sales tactics, but if you move this into an investment portfolio that the bank now also manages, it is no longer regulated by the FCAC or its oversight.

It is my understanding that the Canadian Securities Administrators oversees each provincial securities regulator. From doing some research and from media reports, it is my understanding that in 2013 the Canadian Securities Administrators was saying that sales practices around mutual funds were a concern. Spelling “adviser” with an “e” or with an “o” actually makes a great difference to consumers, and we talk about literacy. For me, the missing piece is the fact that banks have completely different financial service packages now than they did when the oversight was first established.

Is there not a large gap, in terms of oversight and regulation, to start bringing some of these provincial and territorial oversight groups together and have the FCAC look at sales techniques within the four walls of the banks, and stop having them all in silos?

6 p.m.

Commissioner, Executive Services, Financial Consumer Agency of Canada

Lucie Tedesco

I can answer that.

Typically, any mutual funds, securities, are handled by a different arm of the bank, which is provincially regulated. It's very difficult, they're separate corporate entities, and plainly speaking we don't have jurisdiction over that business. It's clearly a provincial jurisdiction and provinces have investor education programs, and as we do they try to educate consumers on the risks and on the pros and cons of certain investment products.

6 p.m.

Liberal

Jennifer O'Connell Liberal Pickering—Uxbridge, ON

This is the first day of testimony, of course, but if this committee sees a consistent theme that clients are walking into banks for some other product or service and are being consistently moved into the mutual fund investments, securities—and they might be legally separate entities, however, they're within the four walls of the bank—this committee will potentially make recommendations of what needs to be done moving forward, even if that is a collaboration with provincial entities.

Especially with consumer literacy, if the FCAC doesn't really regulate or oversee all actions within the bank, then should it not be a recommendation to really work towards essentialized oversight within the four walls of those banks?

6 p.m.

Commissioner, Executive Services, Financial Consumer Agency of Canada

Lucie Tedesco

That might raise some constitutional issues, and unfortunately we don't debate constitutional issues at FCAC. We leave those questions to the constitutional law experts. That's really all I can say on that question.

6 p.m.

Liberal

Jennifer O'Connell Liberal Pickering—Uxbridge, ON

Fair enough, but we also have voluntary codes of conduct. I'm not suggesting constitutional overstepping, however, there has to be a consumer level playing field and, yes, banks volunteer for best practices, because it's in their best interests if they truly care about relationship businesses. Could this not be part of the conversation for those voluntary codes of conduct?

6:05 p.m.

Commissioner, Executive Services, Financial Consumer Agency of Canada

Lucie Tedesco

Perhaps, but I would submit to you that the securities arms of the financial institutions are well regulated by the provinces and if there are issues regarding investment or investor fraud and those kinds of things, they would look after that.

6:05 p.m.

Liberal

Jennifer O'Connell Liberal Pickering—Uxbridge, ON

I wanted to speak about literacy. I'm wondering if consumer literacy is being done. What is the role of FCAC in providing it or do you rely on the banks themselves?

I can tell you I never received a single course in elementary school, high school, or university about financial literacy. If it's being left up to the institutions themselves, is it getting out there or what should be done?

6:05 p.m.

Commissioner, Executive Services, Financial Consumer Agency of Canada

Lucie Tedesco

I'll start and let my colleague follow up.

I can tell you that we have a mandate to strengthen the financial literacy of Canadians and we do that through our financial literacy leader, Jane Rooney, who was appointed for that sole purpose to develop a national strategy for financial literacy. The strategy has goals and helps focus the work of those who are also involved in strengthening the financial literacy of Canadians to help them target populations such as children and youth, adults, and seniors.

There is also a separate strategy for financial literacy for seniors and some of the priority populations that the strategy is targeting are vulnerable populations.

I'll let Jérémie follow up.

6:05 p.m.

Jérémie Ryan Director, Financial Literacy, Financial Consumer Agency of Canada

There is some good news on the education front at the school level. You mentioned not receiving any financial literacy training. Over the past few months there have been some great announcements. Both Ontario and Quebec have announced that financial literacy will be mandatory. That's good news for us.

I should also state that in 2007, when FCAC's consumer education mandate was expanded, it was to look at the financial literacy of young Canadians. As such, we partnered with the Province of British Columbia to develop a youth educational resource called The City, a financial life skills resource, that is being taught throughout the country right now in all provinces at different levels. Some will be compulsory courses; others will be elective. The provinces have really come on board and are developing their own resources as well.

As Lucie mentioned, we work with a number of stakeholders across the country. There are 13 financial literacy networks that represent 532 organizations and work with various audiences, indigenous peoples in Canada, newcomers to Canada, seniors, low-income people, and people living with disabilities. We develop initiatives, workshops, and material and then we disseminate these through the networks.

6:05 p.m.

Liberal

Jennifer O'Connell Liberal Pickering—Uxbridge, ON

To clarify, did you say that program was City Financial, as in sponsor—

6:05 p.m.

Director, Financial Literacy, Financial Consumer Agency of Canada

Jérémie Ryan

No. It's The City. It is a financial life skills resource, not the financial institution.

6:05 p.m.

Liberal

Jennifer O'Connell Liberal Pickering—Uxbridge, ON

Thank you.

6:05 p.m.

Liberal

The Chair Liberal Wayne Easter

Mr. Généreux has a five-minute round.

June 5th, 2017 / 6:05 p.m.

Conservative

Bernard Généreux Conservative Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC

Thank you, Mr. Chair.

Ms. Tedesco, I want to make sure I understood something correctly. Mr. Dusseault mentioned $15 million earlier. It was mentioned in his question or in the answer to his question. What I saw, however, were reimbursements of $50 million for last year.

Which is the correct amount? Did I imagine that amount of $50 million?

6:05 p.m.

Director, Supervision and Promotion, Financial Consumer Agency of Canada

Richard Bilodeau

It is about $15 million.

6:05 p.m.

Conservative

Bernard Généreux Conservative Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC

So that $15 million is the amount returned...

6:05 p.m.

Liberal

The Chair Liberal Wayne Easter

Could I get clarification? It doesn't show up on the record when you shake your head, so could you give us a number?

6:05 p.m.

Director, Supervision and Promotion, Financial Consumer Agency of Canada

Richard Bilodeau

I thought I had answered. Sorry. It is close to $15 million.

6:05 p.m.

Liberal

The Chair Liberal Wayne Easter

It's $15 million.

6:05 p.m.

Conservative

Bernard Généreux Conservative Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC

What are consumers being reimbursed for? Is it for fees they were charged?

6:05 p.m.

Commissioner, Executive Services, Financial Consumer Agency of Canada

Lucie Tedesco

It could be fees that were charged or interest. We assess the difference between what the consumer paid and what they should have paid, and that is the amount reimbursed to them. In short, it is what they were due.

6:10 p.m.

Conservative

Bernard Généreux Conservative Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC

How many investigations were conducted to lead to $15 million in reimbursements? Were there thousands, tens of thousands, or hundreds of thousands?