Evidence of meeting #40 for Finance in the 43rd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was information.
A recording is available from Parliament.
3:30 p.m.
Liberal
The Chair Liberal Wayne Easter
Okay. No to the two-meeting proposal.
Are we ready for the question, then? I don't believe Mr. Fraser is back.
(Motion agreed to: yeas 9; nays 1)
We will have to go to the other meeting, but could I have some idea, Pierre, when we should try to start these meetings?
3:30 p.m.
Conservative
Pierre Poilievre Conservative Carleton, ON
The idea was to hold them all within this month. I think we could just get the subcommittee together and book some time and we'd be off to the races.
3:30 p.m.
Liberal
The Chair Liberal Wayne Easter
Yes, we can do that, then.
Parties, think about your witness lists. We have four three-hour meetings and we certainly don't want to go with more witnesses than we have for our regular pre-budget consultations. That may be too many, I would think.
We'll get together as a steering committee and try to sort this out. I'll be in contact with people as soon as possible.
We'll suspend for two minutes and then we'll go to our regular meeting.
3:35 p.m.
Liberal
The Chair Liberal Wayne Easter
We will reconvene.
For the witnesses who are here, we had a committee meeting just before this, and we'll continue now.
I welcome people to meeting number 40 of the House of Commons Standing Committee on Finance.
We're operating under an order of reference from the House and meeting on the government's response to the COVID-19 pandemic, as has no doubt been stated to you on your invitation.
Today's meeting is taking place by video conference and the proceedings will be made available via the House of Commons website.
With that, I would like to welcome the witnesses from the Financial Consumer Agency of Canada. I am not sure who is leading off with a presentation.
Please go ahead and introduce yourself. The floor is yours.
3:35 p.m.
Judith Robertson Commissioner, Financial Consumer Agency of Canada
Thank you very much, Mr. Chair.
I am the leadoff hitter today and I am very happy to be here. Thank you very much for the invitation to update the committee on how FCAC is responding to the COVID-19 pandemic.
As suggested to me, I will be speaking only in English to avoid any technical difficulties.
As suggested to me, I will be speaking in English today to avoid technical difficulties with the back-and-forth.
I am joined by three colleagues: Frank Lofranco, deputy commissioner of supervision and enforcement; Teresa Frick, director of supervision; and Ruth Stephen, director of strategic policy, research and education. They are here to provide additional detail on specific program areas if desired by the committee.
I will first give a short background on the agency and then focus my comments on our response to the pandemic.
FCAC is a federal agency that operates independently and is primarily funded by the financial institutions we regulate. Our mandate is to protect Canadian financial consumers. We do that in two principal ways.
First, we supervise federally regulated financial entities, primarily banks, for compliance with consumer protection measures as set out in legislation, public commitments and codes of conduct. Second, we promote financial literacy through education and raise awareness of consumer issues and rights. Knowledgeable consumers are better-protected consumers.
I was appointed commissioner last August, so this is my first appearance before this committee, and since that time we have been focused on preparing the agency for our next stage of evolution.
Even prior to the unique challenges of COVID-19, we had a lot on our plate. Our role was recently strengthened, as you know, by legislative changes to the FCAC Act and the Bank Act that received royal assent in December 2018. They provide new powers for the commissioner, embed financial literacy as core to our mandate, and modernize Canada’s financial consumer protection framework. Some of these provisions came into force on April 30 of this year. The other elements will come into force over time, as they require the regulations that are currently being drafted and time for both industry and FCAC to prepare for implementation.
We have made remarkable progress over the past year. We refreshed our vision and mission statements, introduced a new organization structure, recruited a new senior management team—including Frank Lofranco, who has been with us two months—published our strategic priorities and improved the transparency of our adjudication process. Of course, there is still much to do.
FCAC has a team of about 160 people who have been working remotely since the middle of March. Like many organizations, this is a difficult new reality for our employees and has required us all to adapt and adjust. I am happy to report that thanks to the dedicated efforts of our team, we have adapted and have maintained our progress even during these unprecedented times.
Turning to our COVID-related actions, in our supervisory work we have maintained close contact with the financial institutions we regulate and have proactively communicated our expectations, including that they prioritize providing safe access to financial services, particularly for vulnerable consumers. We adjusted our priorities so that financial institutions could reassign internal resources to adapt their operations and to accommodate the demand for financial relief. For example, we paused our industry consultations on the new framework for the past few months. That work is now back on track; however, we recognize that we need to remain flexible and may need to adjust again as the situation evolves.
Despite considerable disruption and pressure on their operations and employees, banks have demonstrated a commitment to ensuring that financial services remain available. They have shown a willingness to work with impacted consumers who request financial relief. We have provided some data on that in our background information.
We consider these relief measures to be public commitments and are therefore monitoring that they are implemented in a fair and appropriate manner. To that end, we have been receiving weekly reports on payment deferrals for mortgages and other credit products since April. Based on our data, while the implementation has not been perfect, most consumer requests have been approved and in a timely manner.
On the consumer education side, FCAC is supporting consumers with unbiased, fact-based information through our call centre and online resources. Our call centre volume has increased by 28% compared with the same period last year, and our online resources have seen increased traffic, as we quickly created and promoted new pandemic-specific information that is responsive to the current situation. We are committed to providing updates as the situation evolves.
Finally, through our ongoing research programs, FCAC monitors financial consumer trends and behaviours. For example, we are building on the baseline established by the Canadian financial capability survey, which we published last fall. Starting this month, we will be launching two new monthly surveys to update that information and assess the changes resulting from the impact of the pandemic. These survey findings will help inform our supervision efforts and enable us to refine and update our educational information for consumers.
From the outset of the pandemic, we have worked closely with our stakeholders to gain insights into the issues consumers are facing. This includes the 18 financial literacy networks, representing over 600 community organizations across the country. We have also initiated communication with provincial regulators on matters of mutual interest and have been coordinating closely with the other members of the Financial Institutions Supervisory Committee, or FISC, which, as you know, includes the Department of Finance, the Bank of Canada, CDIC, OSFI and us. In addition, FCAC actively participates internationally in organizations such as the OECD, where we share information and ideas and learn about best practices elsewhere.
Through all these efforts and initiatives, we aim to live up to our vision, which is to be a leader and innovator in financial consumer protection. Consumers must have confidence in the financial system, especially in times of crisis. The actions we and our FISC partners have been taking in response to the pandemic are designed to contribute to that confidence, and FCAC is committed to working together with others to uphold the protection measures that consumers have come to rely on.
This completes my opening statement, and I am happy to answer any questions that you may have.
3:45 p.m.
Liberal
The Chair Liberal Wayne Easter
Thank you very much, Ms. Robertson.
Mr. Lofranco, you sure picked an interesting time to come into your new seat.
3:45 p.m.
Frank Lofranco Deputy Commissioner, Supervison and Enforcement, Financial Consumer Agency of Canada
I agree.
3:45 p.m.
Liberal
The Chair Liberal Wayne Easter
It's interesting and difficult.
For members of the committee, I just got an email from Mr. Fraser, who is the parliamentary secretary. The power is out in his area of Nova Scotia and the Internet is down. Nothing is working, so we'll see if he gets back on.
We will now turn to the first round of questions. The question order will be Mr. Poilievre, Ms. Koutrakis, Mr. Ste-Marie and Mr. Julian.
Mr. Poilievre, you're up.
3:45 p.m.
Conservative
Pierre Poilievre Conservative Carleton, ON
Thank you very much.
It's good to be with the FCAC. Thank you very much for coming.
In 2019, consumer bankruptcies were up 9.3%. Other proposals, which can include insolvency or writedowns, were up 17.8%. That's the year-over-year change from 2018-19. In other words, there was a very large increase in bankruptcies prior to COVID-19. This is not a phenomenon that can be blamed on COVID-19, because it occurred before the very first case of COVID-19 was discovered in Canada.
Do you have any insight into why an increasing number of people were finding themselves in this tenuous position prior to the arrival of COVID-19?
3:45 p.m.
Commissioner, Financial Consumer Agency of Canada
It is well understood that there were increasing concerns—and certainly our research supports those concerns—about the high level of indebtedness of consumers generally, and particularly those consumers whom we consider vulnerable.
I mentioned in my opening remarks our financial consumers survey, which we publish on a five-year basis. We published it last fall, and certainly the information in that survey corroborated the high levels of indebtedness and the lack of resiliency among Canadian consumers. If you would like more detail on that, Ruth was instrumental in that survey. She could go a little deeper if you would like.
3:45 p.m.
Ruth Stephen Director, Research, Policy and Education, Financial Consumer Agency of Canada
Thank you, Mr. Chair.
Results from our 2019 financial capabilities survey indicate that nearly three-quarters of Canadians have some type of debt outstanding or used a payday loan at some point over the previous 12 months, and almost 31% believe that they have too much debt. We know that higher debt levels are linked to financial stress, so we've been working hard to inform consumers about how to manage their finances well, and we continue to collect data on debt.
3:45 p.m.
Conservative
Pierre Poilievre Conservative Carleton, ON
Thank you, Ms. Stephen.
I have two questions to follow up. One, did you say 19% of Canadians used a payday loan? Did I hear you right?
3:45 p.m.
Director, Research, Policy and Education, Financial Consumer Agency of Canada
Nearly three-quarters of Canadians have some type of outstanding debt or used a payday loan. If you would like, I could provide you with more specific data on payday loans specifically.
3:50 p.m.
Conservative
Pierre Poilievre Conservative Carleton, ON
Yes, if you would, that would be very helpful. Do you have that now, or would you like to send it later? Either is fine.
3:50 p.m.
Director, Research, Policy and Education, Financial Consumer Agency of Canada
I have that. In terms of the overall population, 2% of Canadians used a payday loan over the previous 12 months. Then you will see that percentage rising for a specific vulnerable subgroups. For example, in low-income households, 4% of low-income households used payday loans. Among indigenous peoples, it was 8%, and it was 3% of individuals with lower educational attainment and then 8% of single parents.
3:50 p.m.
Conservative
Pierre Poilievre Conservative Carleton, ON
All right.
What group of Canadians is most vulnerable to a financial crisis like a bankruptcy or an insolvency? Is there a specific income quintile, a specific geography, a specific age group or a combination thereof that you can highlight?
3:50 p.m.
Director, Research, Policy and Education, Financial Consumer Agency of Canada
I could speak to the demographics that are struggling to make ends meet. Based again on our Canadian financial capability survey, people struggling to meet their financial commitments or falling behind on bill payments are most likely to be under the age of 65, individuals with incomes under $40,000, those who are separated or divorced, indigenous peoples and lone single parents.
In terms of individuals who are least confident in their ability to meet unexpected expenses, these were vulnerable populations such as single parents, once again; low-income households; renters; and individuals who were aged 55 and under.
3:50 p.m.
Conservative
Pierre Poilievre Conservative Carleton, ON
More specifically then, do you believe that there is a possibility of large-scale bankruptcies and insolvencies? Right now, do you believe we could experience enough bankruptcies and insolvencies that there would be a generalized debt crisis?
3:50 p.m.
Commissioner, Financial Consumer Agency of Canada
I'll take that one. Thanks, Ruth.
The current situation, of course, is very difficult for all Canadians, and particularly difficult for those who had less financial resilience to start with. This is an area of concern for us. We do not have any particular insight into bankruptcies or insolvencies. Our role is not to forecast those things, but we do share the concern about the exposure of these vulnerable groups of Canadians.
We have been doing a number of things, particularly on the education front. I mentioned that over the course of the first weekend we pulled together some excellent information about how to respond and react. We are continuing to update that and will use the information we get on our new surveys.
We have also been working with the Department of Finance, for example, to increase the size of government cheques that can be cashed at a bank to match the CERB amount, again to try to avoid people going into payday loans. We've updated our payday loan information in order to give people the information they need in order to do the best they can with the resources they have.
3:50 p.m.
Liberal
The Chair Liberal Wayne Easter
Thank you all.
Ms. Stephen, what's the regular interest rate on payday loans?
3:50 p.m.
Director, Research, Policy and Education, Financial Consumer Agency of Canada
I don't have that information with me, but I can certainly provide it.
3:50 p.m.
Liberal
The Chair Liberal Wayne Easter
It's desperately high, I know, but I would love to know how much they're overcharging.
Go ahead, Ms. Robertson.
3:50 p.m.
Commissioner, Financial Consumer Agency of Canada
I have a quick reference. We did an infographic that's on the Government of Canada website. I don't have the numbers in my head, but it's actually a pretty good picture that translates into an interest rate. If you wanted to just go to governmentofcanada.ca/moneypaydayloan, you'll find it.
3:50 p.m.
Liberal
The Chair Liberal Wayne Easter
Thank you. That's good information to have.
We'll turn to Ms. Koutrakis, followed by Mr. Ste-Marie.