Finance Committee on July 7th, 2020

[Annie Koutrakis, Liberal, Vimy, QC]

Thank you, Mr. Chair.

Good afternoon and thank you to our witnesses.

Can you comment on the impact the pandemic has had on fraudulent behaviour and scams against Canadians? Are we seeing an increase in scams?

[Judith Robertson]

We do have a concern about that. We are seeing an increased level in scams. I would guess everyone on this call has had those telephone calls. We have embedded alerts against fraudulent behaviour in our information and have been working to update the information with the Canadian Anti-Fraud Centre and with our regulated entities, because it is an area of shared responsibility to try to ensure that consumers are aware and avoid these traps.

[Annie Koutrakis, Liberal, Vimy, QC]

Would you say there's an increase in these scams? Are the scams most prevalent in targeting certain groups? How would you recommend that the federal government respond if there is an increase?

[Judith Robertson]

I don't have particular information about levels or targeting. I would say anecdotally that it would appear as though there has been an increase in these scams and that the response is elsewhere than the FCAC, except to say that we view it as part of our education mandate to try to forewarn and prepare consumers every time we see a scam.

[Annie Koutrakis, Liberal, Vimy, QC]

Also, in order to protect seniors and make banking safer and more secure, we called for the creation of a code of conduct to guide banks and delivery services to seniors. Can you tell us about the code of conduct for the delivery of banking services to seniors?

[Judith Robertson]

Sure. We call it the seniors code. It was agreed to last summer, about a year ago now. It was negotiated with the Canadian Bankers Association, and all members of that association have signed on to it. We view that as an excellent first step in recognizing that there are specialized concerns and issues facing seniors.

We also recognize, though, that the code, as it's drafted, doesn't include everything that people are concerned about, so we will look to continue working in that area for seniors and other vulnerable consumers over time.

[Annie Koutrakis, Liberal, Vimy, QC]

Do I have time for one quick question?

[The Chair, Liberal, Wayne Easter]

You have time for two.

[Annie Koutrakis, Liberal, Vimy, QC]

Okay. Great.

How does the financial literacy of Canadians compare to that of citizens of other G7 countries? Also, how do you think we might improve financial literacy to soften the economic impact in future emergencies like COVID-19?

[Judith Robertson]

That's such a great question. Thank you so much.

Comparisons are difficult. We do have one international study that compared Canadian 15-year-olds internationally, so we have that, and we scored very high. Ruth will correct me if I'm wrong, but I think we were tied for second. I'll say that it's not a very high bar, so doing well internationally, which is our impression as we talk to our international colleagues, is probably still quite challenging for us.

Where we see us moving is in the growing recognition that information is not sufficient, right? Information is not sufficient, so part of our new initiatives is experimentation in using tools and techniques to change behaviour and on what is effective for changing behaviour. It's not just knowledge; it's knowledge at the right time in the right place and in the right form of information, but it's also nudges and behavioural changes. It's quite an exciting time, but also a lot for us to learn and experiment with.

[Annie Koutrakis, Liberal, Vimy, QC]

Do you think that after COVID-19, savings goals for Canadians will or should change? How do you see the future of financial literacy, and should Canadians be trying to save more for unforeseen situations?

[Judith Robertson]

Well, we certainly do see this as a great example of why you should care about your financial resiliency. We've described that as having emergency savings or a cushion, with the ability to withstand unexpected shocks. There could be no better example than this, I would say. It is our hope that if there is a positive that comes out of this experience for all of us, there is perhaps some learning that happens as a result of that shock.

[The Chair, Liberal, Wayne Easter]

Thanks, all of you.

Just to go back to the point I raised earlier on the payday loans, I am absolutely shocked that there are 8% of indigenous and 8% of single parents using payday loans. I never realized it was anywhere near that.

I looked at that website that you mentioned to me, and you basically say that “payday loans are very expensive compared to other ways of borrowing money” and that “is because you pay high fees”, and “the cost may be equivalent to an interest rate of 500% or 600%”. That's usury. That's ungodly. I know they're legal, but man, we have to do something about that.

We will go to Mr. Ste-Marie, followed by Mr. Julian.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Thank you, Mr. Chair. I agree wholeheartedly with what you just said.

I would like to welcome the witnesses representing the Financial Consumer Agency of Canada and thank them for participating in today's meeting. Their presentation was very interesting.

I'm going to come back to the chair's question. Is there anything you can do about the situation he raised?

[Judith Robertson]

I'd just like to clarify the question. Is it on the point about payday loans and the interest rate? Is that the question?

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Yes.

[Judith Robertson]

Thank you.

We share the concern, which is why we have tried, as graphically as we can, to put that information on our website. It's not just on our website, of course; we share that through our networks and try to get that information out.

We do not have authority. That's not part of our regulatory authority over payday lenders. They are regulated provincially. However, we do have an interest, as do you, and we try to use our educational tools in order to give consumers the information they need to make better choices, but the truth is that these businesses exist because they are serving a need.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

You oversee the Payment Card Networks Act, so as I understand it, you have the authority to investigate interchange fees. I would like to know whether you have the authority to make that information public. I'll explain.

Apparently, because of the pandemic, the number of credit card transactions has skyrocketed, both in person, to avoid physical contact, and online, because people are staying home and making more purchases on the Internet. First, can you confirm this boom in credit card transactions?

As elected officials, we often hear that these transactions result in higher interchange fees for merchants. In addition, consumers seem to be more dependent on credit cards and, therefore, on credit.

Could you tell me what kind of investigation you have conducted so far or are planning to conduct?

[Judith Robertson]

Perhaps I'll first explain where we fit in the credit card network operators, because it's a complicated area, with many parties.

The network operators like Visa, Mastercard and Interac also work with individual parties like the merchants, the banks that issue the credit cards, and then of course the consumers.

Your question is about the relationship and the charges between the merchants and the payment card network operators. Our role in that relationship is governed by a code of conduct that is principally designed to ensure that there is proper disclosure and information about charges so that merchants know what they have to pay. That's just a little background on our role.

We do agree, and we have seen reported the increase in transactions taking place, either by debit or credit. That is absolutely valid. We do not know whether that will continue or whether it's a permanent change or a temporary thing, but that is something that we are monitoring.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Thank you.

As I understand it, then, a code of conduct requires that Visa and MasterCard honour their own commitments. If we wanted to change that, it would be our duty to pass a new bill in the House.

Comparisons are often drawn with Australia and the European Union, which regulate interchange fees. I will digress for a moment. In your response, you talked about the relationship between the merchant and the credit card company, but you also spoke of the consumer and their reliance on credit, which is reflected in their credit card usage. The banks and credit card companies were asked to be flexible during the pandemic, but we are quite disappointed with what we've seen so far.

With respect to the Payment Card Networks Act, how does Canada compare with Australia and the European Union, where legislative changes have been undertaken to rein in the credit card companies' power?

[Judith Robertson]

I'm going to ask Teresa if she has some information on an international comparison of fees. As I say, we monitor compliance with the code of conduct, as opposed to setting fees or regulating fees.

Just before we see if Teresa has something to add, I'll just say that the relationship between the bank and the consumer is of course governed under the Bank Act. There are separate regulations there that we also monitor, including the disclosure of the cost of borrowing.

Teresa, I don't want to put you on the spot, but do you have any information on an international comparison of exchange rates, or is that outside our purview?

[Teresa Frick, Director, Supervison, Financial Consumer Agency of Canada]

Thank you very much. I appreciate the question.

I know that we do have some information on international comparisons. Unfortunately, I don't have that with me right now. I'd be happy to share it with you at a later date, if that's all right.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Thank you.

[The Chair, Liberal, Wayne Easter]

Ms. Frick, if you send that in to the clerk, she will distribute it to the committee.

[Teresa Frick]

Of course.