Government Operations Committee on Oct. 31st, 2016

[Robert Martin]

It depends on the area. I would say that overall, just in terms of assets, we're steady. We are growing in the small to medium-sized enterprise market. We're almost as big as BMO right now in terms of what we do as a collective of individual credit unions. In ag we've grown. Probably until two years ago, we were steadily growing and then there's been some slowdown.

[Nick Whalen, Liberal, St. John's East, NL]

One thing identified by the task force was the strong brand value associated with Canada Post. Do you think the Canada Post brand, associated with banking, would allow your organization to attract and retain customers you wouldn't ordinarily be able to attract and retain? Would your organization pay a premium to be part of such a...?

[Robert Martin]

I think we might look at it the other way, that in some regions, in terms of the attactiveness of banking institutions, the credit unions would have some attractiveness, say, if you were living in northern Alberta and you know Servus Credit Union. If there were a joint branding exercise with Canada Post, then I could see there could be some synergies. Once again, it all depends on the terms of a contract with Canada Post and how that's modelled. Once again, we want it to be an open process.

[The Chair, Conservative, Tom Lukiwski]

Thank you very much.

Mr. McCauley, you have seven minutes, please.

[Kelly McCauley, Conservative, Edmonton West, AB]

Welcome, gentlemen.

Mr. Irwin, thanks for being here today. I appreciate your comments. We have heard a lot across the country about the predatory...I don't want to say “spin”, but the predatory narrative that's been spread around. To my understanding, most of the payday loan outlets are within a block or two of an existing bank. Is that generally correct?

[Tony Irwin]

I don't have specific information on that, but it would not surprise me if that were the case.

[Kelly McCauley, Conservative, Edmonton West, AB]

Most of your customers, I understand, actually do have bank accounts. They just do not have the ability to put in their paycheque and access the money immediately.

[Tony Irwin]

Right. Banking is not the issue. They do have accounts. The issue is obtaining credit. They have had trouble doing that in other places.

[Kelly McCauley, Conservative, Edmonton West, AB]

Right.

Money Mart, I guess, is the largest player in town. How big would their collections office be? We heard from someone in Edmonton that they had about a 20% default rate on their cheques, but they had about 500 people in their collection department.

I ask this because the question came up earlier about whether or not Canada Post would do their own collections.

[Tony Irwin]

Yes. I read some of those transcripts in advance preparation for today.

I don't know how many people Money Mart employs for collections, but they do have a significant operation for that action in Victoria. They have a full team there.

I think there are a few important points to note about that in terms of some of the testimony I read. From the collections standpoint, they don't generally seek redress through the court system. These are small loans.

[Kelly McCauley, Conservative, Edmonton West, AB]

What I'm getting at is that it's not a simple procedure, is it?

[Tony Irwin]

No, it is not, sir. In terms of trying to work with their customers, trying to work out some sort of payment plans, a lot of times they do that before the loan is even due if the customer has indicated they can't repay it on time. Our members do try a number of ways to work with their customers to obtain repayment of the loans.

[Kelly McCauley, Conservative, Edmonton West, AB]

Right.

Mr. Hannah, I asked another witness earlier today about this. The postal bank has been presented by some parties as a panacea to cure all that ails you financially with Canada Post. What would it cost to capitalize Canada Post as a full bank across the country?

[Darren Hannah]

That's a good question. Actually, the regulator would be in a better position to answer that than I would. There's a minimum capital requirement, but then there is, beyond the statutory minimum, whatever it would take to satisfy the regulator that the enterprise has sufficient capital strength to carry itself forward and has put in place sufficient operational and managerial capacity so that they are fit and proper and know what they're doing.

[Kelly McCauley, Conservative, Edmonton West, AB]

Well into the billions?

[Darren Hannah]

It would be enormous.

[Kelly McCauley, Conservative, Edmonton West, AB]

Yes. This is what we came across in Alberta. The ATB had switched over to a new accounting system with SAP. I think they spent $500 million just on training for the new system. It boggles the mind what it would take to do this across the country with individual outlets.

One of the other issues we're hearing about is the amount of bank closures and credit union closures in small towns, but I saw a report where it was actually less than 100 planned over a five-year period. Is that generally correct? The quote for the Bank of Montreal was “several” across the entire country.

Again, I ask this just to counter the narrative of this dystopian future where banks are shutting everywhere, leaving them without services.

[Darren Hannah]

As I said in my opening remarks, branches still matter. They still are a feature of the banking system. There are over 6,300 bank branches in Canada right now. The number has actually gone up a little bit in the last few years. It's also worthwhile noting that this number is roughly twice the number of Canada Post corporate outlets.

[Kelly McCauley, Conservative, Edmonton West, AB]

Right.

[Darren Hannah]

If you add in the credit unions, I think it would be up to 3:1. The footprint is large and substantial.

[Kelly McCauley, Conservative, Edmonton West, AB]

So it's actually growing.

Mr. Martin, we heard from some of your colleagues at Desjardins about doing training sessions for seniors for online banking and mobile banking in Saskatchewan. Do you see that and similar initiatives growing with the credit unions, to reach out to the rural areas that might be looking for—

[Robert Martin]

In general, individual credit unions would have their own individual financial literacy programs, in the past. Now what's happened is that Vancity has elaborated a very sophisticated financial literacy program, called Each One, Teach One. They have just given that to the system gratis. They are rolling it out across the country. Individual credit unions are now incorporating Vancity's model of financial literacy. That will be an ongoing project for us for many years. It eliminates the duplication we used to have in our financial literacy models.

So yes, we're doing that in a big way.

[Kelly McCauley, Conservative, Edmonton West, AB]

Mr. Hannah, maybe you, or actually even Mr. Martin, can answer. We were in New Brunswick, where we heard from a local mayor who was doing a phenomenal job in his town but they had lost their bank and they had even gone as far as offering basically free rent to attract a bank, with no takers.

One of the recommendations that came out of one of the reports when they talked about banks teaming up to go with Canada Post, I think was mostly just renting space within an existing Canada Post. Is that viable? If we have a town that's doing well but if they can't even get a bank with free rent, is it viable to think that banks will team up to rent in areas where it may not be financially viable?

[Darren Hannah]

You've put your finger on it. As you said in the last statement, there's the financial viability. The rent of the location is but one factor that goes into financial viability. You have to look at the size of the market. You have to look at foot traffic. You have to look at economic circumstances. Ultimately, the business decision to close a branch is not one that anybody takes lightly. Ultimately, these are customers you want and these are your clients, and you are part of the community. There is a robust process that banks go through to ensure that there is community involvement and they have a consultation and talk about alternatives.

But at the end of the day, you're correct, in that it has to be driven by viability and a number of factors go into assessing viability.

[The Chair, Conservative, Tom Lukiwski]

Thank you very much.

Mr. Weir, for seven minutes, please.