Our second main point is that consumers need to know a lot more information about their debt and any new debt that they take on. Our fellow panellist, the FCAC, has outlined in their financial literacy strategy key building blocks for empowering consumers in making financial decisions, which include having the skills to navigate the financial marketplace, being knowledgeable and confident, and knowing how to manage expenses, debt and savings.
We simply do not have clear data on how well—or not well—Canadians understand the various credit products and services available to them and the costs and risks associated with the ones they are recommended. The same goes for how well Canadians understand the related rewards programs with their credit cards. At minimum, consumers need to know the risks, costs, hidden costs and cumulative effect of each new debt product they take on and how it will affect their credit score. This is especially important for younger Canadians and newcomers to Canada who are navigating the credit score system for the first time. We do not believe disclosure of this information will solve the problem, but we do believe in making sure consumers have their eyes wide open each time they take on new credit or change their credit services.
Our third point is about credit-card-like products operating outside of credit card consumer protection regulations at the federal level. The biggest example of this is the “buy now, pay later” services offered through online providers or through the major banks. While our neighbours to the south have already begun expanding credit card consumer protections to include these credit-card-like products, the FCAC has done only one small study on the use of these services and how they impact consumers. PIAC would like to see more proactive approaches to expanding regulations to these types of products as well, which are mostly used by and targeted at young and financially vulnerable people.
Another example would be the credit cards and credit products offered by non-federally regulated banks, including those from fintech companies. This is called open banking or consumer-driven banking and is slowly being implemented in Canada with budget 2024's planned consumer-driven banking framework. It is important that the people who use these open banking services are protected. We recommend implementing consistent consumer protection regulations for these products across the country. “Open” should not become a synonym for “unregulated”, because this will only worsen the current credit landscape for Canadians.
Thank you. We welcome your questions.