moved:
Motion No. 2
That Bill C-82 be amended by deleting Clause 45.
Motion No. 4
That Bill C-82, in Clause 55, be amended by deleting lines 19 to 42 on page 31 and lines 1 to 10 on page 32.
Motion No. 6
That Bill C-82, in Clause 412, be amended by replacing lines 18 to 22 on page 254 with the following:
"Governor in Council."
Mr. Speaker, I wish to speak to these amendments and to refer briefly to the hon. parliamentary secretary with regard to Bill C-82 covering a number of financial institutions. I think that is correct, a number of the wishes were put into place, a marked improvement forward.
However, the sections I am referring to, essentially clause 45, part of clause 55 and the subsequent amendment to clause 412, are there for a very specific reason which has to do with tied selling. Tied selling means to sell one product on the condition that another product be purchased. In other words, in the case of getting a mortgage from an institution you would get that mortgage only on the condition that you also brought your RRSPs or other kinds of things to that institution, which could be a bank, credit union, trust company or whatever the case.
The difficulty is that the individual once having made application for loan and wanting that loan has no choice. That is where the issue lies and this is where we want to come to grips with this matter.
I draw this to the attention of the House. The government has indicated that it would pass this legislation at this time but that it would not proclaim these two sections of the act until September 1998. That proposes a very interesting dilemma. If the issue is that this should be done now, then why would one delay this thing? The rationale given was that it has to be given to the finance committee so it can study in depth the implications of tied selling in the world of financial business.
All the rest of this was done in consultation with industry and was subjected to an in depth study. Now apparently this issue requires further study but in the meantime the government will pass legislation to permit institutions to do it. There seems to be a certain lack of logic in this procedure.
I am so concerned about this issue because it is not in the interests of the consumer. There are people who would argue this is of particular interest to certain vested interests in the financial sector.
I submit that the interest is the consumer and the protection of the consumer. I draw to members' attention the comments that were made by the director of government relations of the Insurance Bureau of Canada when he appeared before the committee: "If there is an area where the committee may choose to make Bill C-82 an even better piece of legislation, it is with respect to the tied selling provisions proposed under section 459.1 of the Bank Act. Our view is that subsections (2) and (3) have been worded too
broadly and may permit the bundling of certain bank products and other financial services in a way that may not be beneficial to consumers".
That is the crux of the issue. It is not only our view but it is the view of the Insurance Bureau of Canada and the member companies. It is also the view of the Insurance Brokers Association of Canada, which has written a similar letter on this issue.
The matter goes even further when we get into the statement: "The finance committee is also expected to assess ways to make a distinction between cross-selling and practices anti-competitive or coercive ones. The distinction between what is and what is not acceptable could be, we are told, reflected in future regulations. If our understanding is correct, it implies that the proposed interpretive amendments to section 459.1(2) and (3) of the Bank Act may be deleted or modified to reflect the finance committee's findings and recommendations".
What are the implications of tied selling that make me concerned and that show why these provisions are not in the interests of the consumer? Probably the primary issue here is the matter of forcing consolidation of financial assets into a single institution.
Why is this significant? In this case we are dealing only with banks. It should apply to other institutions as well but the act refers here only to banks. They could precipitate a change in loan status, credit lines and so on based on the customer information available to them from information that may be existent in a subsidiary.
We were told before the committee by the Canadian Bankers' Association that the bank would never use information from its health insurance subsidiary or their life insurance subsidiary to in any way influence what would happen in terms of this issue.
Let me read the policy statement that exists in one of the subsidiaries of one of our six major banks. This is written to clients of this subsidiary: "In respect of the law the officers and employees must scrupulously observe in letter and spirit all laws governing business and securities activities. Confidentiality of client information is a fundamental principle of our firm. No employee may release confidential client information unless required by law or with the client's consent".
Then there is assurance that the subsidiary is wholly owned subsidiary of the bank and the bank guarantees all the liabilities of the subsidiary.
Now comes the key part, sharing client information. The subsidiary: "May give confidential client information to the bank. This type of information includes a client's name, address, phone number, income, assets, debts, investment objectives and financial plans".
The bank may use this information for the following purposes: to sell its services to the client; to survey the relationship between the subsidiaries and their clients; to determine the amount of debt outstanding to the subsidiary and to the bank; for any other purpose about which the subsidiary will inform the client in writing. That is the clincher.
What is excluded? Nothing. The bank will not pass this information to anyone else. Notice under the heading of consent: "By opening an account with this subsidiary, you are consenting to the bank's use of the information. If you want to end this consent, you must give written notice to the subsidiary, addressed and delivered to your subsidiary's branch. Your notice will be in effect when you receive a written acknowledgement from that subsidiary. The subsidiary may then decide to close your account if you said you wanted to withdraw this consent, and give you at least 30 days written notice before doing so. They will assume that you have received this notice five days after it was mailed".
If that is not a clear indication of how the information in a subsidiary may become the information available to another subsidiary or the bank, I would like to know what could be clearer than that.
That is one of the reasons confidentiality of information and consolidation of all of one's financial assets under one bank could be very serious if one of these businesses or certain parts of the enterprises get into difficulty.
There is another reason this is not in the best interest of the consumer. The point has been made, which is precisely what subsection 459.1(2) states, that preferred rates may be given on the condition that certain other products and services be purchased from a particular person. Preferred rates are given.
What does this suggest? It seems to me that we all know about lost leaders. It is certainly possible for a financial institution, in this instance a bank, to provide the individual a preferred rate, perhaps even a preferred rate in RSP purchases or in terms of negotiating securities. Then, once the business is consolidated under one roof, it could simply say: "Guess what? Our costs have gone up and we are going to have to increase the price of these services to you".
It is certain price fixing and a certain monopoly position vis-à-vis a particular customer that may not be in the interest of the consumer.
Finally and probably the most significant part is to recognize that we in this country need freedom. We need freedom of choice, fairness and equality. If the government wants to declare its support for consumers in the first instance, to support growth and development of small business and to maintain strong, stable and viable financial institutions like banks, it will support these amendments.