Mr. Speaker, in April 2009 the House passed my motion to bring relief to Canadians by instituting binding regulations regarding credit cards, yet two and a half years later the government has failed to fulfill the will of the House.
Last year, in an attempt to placate consumers, the Minister of Finance introduced the voluntary code of conduct for credit cards. However, this move was mostly spin, with little substance.
In the first place, the code of conduct simply did not do enough to protect consumers. For example, the code was directed mainly toward the credit card issuers, meaning that most of the issues addressed were those of small businesses, not consumers.
While I welcome any way to help small and medium-sized businesses in Canada, and while I recognize that helping them protect their razor-thin profit margins could help lower consumer prices, there are many precise issues, specifically at the banking level, that affect consumers directly and that were not addressed by the code.
Additionally, even those provisions that were put in place do not go far enough. Study after study by academics and reserve banks shows that consumers who use cash and debit cards are effectively subsidizing the spending of credit card users, as businesses are forced to increase their prices to cover merchant fees. Credit card users then receive reward points, cash back, or air miles to compensate them for this increased cost, while consumers using cash and debit cards are forced to cover this cost with no return.
Second, this weakness is compounded by the voluntary nature of the system. The failure of voluntary systems of quasi-regulation has been brought to light recently by the banks pulling out of the Ombudsman for Banking Services and Investments external complaint resolution system. When banks first joined OBSI following a spate of consumer complaints and media coverage of the failure to resolve them, the industry and the minister of finance of the day made a behind-closed-doors deal to adhere to the system in order to avoid formal regulation from a government body.
Now, with the eye of economic reporting focused elsewhere, the government has allowed banks to leave the OBSI system and instead settle their complaints through a downtown Toronto law firm. The government likes to say that this brings choice to the market, but the only ones getting choice on the matter are the big banks.
What is to stop the government from allowing credit card issuers to leave the mechanisms of the voluntary code of conduct later, when it senses the opportunity?
The banking industry is one of the fastest-changing industries in the world, and even specialists sometimes struggle to keep up with the acronyms and investment vehicles that banks use. It is important that the government keep up with the industry.
As I stated earlier, the Minister of Finance likes to applaud our regulatory regime. However, if we do not keep moving forward, we risk being left behind. The government needs to act now to ensure that our financial regulation continues to protect consumers, businesses and the economy as a whole.