For years, PIAC and other public interest groups in Canada have advocated greater consumer rights and protection in the financial services sector in Canada. These efforts have met with considerable success with the announcement by the Minister of Finance on June 25 of a new policy and regulatory framework for Canada’s banking system. Key benefits for consumers include:
- legislation guaranteeing consumers access to banking services and a low-cost account. More than 600,000 adult Canadians currently do not have access to a bank account, largely because banks would not provide service to these low income individuals;
- a new independent regulatory agency that will ensure that banks adhere to consumer protection policies and to provide consumer awareness and education about banking services;
- the establishment of an independent ombudsman office that will mediate problems and complaints between individual customers and their bank;
- incentives for the development of more community and national banking services to increase competition in services and choice for consumers.
- new restrictions that prevent banks from requiring customers to buy a second product in order to buy the product or service they want. This ‘tied selling’ strategy will now be prevented through an amendment to the Banking Act.
Traditionally regulation has protected large institutional investors and ensured banks’ dominance of the market place. This is the first time that consumer protection legislation has been introduced to the market.
Earlier this year, PIAC, in a coalition with the consumer groups Action Réseau Consommateur, the National Anti-Poverty Organization and Option Consommateurs, issued a Consumer Charter for Financial Services Reform. The provisions of the Charter were:
1. Creation of a Consumer Protection Bureau.
An independent regulatory agency should be established. The agency’s members should include consumer representatives. The agency’s mandate should include consumer protection rules, regulation and compliance, as well as industry auditing and consumer education initiatives.
2. Federal Legislation Guaranteeing Access to Financial Services.
Legislation is required to ensure that: all Canadian have access to a bank account; minimum standards be created for a minimum level of final services; no fee and no minimum balance bank accounts be available; federal government cheques can be cashed at any bank branch.
3. Support for Research, Industry Oversight and Advocacy for Consumer Organizations.
Adequate funding should be provided by the Federal government to maintain and extend the expertise of consumer organizations in representing the needs of Canadians in the areas of policy, regulation and consumer awareness.
4. Ensure that Bank Closures are Handled Responsibly in the Public Interest.
A federal consumer protection bureau should be mandated to ensure that banks are accountable to the communities and neighborhoods where branches are located. Legislation should ensure that when a branch closes that the bank assists in establishing an alternative financial institution that is acceptable to the community.
5. Improve Disclosure and Transparency.
A new consumer protection agency should have the authority to establish regulation and penalties to ensure that: agreements, contracts, service fee billings and marketing documents are available in understandable language and standardized forms; disclosure is mandatory on fees and commissions to third parties; and unilateral amendments to financial services consumer contracts are prohibited. Mandatory disclosure of service fees should also be required.
PIAC’s input is reflected in the policy changes for the financial sector which I announced on June 25, 1999.
The Department looks forward to working with PIAC during the process of developing legislation on these matters.
The Hon. Paul Martin, letter, July 19, 1999.
We were pleased to see that many of these issues were addressed in the proposed new financial services policy. PIAC will continue to push to have the unresolved matters addressed by the Department of Finance and the new regulatory agency over the next few years. As the proposed legislation is passed and the new consumer protection agencies are established, consumers should begin seeing a fairer set of rules and practices in their everyday dealing with banks.
While many of the changes proposed by Minister Paul Martin on June 25 are important steps in balancing consumer rights with those of the banks, there are still a number of issues that have not been fully addressed. One area is bank branch closures. Many Canadians, both in rural areas and in some neighborhoods in cities, are seeing their local bank branch close. Often these branches provide the only banking service in their area. The new bank policy will require banks to justify a branch closure to communities, and will require some consultation with the community to mitigate the affects of the cessation of service. However, the problem of ensuring that some form of banking service will still exist in a community has not been addressed. Other areas of concern include: the lack of clear rules on how long a bank can ‘hold’ a cheque before the funds are made available to a customer; the need to improve physical access to branches for disabled Canadians; and increasing difficulty of receiving “in-person” service from a teller as opposed to the increasing use of banking machines.
Consumers Finally to Get a Say in Some Basic Cable TV Prices
On July 7, the CRTC issued a decision (Public Notice CRTC 1999-108) whereby cable companies will now be required to obtain approval from CRTC before increasing their basic monthly fee when the fee increase is the result of adding a specialty service to the basic package. Specialty services are those channels which generally offer a special theme such as news, sports, or music, etc.. Consumers have long complained to the CRTC about the cable companies arbitrarily adding channels and raising rates in basic service. The CRTC proposed to amend the Broadcasting Distribution Regulations earlier this year (Public Notice CRTC 1999-56) and asked for public comment. In its submission to the CRTC, PIAC supported the proposed amendments and argued that public participation in CRTC decision making should involve all channels which are included in the basic package, including specialty channels.
Under the new rules, cable subscribers will have to be notified about proposed price increases and will have 30 days to voice their concerns to the CRTC. The cable companies will also be required to file information with the CRTC to justify why a specialty channel should be added to basic service. With these changes, the CRTC will be able to suspend or disallow a proposed fee increase if it determines that such an increase is not justified. This is a good victory for consumers. In spite of the hype about competition, most Canadians do not have a choice of who provides their cable service, and where choice does exist, e.g., satellite tv, it is not a comparable option because it can be more expensive than the traditional wire-line cable service.
New Report: “Consumer Issues in Electronic Commerce”
Five years ago, almost no one imagined that consumer activity would shift to a new electronic medium at the rate that it is doing. Electronic commerce has been used by businesses for many years, but only recently has it caught the attention and interest of individual consumers. People can order books, reserve airline tickets, or transfer funds between bank accounts at any time of the day or night, as long as they have a working computer, modem, and Internet service provider.
But is it all a bed of roses for consumers? PIAC’s new report, “Consumer Issues in Electronic Commerce” examines the implications of buying online, and highlights the risks and potential problems of this new medium.
In particular, electronic commerce provides new opportunities for abuse both by the deliberately dishonest and by the careless or cavalier. How do you judge the reliability and integrity of online merchants? As a now famous cartoon put it, “the great thing about the Internet is that no one knows you’re a dog.” Unscrupulous merchants can disguise their identity, and hide behind sophisticated websites that mislead consumers into a false sense of security.
Previously marginal problems such as pyramid selling become far more serious on the Internet, where millions of consumers worldwide can be accessed at very little cost. Consumers are more vulnerable than ever to false and misleading claims, insecure handling of sensitive data, hidden privacy invasions, and lack of effective cross-border enforcement mechanisms. The need for effective consumer protection laws and mechanisms is therefore greater than ever before.
TIPS FOR E-COMMERCE CUSTOMERS
Online consumers should:
- look for information confirming the vendor’s identity, location, and reliability before making online purchases;
- confirm any claims to membership in a quality assurance program such as BBB (eg. confirm with the program that the organization is indeed a member in good standing – this should be possible by clicking on the program logo);
- navigate carefully through retail websites, so as to avoid unintentional transactions;
- read all contractual information presented online before agreeing to purchase, and be sure to obtain a copy of the contract for your own records;
- take reasonable precautions to keep your credit card and/or PIN number confidential;
- be comfortable with the security features employed by the vendor to safeguard the confidentiality of financial information exchanged (NEVER send confidential information by e-mail!);
- look for the vendor’s policy regarding complaints, returns, cancellations, warranties, etc. before transacting; and
- be aware of potential difficulties obtaining redress across borders, in the event of a dispute.
The report can be obtained from PIAC (email@example.com, or tel: (613)562-4002 x.60, or fax: (613) 562-0007) for a price of $20 plus postage. For French versions contact Action Réseau (firstname.lastname@example.org, tel: (514) 521-6820,fax: (514) 521-0736).
Legislated Privacy Protection Still in Limbo
In our May 1999 Hotwire, we highlighted the problem of personal information abuse in the private sector and the need for legislated rules establishing the right of individuals to control over their personal data.
Bill C-54, the federal government’s proposed legislation to protect personal information in the context of commercial activities, was introduced last fall, but never made it through Parliament before the summer break. The government, however, has promised to push the Bill forward when Parliament reconvenes in the fall, and to fulfil its commitment to passing privacy legislation by the year 2000. We intend to hold the government to its promise.
However, the Bill is still in rough waters. Some business groups and government agencies have expressed opposition to the legislation. The Ontario Ministry of Health is lobbying to have personal health information exempted from the Bill, so that it would be completely unprotected under the federal regime. The insurance industry doesn’t like having to get individual consent to share personal information among themselves for the purpose of detecting fraud. Bankers (and others) don’t want to be subject to spot-audits of their privacy practices.
If you want legislated protection of your personal information in the private sector, make sure that your M.P. knows! Tell our legislators how important it is that they pass effective data protection legislation without any further delay. More background information is available on the PIAC website at http://www.piac.ca