Banks Solidly Chided by Feckless Regulator

PIAC reacts with bemusement at the high-level whitewash of banks’ aggressive sales practices
Despite it taking a solid year to get into action, investigate and report, despite reviewing 4500 complaints and talking to hundreds of bank managers, front-line employees and bank executives, despite reviewing 100,000 bank documents, despite extensive media stories documenting unfair, unsuitable and misleading sales practices by Canada’s big six banks, the Financial Consumer Agency of Canada (FCAC) today managed not to find widespread mis-selling of bank products, including travel rewards credit cards, personal lines of credit, increased credit limits, loans, mortgages, high-fee bank accounts and credit insurance in Canada.
The FCAC report is notable for detailing the bank sales culture and the extensive incentives to employees and managers to make sales. It also rightly points out that the control mechanisms employed by banks to discourage mis-selling are virtually non-existent. However, nowhere in this discussion is mention of the obvious fact that such a culture and such financial incentives clearly create a conflict of interest with bank customers, who are seen not as clients in their own right but as a means to an end of meeting sales targets, achieving bonuses or other “non-financial incentives” including company-paid trips and even promotions. This mistreatment leads to sales of products consumers don’t need, don’t want, and cannot afford.
The FCAC report also documents what every banking consumer already knows, namely, that the outsourcing of bank product sales to third parties, in particular those compensated by commission only, are a recipe for ignoring consumer needs and turbo-charges mis-selling.
But for all of its documenting of the general practice of bank mis-selling, the FCAC’s slim 24-page report provides no numbers or even quantification of complaints received or verified and absolutely no indication of which banks had more or fewer complaints regarding sales practices. This assiduous avoidance of any hard facts, or clear accusations directed to any one bank (besides the group as a whole) smacks of protecting the industry and undermines the usefulness and integrity of the entire report. The message from FCAC is: consumers can do nothing about this situation; all of the banks do it and there is utterly no point in switching banks. Suck it up buttercup.
In fairness, PIAC should mention that the FCAC did say out loud that: “retail banking culture encourages employees to sell products and services, and rewards them for sales success. This sharp focus on sales can increase the risk of mis-selling and breaching market conduct obligations. The controls banks have put in place to monitor, identify and mitigate these risks are insufficient.” That kind of language is unheard of in the cozy world of Canadian banking regulation. It is, in short, a strong chiding indeed.
However, having found that “the banks” nurture a culture of overselling, that that overselling creates a “risk” of breaching obligations to consumers, and that the banks effectively do not monitor or control this risk, the FCAC then confidently proclaims that it: “did not find widespread mis-selling during its review”. Really? So, although there was a great risk of poor behaviour due to corporate sales culture, misaligned incentives, and virtually no oversight or internal controls, “the banks” were somehow resisting temptation to oversell to customers? While this may be theoretically possible, PIAC believes this conclusion is unlikely.
The hundreds of bank employee and customer stories conveyed to the CBC alone belie this conclusion.
The 4500 complaints from recent years reviewed by FCAC are but a fraction of those that are made directly to the banks each year, yet the FCAC in its report found that the banks were not keeping sufficient records of these internal complaints even to know how many were made, let alone the nature of the complaints – what the FCAC described as a “limited line of sight” to complaints. What the FCAC has really described is wilful blindness of the banks to the fundamental conflict of interest with their customers.
So, to us, this is a problem. And only the Minister of Finance can try to fix it. FCAC can’t and won’t.
How can the Minister of Finance fix this and avoid the potential dismantling of the banks as they turn away from their greatest strength and source of revenues, retail customers? By re-introducing his promised Financial Consumer Code – this time with real rules that require that banks act to act fairly, honestly and in good faith towards their clients and to sell products and services that are in the clients’ best interests. Anything less should be mis-selling and prohibited.
PIAC will be demanding a new Financial Consumer Code to make sales and performance of banking services work for consumers and to force banks to mend their ways.

CRTC Television Service Provider Code takes effect from September 1: A Step in the Right Direction

PIAC welcomes the CRTC’s decision to implement the Television Service Provider Code (Code), allowing Canadians to make well-informed choices. CCTS, an independent ombudsman, will now review consumer complaints about TV subscriptions.
The Television Service Provider Code is a mandatory code of conduct for most television service providers (TVSPs).
How would it help Consumers?
From September 1, 2017, TVSPs must give consumers clear information about their products, services and pricing. Specifically, by providing:

A “critical information summary” with a copy of the written agreement in plain language- including a list of channels or packages subscribed to, monthly costs, contract duration, and complaints filing procedure
Information as to the duration and conditions attached to any promotional offers
Information as to the charges and time it would take to do any installations and repairs
Thirty days’ notice for any price changes
A trial period for Canadians with disabilities

Consumers are encouraged to carefully read these agreements. Before signing, get clarification from the TV Service Provider to avoid any confusion. Consumers should note that, unlike the Wireless Code, the TV Service Provider Code provides few substantive rights, and instead focuses on making the TV service provider offers more transparent. Therefore, consumers should be vigilant and carefully compare the services before subscribing. The major benefit of the TVSP Code, outside of improved information, is consumers’ ability to bring complaints about bundled services. (TV sold with internet and for wireless or wireline telephone) to the CCTS (See below).
What can Consumers do to resolves disputes?
PIAC has actively advocated for an independent ombudsman to handle consumer disputes with their television service providers. We are pleased that now, if consumers are unable to resolve any issue with their TV Service Provider or telecom provider, they can complain to the Commission for complaints for Telecom-Television Services (CCTS).
The CCTS is an independent organization committed to help customers resolve complains about Canadian telecommunications and television services. The CCTS can only take TV complaints on issues arising on and after September 1, 2017. It cannot review TV issues, which arose before this date.
How to complain to the CCTS?
Consumers can complain to the CCTS, free, by completing an online complaint form. Before filing any complaint, they must attempt to resolve the issue with the TV Service Provider, otherwise approach the CCTS. They must also check if and when their TV service provider is required to join the CCTS. This information is available on CCTS’s website.
What will the CCTS do?
The CCTS reviews and accepts any complaint within its mandate, which is subjected to an informal resolution and investigation. After this, the CCTS may make recommendations on what needs to be done, and finally issue a decision.
What can the CCTS help with?
The CCTS can help resolve complaints concerning billing issues, services provided, credit management, and compliance with contracts terms and conditions. Consumers may expect a refund in case of any overbilling.
Useful resources:
Source: CRTC website, “The Television Service Provider Code (Infographic)”, online: http://crtc.gc.ca/eng/television/services/icode.htm.
Canadian Radio-television and Telecommunications Commission, Broadcasting Regulatory Policy CRTC 2016-1, (January 7, 2016).
Canadian Radio-television and Telecommunications Commission, The Television Service Provider Code (Infographic).
Canadian Radio-television and Telecommunications Commission news release, “Canadians will soon be able to file complaints about television service providers with ombudsman for communications services”, (August 30, 2017).
Canadian Radio-television and Telecommunications Commission, “Your Consumer Rights for TV Services”.
Canadian Radio-television and Telecommunications Commission, “Commission for Complaints for Telecom-television Services (CCTS).”
Commission for complaints for Telecom-Television Services resources. See its TV mandate, complaints form and Complaints process explained.

“The Economist” concludes Canada has “most affordable” Internet– what is wrong with this picture?

The Economist’s Intelligence Unit released a study yesterday concluding that Canada, amongst the countries studied, has the world’s most “affordable internet”. This greatly surprised us at PIAC and we beg to differ.
The Economist study defined affordability as: “the cost of access relative to income and the level of competition in the Internet marketplace.”
However, a closer look at shows that the only aspect of internet service where Canada truly leads the pack is “average revenue per user”– a measure of how much Canadians spend on internet service. In other words, the study counterintuitively concluded that Canada’s internet is the world’s most affordable even though Canadian internet companies make more money from Canadian consumers than any other internet providers in any other country. The strange conclusion that our internet is the most affordable appears to stem in part from the study’s measure of income, which is then compared to the access cost. Income is based on average income – meaning that, relatively speaking, access costs may appear affordable relative to Canadians’ average income but it may well not be affordable to Canadians living below the average income threshold.
More importantly, the Public Interest Advocacy Centre defines affordability quite differently than the Economist’s Intelligence Unit. In our first report on communications affordability in Canada in 2015 we stated that:

a [communications] service can be described to be affordable where its cost does not require a household to cut back its expenditures on other basic necessities such as food, shelter, clothing, transportation and health care. This relative threshold can be quantified as a percentage of household income. We suggest that communications services are “affordable” where, as a guideline, they make up about 4% to 6% of a household’s income.

PIAC also noted:

However, affordability in our view must also incorporate a subjective quality because it is related to control – the ability of an individual or a household to control their expenditures in order to fulfill their needs. Therefore, because affordability concerns a household’s control over their budget, affordability is also about choice which allows a household to access a service offering which meets their needs. An assessment of affordability, therefore, should take into account the choice and preferences of low- income consumers in meeting their needs.

The Economist’s index measure of affordability is an economist’s blunt one that only judges by relative, average, objective measures. PIAC, however, considers the essentiality of these services and understands subjectively how low-income Canadians struggle to afford communications. We surveyed low-income Canadians. They told us that communications is essential to them and what’s more, 17% told us they have gone without essential goods like food, medicine or clothing to pay their communications bills. We published our findings and took those findings to Canada’s telecommunications regulator, the CRTC. The CRTC heard our submissions and called on Canada to take action to address challenges with affordability:

Over the course of the BTS [Basic Telecommunications Services] proceeding, however, the CRTC heard from Canadians forced to make difficult spending decisions due to the cost of broadband Internet access services. Given the economic, socio-cultural and civic importance of broadband, the CRTC concluded that any Canadian left behind in terms of broadband access is profoundly disadvantaged, and that coordinated national action is necessary to address this problem. The risks of non-action are too great: missed opportunities for innovation, creativity and engagement; reduced competitiveness; weakened domestic prosperity; and diminished prospects for Canadians.

PIAC hopes to see such action in the 2017 Federal Budget, as well as in federal and provincial government initiatives going forward. After examining the affordability of communications services in our two reports in 2015 and 2016, PIAC advocated for, in the CRTC hearing noted above, the establishment of a National Affordability Plan to ensure broadband Internet service is both available and affordable for low-income households in Canada. PIAC also suggested the CRTC spearhead affordability initiatives, with federal and provincial political support and coordination. Sadly, the CRTC refused to take responsibility for communications affordability in Canada and instead asked the federal and provincial governments to take the lead. Nonetheless, PIAC continues to advocate for a flexible end-user subsidy, which we believe would most effectively address the affordability of communications services by allowing low-income Canadians to make telecommunications choices that best suit their needs.

An Update on Skinny Basic

On September 8th, PIAC was invited by the CRTC to represent consumers’ views at a hearing regarding the ‘skinny basic’ service which was implemented by all Canadian TV providers earlier this year. The hearing served as somewhat of a follow-up on the direction of TV over the last few months.
PIAC believes that offering a ‘skinny basic’ package is a great step forward for consumers and businesses. It allows a low price option for consumers who are stuck in higher-priced packages but only watch a few channels and it also gives consumers who are avoiding just that scenario the choice to sign up as new customers for a reasonable price.
Unfortunately, the roll out of skinny basic was missing a mandatory (at that time) ‘pick and pay’ option, which would give consumers real control over their cable package and many companies that did offer pick and pay were priced very high. Pick and pay will be available from all providers in December of 2016 and PIAC hopes competition will help lower those prices.
The skinny basic hearing was a chance to look back at the implementation of skinny basic, the problems that consumers have had since then, and what CRTC will be considering for the future of television. The first day featured the companies answering questions from the CRTC.
The first problem addressed was bundle discounts. Bundle discounts often weren’t given for skinny basic subscribers, while other subscribers in the higher-priced brackets were given them. If you’re getting your TV from a company, and they normally have bundle deals with internet or phone, you should be eligible regardless of what TV package you have. As the hearing progressed, Rogers said they would give bundle discounts to those subscribers in the near future.
Shaw also received criticism from the CRTC blocking video on demand and free previews for people on skinny basic. They claimed that this was because of a ‘tech issue’ and it would soon be resolved.
Finally, on day 1, Bell had to explain the leak of some customer service representative materials which called for employees to discourage people from buying the skinny basic package. Bell claimed it was limited to their Bell Aliant branch, and that they needed to centralize their learning materials in the future. However, it does show the reluctance with which some of the companies approached the skinny basic mandate to begin with.
PIAC presented to the CRTC on the second day of the hearing and was very clear, consumers want an “all-in” pricing scheme so you know how expensive your skinny basic package will be: that would include the receiver or PVR, installation fee, loss of any discounts, hardware or how much it would cost in a bundle. PIAC also asked for more clarity around what is included in packages and for the companies to find a way to promote packages more fairly online and through customer service people; there should be a requirement to mention that skinny basic and pick and pay are options for customers.
“We’re trying to make it so that the companies don’t play games, and when you call you get an honest description of what’s in the package, what it’s going to cost you and how it’s going to affect your other services,” John Lawford, Executive Director of PIAC said. “Given honest information, people will pick what works best for them and a good portion will pick skinny basic. A good portion more will pick it once pick and pay is available.”
The hearing seemed to indicate that the direction of TV is certainly more friendly to consumers. Currently, there is some progress on a TV Service Provider Code (TVSP), similar to the Wireless Code that PIAC championed 3 years ago. Stronger rights for consumers and more options through the skinny basic and pick and pay plans leave consumers with more control over what they watch and how much they pay. We’re looking forward to working with the CRTC to ensure that consumers are heard for the new TVSP code and that the new options are properly promoted by TV companies.

Skinny Basic TV Comes to Town

As of March 1st, 2016, all subscription TV (cable, IPTV, satellite) providers in Canada will have to offer a ‘skinny basic’ package, and the option to add on, at least, smaller packages of up to 10 channels or, at their option, à la carte pricing of channels – known as “pick and pay” (true pick and pay for all TV service providers will be required in December 2016). The ‘skinny basic’ is an entry level basic television package featuring local broadcasts, as well as cultural channels, the weather network, and the CBC. The capped price for this service is $25 (it does not include terminal rentals (set-top boxes, PVRs) or taxes). The CRTC has summarized the skinny basic and pick and pay rules in a recent Bulletin.
Skinny basic, with or without pick and pay, is something we at PIAC have been pushing towards for over 10 years. Our research repeatedly has shown that Canadians were eager for the opportunity to have a ‘basic’ service option that isn’t bloated with channels or at a high price point.
With 1 in 3 Canadian households now subscribing to Netflix, and rising subscriptions to competing services “CraveTV” and “shomi”, the direction of the industry appears to be moving away from the massive pre-selected packages of programming and more towards viewing what you want, when you want. The decision by the CRTC may seem like a blow to subscription TV providers but, in fact, switching to a more choice-based interface appears inevitable – and may even increase demand and convince consumers who wanted certain channels but were turned off by the packaging schemes to stay in the subscription TV system.
We believe this is a great opportunity for both consumers and subscription TV providers. There are a growing number of cord-cutters and “cord-nevers” who, perhaps, could be enticed back into ‘plugging back in’ or plugging in for the first time, at a cheap price point and with some amount of freedom of choice. However, within the TV industry some do not see it that way. The CBC has cited sources saying that Bell is “…making the basic package simply unbuyable.” According to the article “The Bell training document states: “Do not promote the Starter TV package. There will be no advertising, and this package should only be discussed if the customer initiates the conversation.” Shaw has named their package “Limited TV”, which seems somewhat uninspiring for prospective subscribers. Rogers and TELUS, as of February 29, 2016 still have nothing on their site about the basic $25 package.
It’s unfortunate that this new product seems to be treated more as a burden than a blessing. There are some organizations that have embraced the basic package. VMedia touts the first skinny basic package offering “TheSkinny” for $17.95 (coupled with their required set-top box rental and internet service subscription, however).
Speaking of extra charges, during the CRTC’s consultation on a Television Code to protect consumers, PIAC and the National Pensioners Federation told the Commission that set-top box policies were a source of consumer frustration because they were often unclear and unfair. Additional charges for the box or applications weren’t always spelled out, customers renting their set-top boxes could ultimately pay far more than the value of the box without knowing who was responsible for replacing or repairing them, and customers still had to pay the same price to rent or own even as the value of set-top boxes depreciated.
The CRTC did not address PIAC’s concerns with such equipment charges when it issued the finalized “TV Code” early this year. However, the implementation of the new skinny basic package and the FCC’s proposal in the United States to open up competition for set-top boxes show that the equipment issue will remain relevant for some time. Now it appears that set-top box charges and other disadvantages (like loss of or no offer of, bundle discounts and downgrade charges to move from higher cost TV packages to the new skinny basic plans) are plaguing early offers of skinny basic service. PIAC will be watching these developments.
We hope that after the March 1st starting point TV service providers will push the basic package for what it is: an opportunity for consumers who have sworn off subscription TV, were considering it but hesitating, or who just couldn’t afford an expensive cable, IPTV or satellite TV package to get basic local television at an affordable price.
We’d also like to make sure that consumers who were anxiously awaiting these packages have a smooth transition either into the package or moving from their high priced package into the skinny basic. If you run into any problems with your provider while subscribing to or making a change to your cable/IPTV/satellite TV package, or you face high or unfair equipment charges, downgrade charges or loss of discounts, please contact us at piac@piac.ca and share your story with us.
We look forward to more affordable package being made available to consumers and the true pick and pay channel subscription service coming to all cable subscriptions in December 2016!

CMPA Prime Time 2016 – Day 1 – Fear Factor

The annual “Prime Time in Ottawa” conference hosted by the Canadian Media Production (or is that “Producers”) Association kicked off yesterday and PIAC’s Executive Director, John Lawford, attended. The conference brings together media producers, distributors and regulators. The first announcement was indeed that the CMPA would rename itself from the Canadian Media Production Association to the Canadian Media Producers Association. PIAC will attempt to remember this change in upcoming regulatory filings. More substantively, new CMPA CEO Reynolds Mastin overtly called for a “Netflix tax” and called it inevitable and chided the CRTC for apparently being willing to “rubber-stamp” the recently announced acquisition of Shaw Media by Corus Entertainment – a view which PIAC shares.

The mood was quietly fearful. The CRTC’s Talk TV suite of decisions are now heading into the first phase with required skinny basic packages required to be offered by TV distributors as of 1 March 2016. Almost everyone expected this to cause much pain for producers as distributors lost revenue as consumers trimmed TV packages to the skinny offering. Pick and pay, which is the other shoe to drop from the Talk TV decision, does not fully come into force until December 2016. However, it already is the subject of much uncertainty, which participants said was additive to the largest concern: the non-contribution of “over-the-top” (OTT) services to the Canadian Media Fund and other funds dedicated to supporting Canadian production.

Panels on “Discoverability” of content (which is the Hail Mary pass of the traditional production and distribution industry in the face of OTT) and the “Evolution of Advertising” (which discussed the changes in where media advertising dollars have gone and are going) are the subject of future posts.

The undoubted highlight of the day, however, was the appearance of the Minister of Canadian Heritage, the Honourable Mélanie Joly. Minister Joly immediate situated the cultural industries and production industry in the innovation and economic development space. She exuded confidence that Canadian culture and productions could become a major economic driver in Canada (in part by cultural exports). The key question, which she carefully addressed, was the possibility of a “Netflix tax” of some kind, whether that took the form of a direct tax on OTT services or a direction to the CRTC to require contribution to Canadian media funds. Minister Joly stated that the government would be examining all options to help the industry manage the “Digital Shift”. Thus the audience was left to read the tea leaves. She did, however, commit the government to publicly consult on the issue and also the wider question, possibly, of Canadian broadcasting policy in general. PIAC looks forward to participating in any such consultation on behalf of consumers and viewers.

To gain a sense of what PIAC might say in this consultation, please see our recent remarks presented at the CRTC proceeding on the future of local and community TV and our comments on the OTT and CanCon decision in the Talk TV proceedings suite.

Poll saying ‘relevance’ of internet is key issue for non-users misses the real point: affordability

IPSOS Public Affairs released a poll in mid-December 2015 which indicated that affordability was not the biggest problem for people accessing the internet but rather a lack of interest. They found that 49% of non-internet-using Canadians say they don’t subscribe due to a lack of relevance. They also state that only 30% of those not subscribing say cost is the major factor.
The trouble with this poll is how it treats the Canadians that do not subscribe to the internet. The summary of the poll states “The Digital Divide is often seen as being driven primarily by income inequality but, in fact, lack of affordability is only a barrier for a fraction of Canadians”.
The statement suggests that affordability of internet really isn’t too much of a problem in Canada. But if you look at the percentage of non-users of the internet at home overall (9% – made up of 5% that don’t use it at all and 4% that access only elsewhere or via a mobile device) and then look at the methodology of the poll, it becomes very easy to confuse high- and middle-income non-users with a low income non-users. This potential confusion is exacerbated by the presentation of the poll in the Ipsos summary and subsequent reporting. So, when the poll summary states that “In fact, most (70%) non-subscribers do not mention cost at all as a barrier” that includes non-users from all income brackets – from less than $25K to over $100K. The poll sought a general account of Canadians’ internet participation and a general reason for non-participation. But it oversteps its bounds by trying to downplay affordability without ever questioning those polled about affordability, in particular, those Canadians who have lower than average incomes.
If you ignore the blanket statements made in the poll summary and just look at the numbers, it is a much more telling story. Among those who make less than $25,000 a year, 30% don’t subscribe to the internet. When you go just above $25K to the next income level ($25-$50K), only 11% don’t use it, and that trend continues its decline to only 2% among the highest earners polled (over $100K). That is a stark difference in access rates.
An important aspect of the affordability question that wasn’t considered at all is how to define “affordability”. In PIAC’s recent affordability research, done with ACORN Canada, we spoke to many low-income individuals about their use of the internet. There were those who did not subscribe, but there were also many who did still subscribe and who were sacrificing other essentials in order to access the internet. Affordability is better measured not just by asking ‘do you subscribe to the internet’ but rather, what are low-income subscribers doing to afford the internet? If the answer is taking from their food budget, then is that really affordable? Without asking any further questions about affordability, the poll can’t so easily dismiss affordability (cost) as a real issue among non-users and low-income users alike.
We are currently in the middle of the Basic Service Objective (BSO) hearing , where the CRTC will decide whether internet access is an essential service for Canadians, not unlike the telephone. The structure and presentation of this poll seems to draw attention away from the idea that many Canadians are struggling with the high price of internet, and instead, blame them as “unengaged” consumers.
The poll summary states “…a more salient issue is that of relevance, i.e. those who see the value of the internet in their lives are willing to pay for it, and those who don’t are not.” However if, as we suspect, the internet has indeed become an essential part of Canadians’ lives, they will find a way to pay for it, if possible. And those who cannot pay for it at all will pay in their personal lives with social exclusion and lack of opportunities to participate in the digital economy. Without diving into the real question of affordability, and the effects of it upon internet use by low-income Canadians, the poll only muddies the debate.