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Bill C-29 – The Financial Code
Since 2013, the government has been promising ‘to develop a comprehensive financial consumer code’. It’s been referenced in every single Budget since then. In many countries, there are consumer codes that protect people while banking. These can vary, but most at least have some substantive rules and a set of consumer protection principles for the financial institutions to follow. Canada, by contrast, has some ad hoc consumer protection rules that have been added haphazardly to the Bank Act, Canada’s original governing document for banking, while other rules are in voluntary codes of conduct or even voluntary ‘gentleman’s agreements’ between the government and the banks.
PIAC has advocated over the past few years on something we referred to as the ‘Financial Consumer Code’. We believed it was an opportunity to clear up a lot of the murkiness of consumer rights when it came to banking. After a long process of consultation, and the drafting of a framework by the government, what was left of the ‘Financial Consumer Code’ was found in Bill C-29, a Budget implementation act.
PIAC examined Bill C-29 and concluded that wouldn’t substantially improve the protection of bank customers and might possibly make things worse. Instead of a document which gave solid rights to consumers everywhere, the bill potentially undercut certain stronger provincial laws, provided no new plans for complaints resolution (even though the current regime allows a bank to choose its external ombudsman – an obvious conflict of interest), and seemed to declare the convenience of bankers to be more important than the protection of consumers.
“Bill C-29 does not address real problems such as banks unilaterally changing any provision in their terms and conditions or disclaiming in their terms and conditions any liability for mistakes or negligence,” stated John Lawford, Executive Director of PIAC, before the Senate of Canada. “Contrast the Consumer Protection Code established by the Central Bank of Ireland, which requires banks to act with skill, care and diligence in the best interests of consumers, and which prohibits in principle exclusionary clauses.”
After PIAC appeared before the Senate and the House of Commons, the new ‘rules’ have been taken out of the budget bill, and there is promise of another attempt at a ‘financial code’ for consumers in a separate consumer protection in banking bill. PIAC looks forward to participating in the shaping of a strong consumer code or other rules which will ensure accessibility and safety for all Canadian banking customers.
PIAC has been continuously working to reel in the many unsavoury aspects of payday lending. On occasion, payday loans can be viewed as a necessity for some Canadians. Rough financial patches can obviously come upon people and a payday loan may seem like the only option. This first move, however, begins a chain reaction which for many that starts with one high-interest loan, and ends with many more, assuming that the customer can ever fully get out of the debt cycle.
Recently, there has been some movement in a few provinces to lessen this burden. The Ontario Government has proposed lowering the maximum rate of borrowing from $21 per $100 dollars advanced down to $18 per in January 2017, with another drop to $15 per $100 in 2018. Similar plans are also happening in British Colombia ($17 per $100 borrowed) and Alberta ($15 per $100). However, even at a borrowing rate of $15 per $100 borrowed, a 19 day payday loan still carried an Annual Percentage Rate (APR) of 390%. There has also been movement outside of the government; alternatives to the standard payday loan companies have popped up in Alberta, as well as through a pilot project in Ontario. However, the ideal method of reigning payday loans, in PIAC’s opinion, would be to have a regulatory board establish their borrowing rates.
“PIAC would like to see a review board for the maximum rate of borrowing,” stated Jonathan Bishop, Research Analyst at PIAC. “It should be placed in a public utilities-like board, a publicly funded board that takes in evidence from all stakeholders when determining what that rate should be. Every time a provincial jurisdiction has set a rate, most of the players in that marketplace have kept the rate pretty much at the maximum. This demonstrates to us that payday lenders are not competing on the basis of price.”
The lowered rate of borrowing throughout many of the provinces is a start towards making the borrowing process more manageable for consumers. PIAC will continue to push for changes to better protect consumers, a more equitable system of repayment and to reign in the incredible interest rates consumers face when they’re trying to make ends meet.