High Consumer Risks Associated with Cryptocurrencies, Lack of Relevance for Average Consumers as Payment Systems

New PIAC Report: Assessing the Emergence of “Alternative” Currencies and Legal Risk: The Consumer’s Perspective

OTTAWA – A new research report by the Public Interest Advocacy Centre (PIAC) shows that there are high consumer risks associated with the use of alternative currencies (referred as “cryptocurrencies” in the report). PIAC’s study indicates that consumers lack knowledge about the risks associated with cryptocurrencies, affecting their ability to make well-informed decisions.

PIAC’s research shows that cryptocurrencies in their present form also are of little relevance for the average consumer as functioning payment systems. Cryptocurrencies today suffer from a litany of woes resulting from their current design limitations, which affect their speed and potential volume of daily transactions. Cryptocurrencies’ level of acceptance as payment systems by both consumers and merchants consequently remains low.

“Consumers should generally avoid cryptocurrencies as payment mechanisms or investment vehicles until regulators can make enough sense of the area to ensure basic financial consumer and investor protection,” stated John Lawford, Executive Director and General Counsel at PIAC.

There is no secure system to reimburse financial losses, and no secure storage mechanism. The cryptocurrency exchanges remain effectively unregulated from a fiduciary or a consumer protection perspective, with no financial security guarantees. Given their volatility, and unpredictable swings in value, cryptocurrencies presently also remain of limited practical use and relevance to the average consumer as a payment system and, as speculative investment vehicles, present extreme consumer risks.

Our research shows that several jurisdictions are moving towards imposing strict regulatory frameworks; however, at the time of writing, no clear and comprehensive framework could be identified in the context of payment systems. Central banks are found to be unwilling to accept the idea of cryptocurrencies operating as mainstream payment systems. The idea of a central bank issued digital currency, also known as a CBDC, has been analyzed by several central banks. However, at this time it does not appear that any central bank would engage in the issuance of a CBDC in the foreseeable future, although the benefits of such a currency for consumers, if it were to be proven to be feasible, could be substantial.

“It is surprising to see central banks’ apparent reluctance to issue a CBDC, considering the advantages it may hold for consumers in the near future,” noted Tahira Dawood, PIAC’s Policy and Research Analyst.

The report identifies an imminent need for raising consumer awareness, regarding the risks associated with the use of these currencies. It recommends consumers to exercise caution when dealing with cryptocurrencies, either in form of payment systems or as investment vehicles. The report recommends the creation of a working group of key stakeholders within Canada to review and address consumer risks in this space. The report also recommends that the Canada Revenue Agency consider introducing a simple, easy to understand guide for consumers concerning the tax issues arising from cryptocurrencies.

To view the report in English, please see the following link.
To view the report in French, please see the following link.

The Public Interest Advocacy Centre has received funding from Innovation, Science and Economic Development Canada’s Contributions Program for Non-profit Consumer and Voluntary Organizations. The views expressed in this report are not necessarily those of Innovation, Science and Economic Development Canada or of the Government of Canada.
For more information please contact:
John Lawford
Executive Director and General Counsel
Public Interest Advocacy Centre (PIAC)
Tel: 613-562-4002 x 25
jlawford@piac.ca

Tahira Dawood
Policy and Research Analyst
Public Interest Advocacy Centre (PIAC)
Tel: 613-562-4002 x 23
tdawood@piac.ca

BACKGROUNDER on the Financial Consumer Agency of Canada Domestic Bank Sales Practices Review

FCAC confirms banks “mis-selling” products to consumers
TORONTO, March 20, 2018
The Financial Consumer Agency of Canada (FCAC) has published a report on its review of domestic banks’ retail sales practices (the “Report”). The Report, which follows 9 months of investigation, finds that the banks do not prioritize financial consumer protection, fairness and product suitability and as a result there is an increased risk of mis-selling to consumers and of bank employees breaching market conduct obligations.
The FCAC News Release identifies the following as key findings in the Report:

Retail banking culture is predominantly focused on selling products and services, increasing the risk that consumers’ interests are not always given the appropriate priority.
Banks’ financial and non-financial incentives, sales targets and scorecards may increase the risk of mis-selling and breaches of market conduct obligations.
Certain products, business practices and distribution channels present a higher sales practices risk.
Governance frameworks do not manage sales practices risk effectively.
Controls to mitigate the risks associated with sales practices are underdeveloped.

FAIR Canada and the Public Interest Advocacy Centre’s (PIAC’s) Key Observations from the Report include:

Compensation structures (sales practices) and firm-wide practices place employees’ and banks’ interests ahead of the interests of Canadians.
Legislative and regulatory requirements for banks are inadequate. The Report defines “mis-selling” as the sale of financial products or services that are unsuitable for the consumer; sales that are made without taking reasonable account of the consumer’s financial goals, needs and circumstances; and sales where consumers are provided with incomplete, unclear or misleading information. Mis-selling, according to the Report, does not amount to a violation of a market conduct obligation. In other words, the rules are inadequate.
There is inadequate protection for Canadians at banks and reforms are needed. FAIR Canada and PIAC call for a best interest standard so Canadians get the advice they expect and deserve. We believe that a best interest standard is urgently needed for those engaged in providing financial advice to consumers. Such a best interest standard should include acting fairly, honestly, with a duty of loyalty to the client and avoiding conflicts of interest, among other things. As part of a best interest standard, banks would be required to avoid financial and non-financial incentives, targets, scorecards or performance measures that puts Canadians at risk of harm.
A best interest standard would lead banks to adapt their business practices so that employees no longer prioritize sales over the interest of the client.
The Report notes that branch and call centre channels have shifted their focus to other kinds of services including “providing financial advice and sales-related customer service”. The fact that these institutions purport to provide “advice” warrants a higher standard of conduct.
FAIR Canada and PIAC are disappointed that the Report does not provide any specifics as to how many Canadians were harmed or what percentage of products sold were done in a manner that was wrongful or unsuitable for consumers. There is no support for their key finding that they “did not find widespread mis-selling.”
Although Canadians may conduct millions of routine deposit, withdrawal and payment transactions through banks, when they seek to make important financial decisions, such as obtaining a credit card, obtaining a line of credit, taking out a mortgage, or purchasing various types of complex investments such as market linked GICs, PPNs, Structured Products or Mutual Funds, they are at serious risk of being ill-advised, misinformed and mis-sold these products. This demonstrates inadequate consumer protection and has serious consequences for Canadians’ financial well-being.
The Report should have greater emphasis on what the risks mean for the financial well-being of Canadians.

Consumer Complaints

The FCAC found “Weaknesses in policies, procedures and systems for handling complaints limit the ability of banks to adequately monitor, identify and report complaints to management, boards and FCAC.”
FAIR Canada and PIAC call for a complete overhaul of the internal bank oversight, management and reporting and handling of consumer complaints.
Banks should be required to follow the FCAC Internal Guidelines for internal complaints and the Internal Guidelines need to be reformed so that consumers do not have to complain at two separate levels at their bank. In addition, consumers should have the right to go the external complaints body if they have not obtained a resolution of their complaint at the bank within 90 days. They should not have to wait for a 90 day letter from the bank (which may not be forthcoming in a timely manner).
FAIR Canada and PIAC also call for major reform to the consumer complaint handling system. The Minister of Finance should work towards having one, national, statutory ombudservice for financial services complaints that can issue binding decisions.
Finally, we are concerned about the robustness and rigour of the proposed enhancements to the FCAC’s supervisory and enforcement functions set forth at page 24 of the Report.

For more information please contact:
Frank Allen
Executive Director
Canadian Foundation for the Advancement of Investor Rights
(FAIR Canada)
36 King Street E., Suite 400
Toronto, ON M5C 3B2
647-256-6693

John Lawford
Executive Director & General Counsel
Public Interest Advocacy Centre (PIAC)
1204 – 1 Nicholas Street
Ottawa, ON K1N 7B7
613-447-8125 (cell)
(613) 562-4002 ×25
lawford@piac.ca
www.piac.ca

Marian Passmore
Director of Policy and COO
Canadian Foundation for the Advancement of Investor Rights
(FAIR Canada)
36 King Street East Suite 400
Toronto, ON M5C 3B2
647-256-6691
marian.passmore@faircanada.ca
www.faircanada.ca

PIAC Research Finds Increasing Legal Risk in Payment Systems Being Borne by Consumers

OTTAWA – A new research report published by the Public Interest Advocacy Centre (PIAC) today demonstrates increasing legal risk being borne by consumers when using established as well as new innovative electronic payment systems.
“Consumers are increasingly being asked to shoulder legal risk with online payment methods,” said John Lawford, Executive Director and General Counsel to PIAC. “Consumer protection in electronic payment systems should be at least as strong as, if not stronger than, protections in traditional payment systems, like paper cheques. Sadly, they are increasingly more risky to consumers, which drives consumers away from realizing the efficiency and advantages of electronic payments.”
The report finds inconsistent allocation of legal risk from electronic payments transactions depending on their form, jurisdictional overlaps and gaps between federal and provincial rules and asymmetrical service provider contracts that leave consumers at a distinct disadvantage.
The report makes four key recommendations towards a universal regulatory framework that is based on principles and consumer safeguards, including: universality and consistency; functional regulation (regulating a function rather than the nature of the provider), accountability; and objectives such as social and financial inclusion.
To see the full report in English, please consult the following link.
To view the report in French, please consult the following link.
The Public Interest Advocacy Centre has received funding from Innovation, Science and Economic Development Canada’s Contributions Program for Non-profit Consumer and Voluntary Organizations. The views expressed in this report are not necessarily those of Innovation, Science and Economic Development Canada or of the Government of Canada.
For more information please contact:
John Lawford
Executive Director & General Counsel
Public Interest Advocacy Centre (PIAC)
(613) 562-4002 ext. 25
jlawford@piac.ca

Summer Newsletter: Bankers Behaving Badly

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 allegations about aggressive sales tactics by TD Bank employees became big news in Canada, it has become even more apparent that the practices and policies of the banks need to be looked at and that consumers need some protections in place.
“Employees at TD bank, it’s alleged, were raising credit limits without permission, issuing credit cards without consent, things like that. Non-disclosure and consent were the two main irritants for us, because they’re definitely not allowed,” said Jonathan Bishop, Research Analyst at PIAC. “When we read these reports it re-ignited our concern of the need for a financial consumer code. A few days after our own blog post on the CBC story, the CBC posted another story saying this wasn’t just TD, it was many banks in Canada. So it’s obvious, we need to do something to protect consumers.”
After PIAC appeared before the House of Commons and Senate to make its case against these ‘new rules’, they were, soon after, taken out of the budget bill. There is now a promise of another attempt at a ‘financial code’ for consumers in a separate consumer protection in banking bill. The Minister of Finance has since began a survey of the provincial laws which touch on banking, with the idea of putting together a new bill that protects provincial rules.
PIAC hopes to assist with this process by creating a list of proposals for this bill, based on codes in other countries which have worked for consumers there. With a strong national code to protect consumers on top of the provincial rules currently in place, banking would become a much more reliable and safe place for consumers. The survey should see some results by Fall 2017.

Banking on Change

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.
PayDay Loans
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.

Summer 2016 Newsletter: Financially Uncertain

Payday Loans
PIAC has long advocated for strong legislation in dealing with certain aspects of the financial world: namely, the payday loan and financial planner/advisor industries. In recent months, there has been much discussion in government regarding some safeguards for payday loan users and potentially some order brought to planners/advisors.
Payday loan storefronts have become nearly as plentiful as Tim Hortons’. The industry has become increasingly widespread and it hasn’t shown any signs of slowing down. Rough financial patches can obviously come upon people unexpectedly. The problem with taking out a payday loan is that the interest rate often leaves those customers needing to take out another loan to afford their first loan, and then another and another.
“The maximum rate of borrowing is problematic in any jurisdiction. You’re looking at financial products that are charging consumers, if you took the interest and made it annual, anywhere from 400-600%; that’s uncalled for,” observed Jonathan Bishop, Research Analyst for PIAC. “This leads to a situation where consumers are on a virtual ‘hamster wheel’ where they need to keep taking loans out, and keep taking loans out, and there’s really no way to easily get off once you’ve started.”
The Ontario Government has begun to move on this situation by introducing Bill 156, which would address the ‘unending loan’ problem by having the third loan that a customer takes out within 62 days be converted into an installment loan. Currently, the loans have very quick turnaround times, generally a few weeks at best. The Ontario Government is also looking into addressing the rate of borrowing. However, the proposed plan falls short of truly addressing the extremely high interest rate of a payday loan. Jonathan Bishop believes that a public review board should be formed to ensure the rates are reasonable.
“PIAC would like to see a review board for the maximum rate of borrowing,” stated Bishop. “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. It’s clear that the market will not take care of lowering the maximum rate of borrowing. Competition has not lowered it. 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. Which demonstrates to us that competition isn’t working the way it would in other markets.”
The payday loan issue in Ontario is still in its consultation phase, with Bill 156 being offered to a legislative committee for review. PIAC will continue to push for changes to better protect consumers, a more equitable system of repayment and to reign in the astronomical interest rates consumers face when they’re trying to make ends meet.
Financial Planners
If you’ve ever found yourself looking to invest or just trying to plan out your financial future, you may have sought the services of a financial planner or advisor. When you embark on that trip to work on your financial future, you would likely assume that those titled individuals are held to a certain standard when helping you. Unfortunately, in most provinces, except for Quebec and to some extent British Columbia, the government regulates the sale (and sellers of) financial products, while the advisory services from “financial planners” or “financial advisors” are not regulated.
The reason why it is so difficult to sort out the differences between financial planners and financial advisors, and to understand what they can and cannot do, is because they all are not regulated – meaning they can do what they will. The Ontario Government is currently looking at how the government can better regulate financial planning and those who give financial advice. PIAC is adamant that there needs to be greater order brought to this industry.
“At the moment individuals call themselves a ‘financial planner’ or something that sounds similar and they’re not regulated. It sounds like they are, but they’re not for that activity anyway. The first reform we’d like to see is to have them all licensed and to give them a common set of names they can use which have proficiency standards attached.” stated John Lawford, Executive Director of PIAC. “Then we really need to look at how they get paid. At the moment, you can’t tell how they’re paid because it often comes from trailing commissions and referral fees and all sorts of things the client doesn’t see, so you think your investment just didn’t make that much money this year but it’s because 2% or more came off the top in commissions.”
Consumers deserve a clear idea of what they can expect when they seek out financial advice. PIAC has continually tried to steer government towards a set of guidelines for the financial advisor/planner industry that give Canadians a fair and informed start to their financial futures. They should be able to know they are dealing with an accredited financial service worker, and they should know the advice given to them was not swayed by commission money or other factors.
The Ontario Government continues to hold meetings and seek guidance on how to bring some order to the financial planner/advisor industry. PIAC continues to advocate for more effective protections for Ontario investors that will set a standard that other provinces will also strive towards. While some results are expected later this year, consumer protection in the financial services will remain an active file for PIAC going forward.

Bad Advice

How you handle your money now can make a big difference in what you can afford later. It can be difficult to figure out a plan or where to invest on your own and visiting a financial planner or adviser might sound like a necessary step. Most people assume that, as with most professions, a financial adviser or financial planner is a regulated title representing specific competencies. However, in most provinces, except Quebec and to some extent British Columbia, the government regulates the sale (and sellers of) financial products, while the advisory services provided by “financial planners” or “financial advisers” are not regulated.

In fact, the reason why it is so difficult to sort out the differences between financial planners and financial advisers, and to understand just what it is they can and cannot do, is because they all are not regulated – meaning they can do what they will. This has led the Ontario Government to create an expert panel to look at how the government can better regulate financial planning and those who give financial advice. PIAC is adamant that there needs to be some order brought to this industry.

“In the financial services industry right now, there are a multitude of professional titles being used: financial adviser, financial planner, registered financial planner, wealth coach and so on,” Jonathan Bishop, Research Analyst for PIAC mused. “In 2012, there were at least 25-30 different titles being kicked around the province of Ontario. There are also a multitude of title-granting associations and certification bodies. We’d like to have these titles legislated. We’d like it set up that only qualified people can call themselves a ‘financial planner’ or a ‘financial adviser’ and that it’s clear to consumers what you can expect from that title. And the fewer number of titles used, the better.”

Someone walking in to meet a “financial adviser” (or a myriad of other similar titles) might believe that there is some duty on that adviser to disclose their conflicts of interest, such as if they make a commission on the product she buys, or to put her interests above the adviser’s – to ensure she gets the best product. In fact, since only the products sold are regulated (by the Ontario Securities Commission, in Ontario and other securities commissions in other provinces), it is up to the adviser’s discretion what they disclose and up to their own ethical standards whose interests they put first.

“Financial planners” on the other hand claim that instead of just selling an investment product they look at things like personal cash flow, estate planning, income taxes, retirement planning, insurance needs and investments and build a “financial plan” for the customer to navigate all of these areas to achieve their financial goals throughout their life. Financial planners state that where they need professional advice in one of the key areas (for example, tax) that they will refer client to the appropriate expert (an accountant or tax lawyer in this case) for help. The problem with financial planners, however, is much like that for financial advisers: no one has made financial planning a regulated profession or with standard government requirements. So while there are self-appointed accreditation bodies claiming to train and oversee these requirements, competencies can vary. And even the best private accreditation schemes may not police all their members to do all aspects of the job because as a body paid for and created by members there is another conflict of interest at their heart – they may avoid disciplining those that pay the bills – leaving consumers at risk.

PIAC wants to see real and significant change in the huge and important financial services industry. Before a consumer walks through the door of anyone offering any level of financial advice to know what it is that person does, and what services they can expect. Once they’re inside, they should expect that the financial adviser or financial planner will disclose the details of what investments they sell or will recommend – including if the “adviser” is getting a commission or fee, or giving the consumer a choice based on a limited selection of financial products.

“At some point someone has to say ‘this sucks’ and there’s actually a race to the bottom in terms of standards. Because one way to get ahead is to be a bad actor, get more commission on a product, or tell customers less,” John Lawford, Executive Director of PIAC stated. “There’s an understanding in places like the U.S., Australia, and England that it’s gotten out of hand. The financial services industry is too gigantic, too unregulated, and having too direct an impact on individual consumers.”

PIAC is hoping the Ontario government will take the lead on this issue and produce some legislation that makes real changes. A financial adviser or financial planner should act in the consumer’s best interest, not their own.

Lending Consumers a Hand

Low value-high interest “payday” and similar loans are used by a large number of low-income Canadians as they fall behind on bills or have an emergency pop up. Storefront payday lenders (now more numerous than McDonalds restaurants or RBC branches) are being joined by numerous online lenders. Unfortunately, the increase in ‘competition’ among payday lenders hasn’t resulted in interest rates going down as they vie for business while consumer indebtedness to this high-cost credit has risen sharply. This has led to the Ontario Government starting a review of the Ontario Payday Loans Act, 2008.
PIAC has been looking into the payday loan industry since the early 2000’s, and has submitted its suggestions to the Ontario government for this review process. We hope the review results in meaningful changes.
“There are two big problems with payday loan companies. Their rate is very high and the entire amount that you borrow is generally due within 2 or 3 weeks. When a loan is high cost and is due in full on the next payday – not paid off over time like a standard loan – it will cause the people who took the loan in the first place to be unable to meet other obligations,” John Lawford, PIAC’s Executive Director points out. “Maybe they can go 2 to 3 weeks without having to take another loan, but they will be short again soon because their other obligations go on and it will keep perpetuating. People who take payday loans tend to take around 10-12 in a year. That pattern of repeat borrowing is where profit is made by the industry. That’s not responsible lending.”
With rates that don’t seem to move with competition, high availability, and some degree of borrower desperation, those who need to borrow some money to get by end up falling into a virtual debtor’s prison from which it is difficult to escape. Many Canadians who should get credit counseling or debt repayment schedules or even debt forgiveness (whether through insolvency or charity) are instead being propped up longer by payday loans and finding themselves deeper and deeper in debt.
Some places have already made drastic moves against the payday loan industry: New York effectively has made them illegal by stipulating an interest rate cap below 30% annually. There’s an argument that in areas like that, those who need money fast will turn to illegal loans, but Lawford says that’s not the case.
“There’s no evidence people automatically turn to illegal lenders or even that that’s that much of the market right now. In the places where people have banned the industry or reduced it, it appears that people just don’t take loans,” Lawford said. “It’s hard to say why with the current data, but it’s not true that it automatically turns into an equal volume of illegal loans. That suggests to me that, for whatever reason, the way the payday loan product is structured now is convenient and easy and it may mask the harder but probably better way of getting out of debt.”
Canadians need a fair solution to the problems payday loans present. A solution that makes lending available, but not a life sentence in debt.
“PIAC would like to see a review board for the maximum rate of borrowing,” stated Jonathan Bishop, Research Analyst for 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. It’s clear that the market will not take care of lowering that maximum rate of borrowing. Competition has not lowered it. 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. Which demonstrates to us that competition isn’t working the way it would in other markets.”
PIAC is hoping to see Ontario’s provincial legislation in place to make the payday loan business model more consumer-friendly by Spring of next year. Alberta recently has announced a review of the industry. Other provinces wishing to protect the borrowing public should follow suit.

PIAC Files Submission on Financial Advisory and Financial Planning Policy Alternatives for Ontario Consumers

September 25, 2015 – Ontario consumers continue needing additional protections when engaged with financial planners or those giving financial advice, according to a submission by the Public Interest Advocacy Centre (PIAC) to the Ontario Ministry of Finance. PIAC’s submission to the Expert Committee to Consider Financial Advisory and Financial Planning Policy Alternatives suggested the creation of enforceable regulations or legislation to ensure those providing financial planning or financial advice always act in the best interest of consumers.
“Many Ontario consumers expect their financial advisor to work in their best interest, and many do. However, the Expert Committee should recommend a defined legal standard that accurately reflects consumer expectations,” noted John Lawford, PIAC’s Executive Director & General Counsel.
PIAC also suggested limiting of the use of unnecessary or misleading job titles by financial advisors and planners, as well as enhanced disclosure about how a financial service provider is paid.
“If PIAC’s suggestions help balance the scales between Ontario investors and their financial service provider, then all industry stakeholders should benefit,” noted PIAC Research Analyst Jonathan Bishop.
To read PIAC’s submission to the Government of Ontario Ministry of Finance Expert Committee to Consider Financial Advisory and Financial Planning Policy Alternatives, please follow the link below:
PIAC Submission Final
The Ontario Ministry of Finance Expert Committee to Consider Financial Advisory and Financial Planning Policy Alternatives consultation paper can be found using this link:
Initial Consultation Document
For more information please contact:
Jonathan Bishop
Research & Parliamentary Analyst
Public Interest Advocacy Centre (PIAC)
(613) 562-4002×23
jbishop@piac.ca
www.piac.ca
John Lawford
Executive Director & General Counsel
Public Interest Advocacy Centre (PIAC)
(613) 562-4002×25
lawford@piac.ca
www.piac.ca

PIAC Files Submission on Alternative Financial Services to Ontario Ministry of Government and Consumer Services

August 2015 – Recently, the Public Interest Advocacy Centre (PIAC) presented a submission in response to a request from the Ontario Ministry of Government and Consumer Services on how to strengthen consumer financial protection for consumers of alternative financial services. These services consisted of payday loans, instalment loans, money transfers (remittances), cheque cashing, pawnbroking, and rent-to-own. Moreover, the Ministry sought commentary regarding the treatment of consumers facing debts in collections.
As part of this consultation process, the Ontario Ministry of Government and Consumer Services released a consultation paper entitled, “Strengthening Financial Consumer Protection.” The consultation paper outlined potential approaches that could be used to minimize risks to these consumers. PIAC’s submission consisted of responses to questions contained in the consultation paper, as well as consideration of financial services not raised by the Ministry.
PIAC found the Government of Ontario would be justified in adopting a wide range of measures to address the current challenges facing consumers engaged in alternative financial services. These measures consist of licensing and disclosure requirements at one end of the spectrum, to specifying product requirements and outright prohibition of certain abusive practices. PIAC also supported the use of serious enforcement measures to ensure compliance.
PIAC encourages everyday consumers, government policymakers and everyone in between to read our comments and submit your views to the relevant government agency on issues related to the provision of alternative financial services in your jurisdiction.
To read PIAC’s submission to the Ontario Ministry of Government and Consumer Services, please follow the link below:
PIAC Comments – ON – Consumer Financial Protection
The Ontario Ministry of Government and Consumer Services consultation paper entitled, “Strengthening Financial Consumer Protection,” can be found using this link:
Strengthening Consumer Financial Protection-2

For more information please contact:
Jonathan Bishop
Research & Parliamentary Analyst
Public Interest Advocacy Centre (PIAC)
(613) 562-4002×23
jbishop@piac.ca
www.piac.ca
John Lawford
Executive Director & General Counsel
Public Interest Advocacy Centre (PIAC)
(613) 562-4002×25
lawford@piac.ca
www.piac.ca