Comments to CRTC on Reverse Directory Services – Initial comments

Canadian Radio-Television and Telecommunications Commission
Ottawa, Ontario
K1A 0N2
Attention: Ms. Ursula Menke Secretary General
Dear Ms. Menke:
Re: Public Notice CRTC 2001-56: Reverse Search Directory Assistance
1. The following submission is made on behalf of Action Réseau Consommateur, the Consumers’ Association of Canada, and the National Anti-Poverty Organization (“ARC et al”), in response to the above-noted public notice.
2. As a preliminary matter, ARC et al submit that regulations governing the privacy of customer personal information, including reverse search directory assistance (“RSDA”), should be consistent across all telephone companies. As the Commission notes, privacy concerns are common to all telephone company customers. There is no reason to apply different standards of privacy protection to different telephone companies.
Application of the PIPED Act
3. The new federal privacy law, Personal Information Protection and Electronic Documents Act (“the PIPED Act”), now applies to telephone companies. It requires that companies obtain customer consent to the disclosure of that customer’s personal information. Personal information, under the PIPED Act, is defined as “information about an identifiable individual”, and hence includes published name, telephone number, and address – information that the Commission has treated as “non-confidential”. However, through its Regulations Specifying Publicly Available Information, the PIPED Act makes an exception to the requirement for consent for “personal information consisting of the name, address and telephone number of a subscriber that appears in a telephone directory that is available to the public, where the subscriber can refuse to have the personal information appear in the directory”. Hence, telephone companies are not restricted from offering RSDA under the PIPED Act.
4. While the Commission should ensure that its rulings are consistent with the PIPED Act, it must not fetter its discretion by treating the PIPED Act as the final answer on all matters to do with customer privacy. In exercising its obligations under the Telecommunications Act, the Commission must take into account many other relevant factors and policy objectives specific to the telecommunications industry and to telecommunications subscribers. Hence, the Commission is free to establish higher standards of privacy protection under the Telecommunications Act than are required under the PIPED Act.
5. It has also been pointed out that reverse search services are already available via the Internet and commercial publications. Hence, prohibiting or restricting telephone companies from offering this service will not solve the general problem of privacy invasion caused by the ability of marketers, stalkers and others to obtain personal information via a telephone number.
6. ARC et al appreciate this situation, but submit that it does not justify enhancing the potential for privacy invasions through the provision by telephone companies of a RSDA service.
7. The Public Notice poses two questions:
a) whether the provision of RSDA service by the telephone companies is appropriate in light of the objectives of the Telecommunications Act; and
b) if the provision of RSDA service by the telephone companies is appropriate, what common tariff conditions should exist for telephone companies under CRTC jurisdiction.

Is the provision of RSDA service appropriate?

8. One of the Canadian telecommunications policy objectives set out in section 7(i) of the Telecommunications Act is “to contribute to the protection of privacy of persons”.
9. The provision of reverse directory services is clearly invasive of privacy, and hence contrary to this objective. The more detailed the information provided via a reverse directory (e.g., street location vs. municipality), the more privacy-invasive the service.
10. However, invasions of privacy may be justified for public policy reasons, or where individual consent to the invasion has been obtained or can reasonably be implied.
11. ARC et al submit that there is no public policy rationale justifying the non-consensual provision of reverse directory services, given the obvious infringement to privacy that they pose. Hence, the provision of such services should be only with the individual’s consent.
12. Previous approaches to RSDA, including that of the PIPED Act, assume that once a person’s telephone number and address is published in a telephone directory indexed alphabetically by name, that person has implicitly consented to the re-indexing of this information by telephone number and to the consequent disclosure of their listed name and location to any third party for any purpose.
13. This reasoning is flawed for a number of reasons. First, customers who have consented to the publication of their name in the alphabetical telephone directory have not necessarily consented to the provision of their name and location to third parties upon the provision of a telephone number. There is a material difference between the disclosure of a published address and/or telephone number upon the provision of a name, and the disclosure of name and/or address upon the provision of a number. The former is a service commonly requested by and provided to individuals seeking to contact other individuals whose names they know. The latter is a service with little value to the ordinary citizen/consumer – rather, it is likely to be used primarily by commercial entities seeking to collect name and address information for unsolicited marketing or other privacy-invasive purposes.
14. Second, while it is true that unlisted service is available to subscribers who wish to avoid the publication of this information, unlisted service is only available for a fee (a recurring monthly rate of up to $2/month). Hence, many lower income subscribers who would like to take this service, do not for affordability reasons. Moreover, unlisted service provides no alternative for those subscribers who wish to be listed in the regular directory, but who do not wish to have their names or locations provided via RSDA. Unlisted service is therefore neither a fair nor realistic alternative for most consumers. The Commission must ensure that privacy can be achieved by all subscribers, not just those with high disposable incomes or extensive privacy needs.
15. For all these reasons, ARC et al submit that the provision of RSDA services by telephone companies without the individual’s consent is inappropriate in light of Telecommunications Act objectives.
16. ARC et al note that a previous application by Telus for reverse directory services that would have provided listed address as well as name upon provision of a telephone number was denied by the Commission, on the grounds that the provision of specific address information was too privacy-invasive. ARC et al agree that Bell’s proposed service is significantly less privacy-invasive insofar as it does not provide specific address information, and does not even make this information available via the RSDA to operators. Nevertheless, ARC et al submit that the provision of name and location via RSDA should be subject to individual subscriber consent.
What conditions should be placed on RSDA services?
17. While Bell Canada does not propose any measures to ensure that RSDA listings are consensual, it is noteworthy that Bell permits its subscribers to opt-out of its Internet-based Canada 411 listings, along with other disclosures of customer listing information (see p.29 of the Bell Canada English Telephone Directory). The only significant difference between the proposed RSDA and Canada 411 is that users must pay for the former. While this charge will likely limit use of the proposed service, it does not justify the failure to offer a free opt-out. Consumers must at a minimum be able to opt-out of a reverse directory service for free, they way they can for Canada 411.
18. Moreover, ARC et al submit that, for the RSDA service to be compatible with subscriber privacy under the Telecommunications Act, there must be an opt-out process that is effectively brought to the consumer’s attention before the subscriber’s name is provided via a reverse directory service, as well as regularly after the fact. In other words, there must be a much more effective opt-out than is currently provided by Bell Canada in respect of Canada 411 listings, for example. All opt-outs should be effected (i.e., the listing removed from the directory) within a short period (e.g., 48 hours) of the request. In this respect, ARC et al propose that the opt-out option be brought to subscribers’ attention annually via the monthly bill and/or bill inserts, as well as via the print directory and the Companies’ privacy policies.
All of which is respectfully submitted,
Philippa Lawson
Counsel for ARC et al
cc: Interested parties, PN 01-56

Keeping the Lights On: Maintaining Universal Access to Electricity

The Public Interest Advocacy Centre (PIAC), a Canadian non-profit organization specializing in utility law and regulation released a study today that suggests that the restructuring of the electricity industry in Canada may create results which disproportionately burden low-income customers. Michael Janigan, Executive Director and General Counsel of PIAC and co-author of the study stated,

” While it is difficult to predict outcomes based upon the current experience with restructuring in the electricity industry in other jurisdictions, there is reason to believe that small volume customers will suffer a detrimental impact as a result of electricity restructuring.”

Several provinces, including Alberta and Ontario have moved towards the creation of a competitive retail market for electricity. Others including New Brunswick are committed to studying the prospect.
The PIAC report Keeping The Lights On: Maintaining Universal Access To Electricity looks at possible policy solutions for financial hardship to low-income consumers. The report surveys various programs that have been put in place by US jurisdictions to deal with problems in maintaining utility access, but does not recommend an immediate move to US style programs.

“Prolonged and sustained electricity increases as a result of restructuring would be a likely result of poor market design,” Janigan said. “This shouldn’t be fixed by subsidizing low-income customers but by fixing the market design.”

Conversely, the report concludes that the problem of short-term electricity price spikes may justify the implementation of a program to mitigate the impact of such price increases.
The Public Interest Advocacy Centre provides legal representation, research, and advocacy services on behalf of consumers, particularly vulnerable consumers of important public services.
A hard copy of the report may be obtained at a cost of $8.00.
To order your copy today please contact the Public Interest Advocacy Centre
(613) 562-4002 ext. 60(phone)(613) 562-0007 (fax) or by e-mail piac@piac.ca

Comments on the CMC draft Template for Internet Sales Contract Harmonization

Draft Internet Sales Contract Harmonization Template: Comments to CMC

Note that the document being commented on can be seen at http://strategis.ic.gc.ca/SSG/ca01642e.html

Scope

We note that this harmonization template is limited to rules regarding information disclosure, contract formation, cancellation and reimbursement rights. Other issues that should be addressed in the context of Internet sales to consumers include:

• liability and consumer rights to redress in the event of unauthorized online transactions (e.g., where the supplier fails to authenticate the identity of the purchaser);
• liability in the event of failures in security mechanisms (e.g., theft of electronic signature)
• validity of subsequent electronic notices (e.g., regarding a service purchased online) which were not actually received by the consumer (e.g., because Internet access has been discontinued or interrupted)

In each of these cases, consumers need protection. Specifically, they need protection from liability where the supplier failed to properly authenticate the identity of the purchaser, where an authentication or other security mechanism failed due to no fault on the consumer’s part, and where an electronic notice was never actually received by the consumer, regardless of the provisions of any sales contract.
In respect of authentication, it is important to recognize that businesses have access to information about electronic commerce-enabling technologies and the ability to limit and plan for the risks created by electronic commerce. Consumers, in contrast, have neither the access to information nor the expertise necessary to evaluate the reliability of a given technology. Moreover, unless fraud and error losses associated with online transaction technologies (and not attributable to carelessness on the part of the consumer) are allocated to technology providers and online vendors, there will be little incentive for investment in the further improvement of authentication technologies.

Information Disclosure

Para.4(1)(a) sets out key information that should be disclosed to consumers prior to the transaction, so that the consumer can make an informed decision as to whether or not to purchase. We agree that the information listed here is essential information that must be conveniently disclosed to the consumer before the transaction is entered into, and which is capable of being conveniently retained and printed by the consumer. If disclosures are not made in a manner that is convenient for the consumer, they are not meaningful disclosures.
We note that it is unclear whether 4(1)(a)(iv) includes “quantity purchased”. Confirmation of quantity ordered is important, given the likelihood of keystroke error in electronic transactions. We suggest making the requirement to disclose “quantity ordered” explicit in para.4(1)(a).
Para.4(1)(b) requires that this information be “located on one webpage…” and “made accessible on the Internet in a manner that ensures that the information is capable of being retained and printed by the consumer”. In comparison, the Alberta Electronic Sales Contract Regulation requires that a similar list of information be provided in “a form of electronic sales contract” that is either sent to the consumer via e-mail or “made accessible to the consumer on the Internet in a manner that ensures that the form is capable of being retained or printed by the consumer” (para.4 of Alberta Electronic Sales Contract Regulation).
We agree that the information listed in para.4(1)(a) should be included in any sales contract, and should therefore be provided to the consumer in a single form, so that the consumer need not print off several separate webpages, for example, in order to obtain a paper copy of the contract and all relevant info. (e.g.,supplier name and address) for future reference. Online consumers should be able to access all relevant contractual information in one place. It is important to note in this respect that an online consumer may not be able to access the online vendor’s website at a future date, and therefore needs to be able to retain all of this information at the time of the transaction.
The fact that some of the information set out in para.4(1)(a) is standard information that should be provided up front to all consumers visiting the site (e.g., supplier name, address, contact info., general restrictions on sales, general return policies) does not change the need for it to be incorporated into each contract of sale as well, for the reasons stated above. The only exception to this may be general “cancellation, return, exchange and refund policies” that do not apply to the transaction in question. For greater clarity, para.4(1)(a)(x), should be explicitly limited to those policies applicable to the transaction in question.
If, nevertheless, it is determined that return policies, for example, need not be incorporated into a single form or webpage, the template should require that such information be prominently disclosed on the supplier’s website, and that it be subject to the remaining rules in para.4(2).

Cancellation Rights

We support the approach to cancellation rights set out in paras.6 – 11. However, one potential problem area has not been addressed: consumer cancellation rights in the event of mistake (e.g., keystroke error) not noticed until after the contract was accepted. Presumably, the drafters intend that the rule requiring order confirmation (Para.4(1)(b)) will operate to prevent such problems from occurring. However, the reality in online contracting is that clicking and keystroke errors are easily made. For example, online vendors often highlight a given response (e.g., “I agree”), such that an unwitting consumer can engage the response by simply hitting the return key. Consumers who are interrupted or rushed can easily make such errors, and even confirm them, without noticing until it is too late.
In such cases, the cancellation right set out in para.6(1)(a)(ii) will not necessarily apply; the problem is not lack of opportunity to accept or decline the contract, but rather potential for keystroke/clicking error. In order to address this additional problem, consumers should have the right to cancel the contract within a certain time period (e.g., one hour) of inadvertently making it.
We also question how the rules would apply to oral cancellations (e.g., by telephone). Para.8(3) specifies that cancellation may be given “by any means, including but not limited to personal service, registered mail, courier, facsimile, and e-mail.” (The same provision appears in para.12(4).) Telephone is not listed, but nor is it excluded, implying that oral cancellations can be effective, but raising the questions: Why was telephone (a method likely to be used by consumers) not mentioned in the list of possible methods? What kind of evidence is needed to prove an oral cancellation?

Credit Card Chargebacks

Credit cards are the prevalent form of payment in online transactions. The credit card payment system offers an efficient mechanism for consumer redress in the event of inadequate disclosure and/or order confirmation process by an online vendor. Indeed, in the absence of a credit card chargeback, the consumer who exercises her right to cancellation under para.6 may well be unable to secure a refund from the vendor. In most cases, the cost of litigation to enforce one’s right to a refund vastly outweighs the value of the refund, hence many aggrieved consumers never obtain redress despite their statutory rights.
The availability of the credit card chargeback mechanism to provide consumer redress in such circumstances should be better exploited than it currently is by government agencies tasked with consumer protection. In this respect, we note that statutory rights to credit card chargebacks do exist in other jurisdictions, and that Canadian consumers deserve to be similarly protected. We therefore strongly support the inclusion of para.12, requiring credit card companies to reverse charges in cases where online merchants have failed to comply with their obligations under this regulation.

Jurisdiction

Para.3 of the draft Template notes that “Work is ongoing by the Committee concerning the issue of jurisdiction.”
This is an issue of great significance for electronic commerce, and one that PIAC has been working on through the Hague Conference and other fora. Work is underway by the Hague Conference on an international Convention (“Convention on Jurisdiction and Foreign Judgements in Civil and Commercial Matters”) dealing with this issue. The current draft of that Convention reflects the Brussels Convention rule (applicable to European countries) that consumers should always have the right to sue and be sued in their home courts regarding purchases that they made while in their home jurisdiction.
PIAC strongly supports the application of such a rule throughout Canada, as well as internationally. So-called “choice of forum” clauses in consumer contracts involve no real choice by the consumer. Rather, they are imposed on consumers in standard form, non-negotiable contracts. No one realistically expects consumers in the course of ordinary commerce to read or appreciate such clauses at the time of purchase. Hence, it is unfair to enforce such clauses against consumers in the event of a dispute. Consumers should always have recourse to their home courts for redress with regard to contracts that they entered into from their home jurisdiction.
Some businesses argue that such a rule will impede electronic commerce, since they will have to limit the jurisdictions in which they do business to those in which they are comfortable being subject to litigation. This is an appropriate result, in our view. Where a trade-off has to be made between increased commercial opportunity and improved access to justice, the latter should prevail. More consumer choice is of course desirable, but not at the cost of redress. Businesses can and should limit their consumer sales to those jurisdictions in which they are comfortable being subject to litigation by consumers.
We therefore urge the CMC to adopt a harmonized approach to jurisdiction in cross-border consumer litigation that reflects this well-established principle of fairness and justice.
END
Contact:
Philippa Lawson
Counsel
Public Interest Advocacy Centre
1204 – 1 Nicholas St.
Ottawa, Ontario K1N 7B7
tel: (613) 562-4002 x.24
fax: (613) 562-0007
email: pippa@web.ca
http://www.piac.ca
 

Comments on the Hague Convention on Jurisdiction

The Public Interest Advocacy Centre Comments on the draft Hague Convention on Jurisdiction and Foreign Judgments in Civil and Commercial Matters

The Public Interest Advocacy Centre (PIAC) is a Canadian non-profit organization whose mandate provides for the representation of consumers in marketplace issues. PIAC’s organizational membership comprises thousands of Canadians. Over the past twenty-five years, PIAC has frequently intervened in regulatory, legislative, and other policy proceedings affecting large numbers of Canadian consumers. PIAC has been particularly active in recent years representing the interests of ordinary consumers in the new electronic marketplace, both nationally and internationally.

Introduction

In the context of electronic commerce, it is expected that cross-border consumer transactions will increase, and that as a result, so will cross-border disputes between consumers and merchants. Hence, governments need to work together to facilitate efficient and effective consumer redress across borders. We therefore welcome this Hague Conference initiative as it pertains to cross-border consumer litigation.
We are limiting these comments to issues around Article 7 and consumer contracts. Other important consumer issues raised by the draft Convention (e.g., intellectual property and tort claims) also need to be addressed. Our focus on Article 7 should not be interpreted as diminishing in any way the importance of these other issues.

Article 7 should be retained

Special rules for jurisdiction in the case of consumer contracts, as set out in Article 7, are a necessary component of any international treaty on jurisdiction. Article 7(1) recognizes important and well-established consumer rights to redress via their own courts in respect of contractual disputes with foreign merchants, where the merchant directs its activities to the consumer’s jurisdiction and where the contract was concluded by the consumer in the consumer’s home jurisdiction. Similarly, Article 7(2) as currently drafted recognizes important and well-established consumer rights to defend themselves against cross-border lawsuits in their home courts. Finally, Article 7(3) as currently drafted recognizes an important principle of fairness and equity: that choice of forum clauses in consumer contracts are rarely understood, let alone consciously negotiated, by consumers, and should therefore not be given legal force and effect. The Hague Convention must not detract from this existing body of law, by excluding consumer protections either wholly or in part via national opt-out rights.
Overall, Article 7 reflects the reality that consumers (both offline and online) suffer from tremendous information asymmetries and unequal bargaining power vis-à-vis sellers, and that if legal redress is to be made available to ordinary consumers in any practical sense, it must be available via their own courts.
Furthermore, the rules set out in Article 7 are essential for the development of consumer trust and confidence in electronic commerce, by assuring consumers of an accessible and trustworthy avenue of redress in the event of a dispute.
The following comments address issues identified in the document by David Goddard entitled “Proposed Convention on Jurisdiction and Foreign Judgments: E-Commerce Issues – An Outline”, under “Topic B – Consumers”.

Issue B1: Definition of “Consumer”

If the current definition of “consumer” in Article 7 is problematic, consideration should be given to extending the benefit of this Article to any person purchasing a mass-marketed product or service. In this way, the test for application of Article 7 would become one of the nature of the contract in question. Where the contract is a standard form, “take it or leave it”, contract, with no negotiation of terms between the parties, Article 7 should apply. We have no objection to broadening the definition of “consumer” in this respect, for the purposes of this Convention.
However, individuals concluding non-mass-marketed contracts for purposes outside their trade or profession still deserve the jurisdictional protections set out in Article 7, due to their relatively weak bargaining position vis-à-vis businesses.

Issue B2: Disclosure of Consumer Status

In respect of the application of Article 7, the selling party (generally, the repeat player) should bear the risk of failure to clarify whether the purchasing party is a consumer. In other words, businesses should assume that they are dealing with consumers unless they are advised to the contrary, or unless the facts clearly indicate otherwise. To take the opposite approach (i.e., to allow businesses to assume that they are dealing with businesses unless advised by a consumer to the contrary) would be to deny the reality of consumer-business transactions and the legitimate expectations of consumers regarding their legal rights. It would gut Article 7 of effectiveness, by establishing a default rule that allows businesses to easily circumvent important provisions designed to ensure consumer rights to redress.
In any given situation, however, the facts will determine whether a selling party’s assumption of the buying party’s status was reasonable. If a consumer was, for example, posing as a business, purchasing through a business-to-business portal clearly labeled as such, and ordering quantities that are normal for a business to order, then the consumer may not be entitled to protections under Article 7. Similarly, if a person fraudulently identifies himself as a consumer, that person would not be able to claim protection under Article 7. It is unlikely that any legal system would permit a person to benefit from such fraud.

Issue B3: Relevance of Consumer Location

The consumer’s location at the time of the transaction is a critical element of establishing jurisdiction (and identifying the appropriate forum) where a transaction occurs online. As Article 7(1)(a) provides, consumers should be entitled to access their home courts where they have taken the steps necessary for the conclusion of the contract in their home jurisdiction.
There is no reason to change this logical and long-standing rule. If businesses choose to transact with consumers in a given jurisdiction, they should be willing to submit themselves to the courts of that jurisdiction. Businesses who wish to avoid being subject to the courts of a certain jurisdiction can choose not to do business with consumers in that jurisdiction.
There is nothing about electronic commerce which justifies changing this rule. Electronic vendors, like non-electronic vendors, have various means by which to determine the consumer’s location, not least of which is simply to ask the consumer. Consumers who incorrectly characterize their location would not be able to benefit from Article 7’s jurisdictional rules.

Issue B4: Connection between Defendant and Forum (Article 7(1)(a))

Article 7 applies to contracts concluded by consumers. For this reason, there should not be any concerns about the application of Article 7(1)(a) where no contract is concluded. In particular, Article 7 does not expose online businesses to foreign jurisdictions unless and until they actually transact with consumers in such jurisdictions.
As noted above, online businesses who wish to limit the jurisdictions in which they may be haled can and should communicate to consumers any such limitations, and may rely upon a consumer’s declaration of location.

Issue B7: The Consumer as Defendant

Most litigation between consumers and defendants will involve consumers as plaintiffs, not defendants. There will nevertheless be situations in which businesses feel wronged and wish to obtain redress from consumers via the courts. It is entirely appropriate that the consumer in such situations benefit from the jurisdictional rule set out in Article 7(2). Otherwise, innocent consumers may find themselves subject to foreign court rulings based on vexatious lawsuits, incomplete submissions, or distorted facts, simply because they could not afford to defend themselves in the foreign jurisdiction. Allowing businesses to sue consumers outside of the consumer’s jurisdiction is to invite businesses to take advantage of consumers in this manner.
More likely, however, are disputes between consumers and businesses based on misunderstandings. To the extent that any rule regarding jurisdiction will benefit one party over the other, it should benefit the weaker party. It is reasonable in this case to expect businesses to take precautionary measures against loss. Businesses can (and do) ensure that they receive payment before shipping. Alternatively, they can use escrow services to eliminate the risk of non-payment. As repeat players with the resources and incentive to take such precautionary measures, businesses do not need to be protected against their own imprudence. Consumers, on the other hand, cannot be expected to go to the same effort as businesses to ensure that their contracts are honoured.

Issue B8: Jurisdiction rules should not be linked to use of Alternative Dispute Resolution (“ADR”)

We are aware of suggestions by business interests that the application of Article 7 be made contingent upon prior resort by the consumer to out-of-court redress systems. While we heartily support the development of effective online ADR options for consumers in cross-border disputes with merchants, we oppose any such requirements, for the following reasons:

• It is unnecessary: if good ADR options are made available to consumers, consumers will use them before resorting to court.
• It is premature: there is no system in place for ensuring that any ADR system meets minimum standards of fairness, independence, competence, transparency, etc.
• Allowing businesses to force consumers into private ADR in this way would diminish the incentive for businesses to build and/or use good ADR systems (so as to attract consumers voluntarily).
• Forcing consumers in engage in private ADR does not enhance consumer trust and confidence in e-commerce.
• Forcing consumers to engage in private ADR before going to court unfairly prejudices their rights to redress via the courts, both by removing the consumer’s right to engage in class actions regarding the matter in question, and by failing to automatically stay the applicable limitation period for court actions.
• Consumers should not be forced to engage a private justice system which lacks the long tradition and entrenched standards of fairness that characterizes the public justice system, which provides no guarantees of fairness, and which could in fact end up costing the consumer more.
• Allowing businesses to require consumers to engage in private ADR before going to court permits abuse by unethical businesses (e.g., through use of biased or unfair ADR).

It has been suggested that a requirement for consumers to use ADR before resorting to court action be contingent upon independent accreditation of the ADR service, or some other method of guaranteeing that the ADR service meets certain minimum standards. Such musings may be interesting, but the reality is that no such system of neutral, independent, and reliable accreditation is likely to be developed in the foreseeable future. First, the standards themselves need to be developed, at an international level. Then, a system of accreditation and ongoing compliance assessment needs to be developed. Both the standards development process and the accreditation/compliance assessment process, to be credible, must involve the active participation and support of consumer groups. No international body meeting the requirements of neutrality and independence is currently working on any such project.
In any case, there are numerous other reasons, listed above, why the Convention should not and need not require consumers to make use of ADR schemes.

Enforceability of Arbitration Clauses under the Convention

There appears to be considerable confusion over how the Convention, as currently drafted, would treat arbitration clauses in consumer contracts. We do not presume to have any particular expertise in the interpretation of private international law Conventions. However, we do have views as to the results that this Convention should achieve. In this respect, it is critical that the Convention be clearly drafted so as to ensure that consumer rights to sue and to be sued in their home courts take precedence over any conflicting contractual agreements, including arbitration agreements.
As commercial arbitration is a practice largely confined to the business-to-business sphere of activity, it is likely that the exception in Article 2(g) was designed to exempt only business-to-business arbitration from the scope of the Convention. Business-to-consumer arbitration agreements cannot be accorded the same deference given the tremendous imbalance between the parties. Hence, if an exception for arbitration is maintained in Article 2, such exception should be explicitly limited to non-consumer arbitration.

Issue B9: Forum Selection Clauses

Forum selection (choice of court) clauses in consumer contracts should never be effective. Like other “fine print” in standard form contracts, such clauses are invariably imposed on unwitting consumers. They are not the result of conscious negotiation between two relatively equal parties. No one, least of all the business using such clauses, expects the ordinary consumer to address her mind to such clauses at the time of the transaction. No one should therefore expect consumers to be bound by such clauses. In effect, there is no forum “selection” other than by the merchant in such cases.
Even where such a clause is brought to the attention of the consumer at the time of the transaction, it is unfair and unrealistic to expect the consumer to appreciate its implications. Choice of jurisdiction, like “ADR-first” clauses, cannot be considered a true choice by the consumer unless it is made after the dispute has materialized, when the consumer can fully understand and appreciate its implications. This is appropriately recognized in the current draft Article 7(3), which permits choice of forum if such choice is made by the parties after the dispute has arisen.

National law exceptions

It has been proposed that the question of whether consumers can sue at home be left to national law, with the resulting judgments therefore not enforceable under the Convention. Such a rule could apply only in the case of a forum selection clause, or generally in respect of consumer contracts. We oppose any such “opt-ing out” by signatory countries of such a fundamental and important jurisdictional rule which is based on notions of fairness and justice that transcend borders. Consumers worldwide deserve to have effective access to justice, via their own court systems, in respect of contracts entered into from their home jurisdictions.
Contact:
Philippa Lawson
Counsel,
Public Interest Advocacy Centre
1204 – 1 Nicholas St.
Ottawa, Ontario K1N 7B7
tel: (613) 562-4002 x.24
fax: (613) 562-0007
email: pippa@web.ca
http://www.piac.ca

Consumer Reporting Practices

Letter to Privacy Commissioner Regarding Consumer Reporting Practices

George Radwanski
Privacy Commissioner of Canada
112 Kent Street
Ottawa, Ontario
K1A 1H3
Dear Mr. Radwanski,
Please find enclosed PIAC’s report, Consumer Reporting and Privacy: The Need for Better Consumer Protection. The main finding of the report is that the new Personal Information Protection and Electronic Documents Act has the potential to bring much needed improvements in privacy protection to the consumer reporting system. However, some vigilance will be required to ensure that these improvements actually occur.
In particular, we would like to draw your attention to two subjects we discuss in the report:
1. Credit Scores: We found that consumer reporting agencies and financial institutions compute scores based on consumers’ financial and demographic information. Yet, the existence of such scores, and the scores themselves, are kept secret from consumers. We feel that consumers should be informed about the use of their personal information to compute these scores, and that consumers should be given access to scores about themselves upon request. 2. Consent Forms: We found that the forms in which consumers give their consent to having their personal information disclosed to consumer reporting agencies, and used by these agencies to create dossiers on them, did not clearly explain these uses and disclosures or the purposes for them. We feel that consumers should be fully informed about how their information is used and disclosed in the consumer reporting system.
We hope that you will conduct a full investigation of consumer reporting practices in the financial sector in light of the fact that the Personal Information Protection Act will apply to both consumer reporting agencies and major creditors on January 1.
Please feel free to contact me should you have any questions or comments on this matter.
Yours sincerely,
Angie Barrados
Researcher

Ontario Consumer Protection Law Reform

Ministry of Consumer and Corporate Relations
Consumer Protection Consultation
250 Yonge St., 35th Floor
Toronto, Ontario M5B 2N5
Dear Sir/Madam:
Re: Consumer Protection Consultation
Thank you for the opportunity to comment on proposals for reform of Ontario’s consumer protection legislation.
The Public Interest Advocacy Centre (PIAC) is a national, non-profit organization which has been representing the interests of ordinary consumers in matters to do with public utility regulation (telecommunications, energy, transportation), financial institutions, broadcasting, Internet access, consumer privacy, and consumer protection generally, since its formation in 1976. PIAC is run by a distinguished Board of Directors from across Canada, and has organizational members who themselves represent millions of Canadians. PIAC has developed a strong reputation nationally for its effective consumer advocacy in these areas.

General

As a preliminary matter, PIAC would like to commend the Ontario government on this timely initiative. We agree that Ontario’s consumer protection laws are in need of modernization for the reasons set out in the Consultation Paper. We also agree with the three guiding principles of Fairness to Consumers, Responsiveness to both Businesses and Consumers, and Flexibility to Adapt to Future Needs. In general, we support the proposals for reform, with the qualifications identified below, and in many cases, we strongly support the proposals. In some cases, such as electronic commerce, however, we feel that more legislative action is needed to address existing or potential problems.

Issues Not Addressed in the Consultation Paper

The discussion paper requests suggestions on additional consumer protection issues that should be addressed in the revision and consolidation of the Consumer Protection Act. There are two important areas that the government should seriously consider taking action on: fringe banking and “white label” ATMs.

• The “Fringe Banking” Sector*

The fringe banking sector is currently unregulated, making consumers who use these fringe services easy targets for unscrupulous operators. Issues include: excessively high fees and interest rates, inadequate disclosure of fees and rates, and unfair collection practices. We understand that all the provincial governments are co-operating with the federal government to develop a national approach to this problem. It is appropriate to wait until this federal-provincial exercise is complete to take any action, but would like to see a government commitment to address fringe banking through legislation in the near the future. Also, as we suggest later in our comments, fringe creditors should be subject to the same collection practices rules as collection agencies.

• Generic (“white label”) ATMs*

Unregulated “white label” ATMs also pose serious consumer concerns, considering that:
“White label” ATM operators enter into contractual relationships with financial institutions, but are not financial institutions themselves. Therefore, while the federal government can regulate bank fees under the Bank Act, the activities of “white label” ATM operators come under provincial jurisdiction. We urge the government to seriously consider taking action on this growing problem for consumers.

Questions Posed in the Consultation Paper

1. Scope of Consumer Protection – type of transactions
PIAC agrees that consumer protection laws should be expanded to apply to a wider range of transactions, as proposed.
2. Scope of Consumer Protection – Small Businesses
PIAC does not oppose expanding the scope of protection to include small business consumers as proposed in the paper.
3. Protection re: Services as well as Goods
PIAC strongly supports the application of consumer protection laws to the sale of services as well as goods. The lack of similar protection for consumers of services vs. goods has been a growing problem that we have confronted on numerous occasions, as the marketplace becomes increasingly centered around services rather than goods. This is an overdue reform. The current asymmetry as between good and services can no longer be rationalized and must be corrected.
4. Electronic Commerce Transactions
We support the government’s proposal as set out in the Consultation Paper, but submit that it does not go far enough.
Ontario recently passed Bill 88, The Electronic Commerce Act, which gives electronic contracts the same legal validity as contracts concluded via non-electronic methods. Yet, a large proportion of consumers in Ontario are not yet fully conversant with this new medium of contracting. Many do not have Internet access from home, and of those that do, many are not yet computer or Internet “literate”. By assuming a level of consumer knowledge and ability which does not in fact exist, the new law risks creating a situation by which unscrupulous businesses can take advantage of those consumers who are not yet Internet savvy.

Delivery of Legally Required Notices and Binding Communications

Ontario’s new Electronic Commerce Act permits contractual notices and other binding communications to be made via email. Often, such notices specify a time period after which action will be taken adverse to the consumer’s interest. Such messages are considered to be received when they enter the “information system” of the addressee and become “capable of being retrieved and processed by the addressee” (subs.22(3)(a)).
This works for people who have private email addresses and who check their email daily. However, it fails to accommodate the current reality, in which email addresses are often shared, infrequently accessed, or otherwise used by consumers in a manner which is not appropriate for binding communications. For example,

• People don’t necessarily check their email daily. Checking email typically requires much more effort (e.g., firing up a computer, connecting by modem, etc.) and cost than does checking a regular mailbox. Email is often ignored for days in a way that regular mail is not.

• Particularly where two people share an email address (a common practice in multi-person households), a message may be entirely missed by the intended recipient, although it has been actually received by the recipient’s computer.

• Email is used by consumers for many more “light” purposes, and to a much great degree for such “light” purposes (e.g., light personal correspondence, networking; discussion groups) than is regular mail; hence it is generally viewed as a “lighter” medium, and it can be difficult to identify a serious binding communication amongst all of the unimportant messages;

• Online consumers often receive dozens of emails daily (much of it spam), and simply can’t cope with the quantity – to a much greater extent than with regular mail.

These are just some examples of material differences between email and regular mail. Such differences must be taken into account when designing rules for today’s marketplace. Until we have progressed further in terms of commonly understood protocols for email use, rules which create liability on the basis of a higher standard of care than is the current practice are premature. Certainty of receipt is too important in certain cases. It is inappropriate to establish laws which assume a higher degree of email “literacy” than actually exists, where such laws make consumers even more vulnerable than they already are.
It is particularly important that any electronic notices, failure to reply to which will lead to loss of service or property, actually reach the consumer. Unlike receipt of mail via Canada Post or courier service, receipt via email requires access to a working computer with Internet access. Home internet access remains a luxury service for many consumers, and is likely to be one of the first services discontinued when a household without such access runs into financial difficulty. In such situations, the customer’s failure to respond to the creditor’s email notice should trigger a requirement that the notice be provided in paper form. We therefore recommend establishment of a rule that:

• in respect of notices of impending default by or penalty to the consumer, electronic delivery is legally effected only where the consumer recipient (and not just the consumer’s information system) has actually received the notice

At a minimum, Ontario’s consumer protection laws should put the onus on vendors to ensure that binding communications sent by them to consumers have actually been received by the consumer. One possible approach is simply to apply the rule for presumed receipt set out in subs.22(3)(b) – i.e., “when the addressee becomes aware of the information or document in the addressee’s information system and it becomes capable of being retrieved and processed by the addressee” – to all consumer transactions, unless the consumer has specifically elected to receive binding communications from the vendor electronically.
This does not solve the problem for all consumers, however. Merchants may simply add a term to their standard form contracts stating that the consumer elects to receive any future communications by email. Such election is clearly not meaningful, but may nevertheless be upheld by courts as a contractual agreement. In any case, leaving the question of when consumer consent to electronic disclosures and records is binding to a case-by-case determination by the courts will create uncertainty and necessitate costly litigation. It is also fundamentally unfair to vulnerable consumers who do not have the means to litigate in the first place.
For these reasons, Ontario’s consumer protection laws should specify that:

• electronic delivery of legally required notices, and of any information that is required by law to be in writing, is permitted only where the consumer transaction is negotiated electronically, or where the consumer’s consent to receive such information electronically originates from the consumer’s email address to which the electronic records will be delivered.

In this way, disputes over the validity of standard form consents to electronic communications will be limited, and consumers will be clearly protected from unintentional consent in the most egregious situations (e.g., when the consumer does not even own a computer, or does not have Internet access). It is important to note in this respect that approximately half of Canadian households still do not have Internet access, and that three-quarters of low income households remain unconnected.
Paper disclosures required by law are designed to provide consumers with information critical to making informed choices in the marketplace, to understanding their rights and obligations during commercial transactions, and to enforcing their rights when transactions go sour. Consumers can benefit from receiving information electronically, and should be permitted to do so, but the law should not create a situation in which consumers without the ability to receive electronic communications may be required by contract to do so.
Another, related, problem with reliance on electronic records in consumer transactions occurs when consumers find that they are unable to access or print the electronic record in question. This can happen as a result of computer breakdown, or incompatible software programs, for example. It is important in such situations that consumers be able to obtain paper copies of the records in question. For this reason, we recommend statutory requirements that:

• regardless of the terms of the contract, the consumer is entitled to receive paper copies of electronic records upon request, for which providers may charge no more than their actually incurred costs of accommodating this request.

Consequences of Refusing to Deal Electronically

It is likely, assuming passage of laws based on the UECA, that businesses rely increasingly on electronic communications. Indeed, given the low cost of electronic communications as opposed to paper communications, it is likely that businesses will take various measures to encourage consumer acceptance of electronic communications, including preferential pricing for those consumers who agree to deal electronically.
While such pricing strategies are understandable in light of underlying cost considerations, they will in effect penalize unconnected consumers (disproportionately low income) and will tend to further marginalize those who cannot afford to deal electronically in the first place. Such implications of the UECA need to be seriously considered in the overall policy context.
At a minimum, consumers transacting non-electronically should always be entitled to refuse electronic receipt of contractual records and statutorily required notices without incurring extra charges as a result. Until Internet household penetration has reached the level of telephone penetration, it is premature to establish laws and policies which assume electronic capability. There is no compelling policy reason to favour consumers with electronic access over those without, in respect of important commercial disclosures.

Integrity of Electronic Signatures

Electronic commerce requires the development of reliable methods of verifying the identity and capacity of contracting parties. The UECA provides electronic signatures the same legal status as handwritten signatures and leaves it up to each enacting jurisdiction to decide whether or not to establish regulations regarding the reliability of electronic signatures. Moreover, the UECA does not attribute liability for losses arising from good faith use of electronic signatures.
In deciding how to address this issue, it is important to recognize, first, that different forms of electronic signatures will have different levels of security and that the standard of care for the use of electronic signatures is unclear at this early stage of development. At the same time, most consumers using electronic signatures will have no sophistication in electronic security procedures, and could unwittingly expose themselves to liability despite due diligence and good faith.
Second, businesses have access to information about electronic commerce-enabling technologies and the ability to limit and plan for the risks created by electronic commerce. Consumers, in contrast, have neither the access to information nor the expertise necessary to evaluate the reliability of a given technology.
Third, unless fraud and error losses associated with online transaction technologies (and not attributable to carelessness on the part of the consumer) are allocated to technology providers and online vendors, there will be little incentive for investment in the further improvement of authentication technologies.
For all these reasons, Ontario legislation should clearly place the responsibility and liability for technology failures on certificate authorities, manufacturers, and/or the businesses dictating the authentication technology to be used. In particular, consumers should be protected against liability for losses arising from misuse or failure of security mechanisms which misuse or failure was not the fault of the consumer.
A good baseline model to consider in this respect is the Canadian Code of Practice for Consumer Debit Card Services, prepared by the Electronic Funds Transfer Working Group in 1992, and revised in 1996. This voluntary code outlines the respective responsibilities of industry players and consumers in the use of debit cards.

Liability generally

Ontario’s consumer protection legislation should clearly establish that consumers are not liable for electronic transactions in which:
a) The transaction was not authorized by the consumer;
b) The product delivered was not as described by the vendor;
c) The vendor failed to provide relevant information about the product;
d) The product was not delivered in the time specified, or at all; or
e) There was no adequate opportunity for the consumer to cancel an inadvertent transaction where the consumer acted reasonably.
In these circumstances, consumers should also be entitled to refund of any payment made, upon return, where applicable, of the product in question to the vendor in good order and within a reasonable time.
5. Standards for Ecommerce
Yes, as technology and the marketplace evolve, modernized consumer protection legislation should also evolve so as to ensure ongoing adequate protection of consumers. New technologies pose new problems for consumers and create new opportunities for unscrupulous merchants. They may also exacerbate previously existing problems, which were until then rare enough to justify inaction. In either case, governments should be able to move quickly and decisively to protect consumers from bad actors.
In addition, even those businesses who wish to operate in full compliance with the law can run into trouble in such a rapidly evolving marketplace. New technologies and marketplace practices can create uncertainty as to the threshold of acceptable business practices. Privacy is a good example of this: technology and market forces have surged far ahead of laws, pushing business practices beyond what consumers consider acceptable. Similarly, standards of information disclosure, contract formation, liability and redress in electronic commerce need to be clearly established. In such cases, it is incumbent on government to provide leadership in the marketplace by legislating minimum standards of behaviour.
6. Application of Consumer Protection Legislation in cases where other regulatory regimes apply
General consumer protection legislation should always apply where it offers greater protection to consumers than does the specialized regulatory regime. If the specialized regime provides the same or greater protection to consumers, then it should take precedence. Essentially, consumers should benefit from the highest level of protection that exists, whether via specialized or general regulatory regimes.
Excluding the application of general consumer protection legislation in respect of transactions governed by other regulatory regimes will result in a “patchwork” of differing consumer protection regimes, precisely the opposite of what the Consultation Paper suggests is a key goal of this initiative. It is essential that consumer protection be as streamlined, consistent, and effective as possible across all marketplace sectors. Permitting some sectors a lower level of consumer protection than others is inappropriate and risks marketplace distortions.
If specialized regulatory regimes are to take precedence over general consumer protection legislation, it is essential that they offer at least the same level of consumer protection as does the general legislative regime. The proposed standard of “adequacy” is insufficient.

Remedies and Enforcement

Yes, consumers who are affected by a violation of consumer protection legislation should be entitled to cancel the contract, receive a refund and pursue damages through civil action. As well, consumers should not be liable in such cases (e.g., for unauthorized contracts).
8. Yes, we agree that consumer legislation should contain a consistent set of enforcement powers and a uniform limitation period. 9. We strongly support the establishment of consistent and effective fines and other penalties for wrongdoers. It is essential that judges have the power to set fines which are proportionate to the gains achieved through the malpractice, and that such fines constitute a meaningful deterrent.
We also strongly support clear statutory authority for restitution orders.
10. Future Performance Contracts
We strongly support the proposals to clarify and improve existing legislation regarding executory contracts.
11. Advance Payment Schemes
We support the proposal to allow for regulation-making authority to prohibit specific advance payment schemes, and to use this authority to limit the activities of credit repair companies. The consultation paper proposes that credit repair companies be required to disclose to consumers their right to correct inaccurate information in a credit file. We would support such a measure, as long as the disclosure is clear and useful to the consumer. It should state how to contact the major credit bureaus, what service standards to expect, and what recourse to take in the event of a dispute.
We would note, however, that while the discussion paper states that credit repair companies sell the service of correcting inaccurate information to consumers, in fact, credit repair companies do offer some legal techniques of removing accurate information on a credit report. Specifically, credit repair companies dispute accurate credit information, which requires credit bureaus to remove the information if it can no longer be substantiated by its source. Also, credit repair companies may attempt to create “split” credit reports, by having the consumer alter their name slightly, and/or remove their SIN number from the file.
Generally, we would support prohibiting these methods of getting around the credit reporting system, but currently, we are uncomfortable with the idea of further restricting consumers’ rights because of serious unresolved consumer protection issues in the sector. For instance, there are no provisions in the Consumer Reporting Act for disclosure to the consumer of his or her rights to correct inaccurate credit information. If consumers’ knowledge of their rights is so low as to necessitate this type of disclosure by credit repair companies as is being proposed, why are similar disclosures not required at other times, such as when a credit file is created about an individual?
The consumer reporting sector does not fully disclose its practices to consumers, and makes little effort to ensure that consumers are aware of how their personal information is used. In addition, there are reports of problems with credit bureau practices in disclosing reports to consumers and correcting credit information. In this context, consumers may legitimately need representation to protect their interests. It is very unfortunate that consumers have turned to unethical companies for this representation, but prohibiting these unethical practices will not solve the underlying problems with the credit reporting system. The most important step that needs to be taken is to subject credit bureaus to comprehensive privacy legislation.
12. Timeshare Marketing
We strongly support the proposal to apply a 10 day cooling off period for timeshare marketing, and to require certain disclosures on the part of timeshare marketers.
13. Implied Warranties on Services
We strongly support the proposal to make consumer services subject to an implied warranty of acceptable quality, similar to that applicable to goods. There is no justification for exempting services from such a requirement.
14. Plain Language
We strongly support the proposal to interpret contracts in the consumer’s favour where the language of the contract is ambiguous. This is a simple, fair, and potentially effective way of encouraging plain language in consumer contracts without creating a burden on businesses.

Bailiffs

We support the proposals to modernize the regulatory regime for private bailiffs.

Collection Practices

We are pleased to see that the government is proposing to extend the protections from harassment in debt collection, and require testing for debt collectors. However, consumers could benefit from further protections in two areas:
a) Greater Application of Prohibitions on Harassment
The consultation paper argues that creditors generally “want to acquire and retain customers” which “discourages them from treating customers badly”. However, creditors usually do not want to retain customers who are badly in debt, and in fact conduct credit checks to identify and avoid such consumers. It is very doubtful that there is “natural” incentive on the part of businesses to treat debtors fairly as the paper suggests, and therefore little rationale for not requiring all creditors to comply with collection standards. No consumer should ever be subject to the tactics prohibited by the Collection Agencies Act, and indeed, no ethical company would engage in these practices. Compliance with the law, therefore, would not be a problem for legitimate businesses. We strongly recommend that the government seriously apply collection standards to all cases of debt collection.
In particular, the government should ensure that the legislation applies to the “fringe” banking sector. This sector has been implicated in coercive collection practices in the United States, and there is reason to be concerned that the same type of practices occur in Canada. Collections and repossessions tend to be a very important aspect of fringe banking, specifically, rent-to-own businesses, second hand dealers, sub-prime lending and payday lending. Consumers who use these services tend to be low income and already in debt, and thus are particularly vulnerable and in need of protection from harassment.
b) Limitations on Use and Disclosure of Personal Information
The Consumer Reporting Act allows credit report reports to be accessed for the purposes of collecting a debt without give notice to the consumer. Similarly collections activities are exempt from the requirements of proposed Ontario Privacy Act. These exemptions are necessary to allow for debt collection, but consumers should still be protected from unnecessary and unwarranted privacy invasions. Therefore, the new Consumer Protection Act should ensure that collections standards include suitable limitations on how personal information that is obtained without consent in the course of collecting a debt may be used and disclosed.
Specifically, creditors and collections agencies should not be permitted to use any of the information they collect in the course of a collection for secondary purposes (purposes other than collecting the specific debt). They should not be permitted to disclose such personal information to a third party (such as telling someone’s family or employer about the debt). Also, collection agencies should not be permitted to disclose information to a credit bureau, as it is not necessary to do so in order to carry out a collection.
All of which is respectfully submitted,
Philippa Lawson Angie Barrados
Counsel Researcher
 

Speaking Notes on Bill C-38

Speaking Notes Before the House of Commons Standing Committee on Finance

Public Interest Advocacy Centre
barrados@web.ca
www.piac.ca
Thank you for inviting us to present our views on Bill C-38 to the committee. First I’ll say a few words about the Public Interest Advocacy Centre (PIAC). PIAC is a non-profit organization which provides legal services and research to Canadian consumers and the organizations that represent them. Our work primarily concerns important public services including telecommunications, broadcasting, energy, financial services and public transportation. PIAC has a national board of directors and members that include individuals, groups and organizations representing 2.5 million Canadians.
Like several other consumer organizations, we have been following the financial sector reform process closely, and have advocated strongly for great consumer protection in the sector. We are generally pleased with the results of reform process and support the consumer oriented provisions of Bill C-38. Good as the Bill is for consumers though, there are several important gaps in its provisions. The committee can rectify these gaps, and I would urge you to take this opportunity to improve the Bill for Canadian consumers.
My presentation will focus on three topics:

1. Rural bank branch closures
2. Accountability of the proposed Financial Consumer Agency of Canada (FCAC)
3. Holds on Cheques

Rural Bank Branch Closures

PIAC recently published a study on rural bank branch closures. We determined that in the ten-year period between 1989 and 1998, about 45% of rural bank branches had closed. Since 1998 many more branch closures have been announced. The situation is considerably worse now than when the Task Force on the Future of the Financial Service Sector published its recommendations, which is why we feel that additional measures to address the problem should be considered for Bill C-38.
When a bank branch closes in a small town, it causes difficulties for consumers and businesses in the entire area who are faced with having to travel long distances to do their banking. Small towns tend to revolve around the gas station, the local shop, the post office and the bank. Once the bank closes, the shop and the gas station may be next, and then who will want to stay there? This situation is very hard on communities. When we published our report, one comment I heard many times was “its nice to know that at least someone in Ottawa cares about what’s happening here”. I would like to urge the members of this committee also to become people in Ottawa who care about the fate of our small communities.
We have several practical recommendations that are not overly interventionist to address the problem:

• Keep a close eye on the problem. Track where branches are closing, if banks are leaving ATMs where there were branches, and what replacement services, like post office agencies, are appearing;
• Make sure banks are accountable to consumers. Get the banks to report on what they are doing to solve the problem;
• Provide the know-how communities need to organize alternative banking services. Community leaders need to know what is involved in establishing a credit union branch, what the options might be for post office banking or other arrangements, and what other towns have done in similar situations;
• Make sure Canada Post’s activities in retail banking are beneficial to consumers. Post office banking clearly has the potential to enhance rural consumers’ access to financial services, but there is no public interest to be served by the Canada Post promoting services that could compete with credit union branches, or offering low quality services such as white label ATMs.

Accountability of the Proposed Financial Consumer Agency of Canada (FCAC)

The establishment of the FCAC is a very positive step, and key to the overall consumer protection framework. We are quite concerned, however, about some the detail in its enabling provisions in the Bill. In particular, we would urge the committee to ensure that:

• There is full public reporting of FCAC activities. It is going to be very disappointing if the FCAC reports do not really tell us about what monitoring has been undertaken and what the results of this monitoring have been.
• The FCAC has an adequate mandate. The expectation is that the FCAC will generally oversee consumers matters in the financial services sector, and it should have the mandate to match this expectation. At the very least, section 3 of the Bill should be brought in line with the mandate outlined in the government’s white paper.
• A consumer advisory committee is established. The implementation of the legislation depends on regulations. Put consumers on an equal footing with the industry in the process to develop these regulations by making sure a there is a fair, effective way for consumer interests to be heard.

Holds on Cheques

This is one area of the Bill’s access provisions that could be improved. More and more consumers are going to cheque cashing outlets to cash their cheques, where they are charged very high fees, and don’t get the benefits of having an account. Why? The main reason is the holds of up to ten days banks place on many cheques. Most people need their cash right away. All the other provisions which promote access to bank services by vulnerable consumers are undermined by these hold policies.
Rather than merely requiring banks to state what their hold policy is, the Bill should actually limit the hold periods. In particular, cheques cashed within a province should be held for no longer than two days, and all government cheques, both federal and provincial, should not be held at all.
More detail on our recommendations can be found in the submission we made to the committee this summer. Thank you for this opportunity to address the committee. I would happy to answer any questions.
 

Comments on Building Trust and Confidence in e-commerce

A Framework for Electronic Authentication in Canada (September 27, 2000)

Mr. Peter Ferguson
Deputy Director General
Policy Development
Electronic Commerce Task Force
300 Slater Street, Room 2016A
Ottawa, Ontario, Canada K1A 0C8
Dear Mr. Ferguson,
Thank you for the opportunity to comment on Building Trust and Confidence in Electronic Commerce: A Framework for Electronic Authentication in Canada. We are pleased that many of the concerns we raised in response to the previous draft of this paper have been acknowledged in the final draft. However, some serious concerns from a consumer perspective remain with the proposed approach.
Throughout the paper, there is an emphasis on balancing consumer interests, such as privacy and protection from additional liability, with allowing market-driven innovation. It must be recognized that certain privacy and consumer protections are fundamental, and cannot be balanced with other considerations. In other words, Canadian consumers do not want, and should not be subject to market-driven innovations that compromise their privacy or other basic interests.
The paper comments that “there is the perception that the use of electronic authentication offers the opportunity to enhance consumer protection to ‘raise the bar’”. We are concerned that our suggestions on consumer protection are being viewed as ‘raising the bar’ when in fact they are merely reflecting the protections consumers have expected and enjoyed until now. The widespread introduction of electronic authentication involves the establishment of new databases, new powerful social actors, new relationships between consumers and corporations, and new consumer responsibilities. Appropriate measures must be introduced if consumers are going to be protected from unprecedented privacy invasions and liabilities that are made possible by the new technology. This is not raising the bar, but keeping the bar at the same level.
We are concerned about consumer protections being a bargaining point in the development of the proposed principles for authentication and certification services. The public does not have any understanding of the principles’ importance, and it is possible that such understanding may not develop until consumers begin to actually use certification services. It is important, therefore, that government strongly represent the public interest as the principles are developed. Most importantly, the government must ensure that representatives of the public are fully involved in the development of the principles. We were concerned to note that the discussion paper suggests a process that includes only government and industry.
Feel free to contact me should you wish to discuss any of these matters further, and please continue to keep us informed of new developments.
Yours sincerely,
Angie Barrados
Researcher

Rural Bank Branch Closures

Letter to Finance Minister about Rural Bank Branch Closures

Hon. P. Martin P.C., M.P.
Minister of Finance,
Department of Finance,
21st floor,
140 O’Connor Street,
Ottawa, Ontario, K1A 0G5
Dear Minister Martin,
Please find enclosed a copy of our most recent report, Banking in Rural Canada: Ensuring that Rural Consumers Have Adequate Service.
The key finding of this report is that rural Canadians are losing access to banking service at an alarming rate. The measures contained in Bill C-38 are an important advance in consumer protection in the financial services sector, but unfortunately do not directly address the problem of rural bank branch closures. The Bill’s provisions are based on the recommendations made by the Task Force on the Future of the Canadian Financial Services Sector, but our report shows that since the Task Force released its report, the problem has worsened considerably.
We call upon you to renew the commitment you made in July 1998 that the federal government would not stand by while rural Canadians lose access to adequate banking services. Please carefully consider the five recommendations the report contains on how to address the problem of rural branch closures.
In particular, we would call your attention to the need to ensure that Canada Post’s activities in the banking sector accord with the public interest. We are concerned about Canada Post’s placements of white label ATMs in rural post offices. These ATMs offer minimal service at high fees, and may block the development of better banking services in these areas. We recommend that the federal government develop a consumer-friendly strategy on post office banking, and ensure that Canada Post operates within it.
Yours sincerely,
Angie Barrados
Researcher
cc.
The Honourable Lyle Vanclief, P.C., M.P.
Minister of Agriculture and Agri-Food and Minister Coordinating Rural Affairs
Andy Mitchell
Secretary of State (Rural Development)
(Federal Economic Development Initiative in Northern Ontario) Frank Swedlove
Executive Director, Financial Sector Review Group
Department of Finance

Newsletter – September 2000, Vol.7, No.2

IN THIS ISSUE
Local Telecommunications: Where’s the Competition?
Consumer Protection in ECommerce
Moving Foward on Privacy
New Report: Banking in Rural Canada: Ensuring Rural Consumers Have Adequate Service
Proposed Rules for Payday Lenders Present a Dilemma for Consumer Advocates

Local Telecommunications: Where’s the Competition?

If you were one of the many who thought that the CRTC’s decision to allow competition in local phone service, as well as long distance, would quickly eliminate the need for a regulator, think again. Regulatory activity in the telecom area is as intense as ever, just trying to help competition along in an industry still characterized by monopoly. It turns out that competition doesn’t just happen because you allow it; there’s a lot of groundwork that needs to be put in place first.
Inside Wiring
One problem that competitors face, in both the telecom and cableTV fields, is getting access to multi-unit dwellings. In the monopoly era, there was only one company with which landlords had to deal. Now that there are a number of service providers chomping at the bit to get in to these profitable buildings, landlords realize that they have a potential bonanza on their hands. Suddenly, what used to be taken for granted (access to the building) is now a hot item. But if landlords limit access to certain service providers, what happens to consumer choice?
PIAC is working with its consumer group partners to help the CRTC sort out this problem, with a view to maximizing consumer choice while respecting the needs of building owners to maintain the integrity of their properties.
Service Improvements in Rural Areas
A couple of years ago, in the CRTC’s High Cost Area proceeding, PIAC argued strongly for rural/urban equity, in terms of both quality of service and rates. The CRTC subsequently ordered telephone companies across the country to upgrade service in rural areas. But it left open the possibility of further rate increases in order to fund these upgrades. In response to the CRTC, a number of rural telephone companies have now tabled their service improvement plans. While these plans include important extensions and upgrades of service, they rely on local rate increases of up to 50% to fund the improvements. The rubber has hit the road.
PIAC has been representing residential consumer groups in these proceedings, beginning with the Northwestel hearing in Whitehorse, Yukon in June. In that hearing, PIAC, on behalf of CAC/NAPO, argued against the proposed $5/mo. local rate increase (which would have raised basic local rates to over $31/mo.), citing high levels of poverty and unemployment in many outlying communities. We brought in experts on financial matters to show that the company’s request for a 12.25% rate of return on equity was unreasonably high. And we argued for a fair balancing of the cost burden between northerners and southerners. We’re waiting for that decision. We’ve also filed submissions in respect of other rural telco service improvement plans, opposing local rate increases that would require people to pay up to $31/mo. for basic service.
The Price Cap Review
In preparation for next year’s review of the price cap regulatory regime, the CRTC recently asked for input on the agenda of that proceeding. In association with its consumer group partners,.PIAC filed a detailed submission urging the Commission, among other things, to put telco profit levels and quality of service at the top of the agenda. PIAC emphasized the importance of focusing on how consumers have fared in terms of rates and quality of service, in comparison with the pre-price cap regime in Canada.

CONSUMER PROTECTION IN ECOMMERCE

PIAC is working closely with other consumer groups, industry representatives, and governments to develop appropriate Codes of Practice, Trustmark schemes, and online dispute resolution mechanisms for consumers engaging in electronic commerce. We are also working with our colleagues internationally to ensure adequate protection for consumers in the online environment. Ultimately, we hope to see widely adopted international standards of business practice that will provide consumers with the confidence they need in this new global marketplace.

MOVING FORWARD ON PRIVACY

One of the biggest issues facing consumer groups today is privacy, and in particular, informational privacy. PIAC has been a leading advocate of consumer privacy over the past decade, and continues to play a key role in the development of legislation and policy in this fast-moving area. Over the past few months, we have:

• been working and speaking on issues in health privacy;
• appeared before a Senate Committee to address issues of consumer privacy;
• provided input to the federal government on the design of key regulations under Bill C-6 (re: the protection of publicly available data);
• provided input on and publicly supported Senator Sheila Finestone’s proposed Privacy Charter; and
• responded to the Ontario government’s Consultation Paper on a proposed new Ontario Privacy Act.

NEW PIAC REPORT: BANKING IN RURAL CANADA, ENSURING RURAL CONSUMERS HAVE ADEQUATE SERVICE

Bank branches are quite important to rural consumers and businesses, and when the only bank branch closes in a small town, it can be traumatic for the entire community. Unfortunately, many rural communities are facing just this situation. Our survey of sample rural areas found a 45% rate of bank branch closures between 1989 and 1998. In addition, the banks have announced more branch closures in the next year.
PIAC’s new report documents the emerging gap in banking services in rural areas, considers alternatives to bank branches for delivery of financial services and reports on the rural consumers’ opinion on these alternatives based on a public survey commissioned for the study. The report concludes with five key recommendations to the federal government on how to address the problem:

1. Renew the Commitment to Rural Consumers: The federal government should take a fresh look at the rural banking issue, and revitalize its commitment to ensuring that rural Canadians have access to adequate banking services. The federal government should not stand by while rural consumers’ access to banking service is reduced to white label ATMs and informal banking with local merchants.
2. Monitoring Access to Banking Services in Rural Areas: As the financial service sector changes, there needs to be monitoring of banking services in rural areas, so that rural consumers’ situation regarding access to financial services can be fully understood. At the moment, it is quite difficult to even track rural branch closures. Also, ATMs are very important to rural consumers, and there is currently no public source of information on rural consumers’ access to ATMs.
3. Oversight of Branch Closures and Industry Restructuring:To improve banks accountability to consumers, the government should monitor what activities banks have undertaken to maintain service in rural areas. In addition, it should encourage the banking industry, through monitoring and educational activities, to make service commitments to rural Canadians.
4. Support for Communities Facing Branch Closures: The government should encourage other types of branches to replace bank branches. The main way to do this is to increase the potential of credit unions to expand their operations, which is already underway. It is also very important that communities with no bank branches have access to expertise on alternatives to bank branches and how to establish these alternatives in rural communities. The government should therefore set up a program to assist communities in restoring or establishing banking services.
5. Strategy on Post Office Banking: The government should immediately review the activities of Canada Post in the banking sector, and develop a federal strategy to ensure that Canada Post’s involvement in the banking sector enhances rural consumers’ access to high-quality financial services, and does not further erode access. There should be a moratorium on the placement of white label ATMs in post offices until there has been a public debate about the role of Canada Post in providing banking services.

Banking in Rural Canada: Ensuring that Rural Consumers Have Adequate Service:
Please call PIAC (613) 562-4002 ext. 60 or fax to (613) 562-0007 Coilbound 90 pages $17.

Proposed Rules for Payday Lenders Present a Dilemma for Consumer Advocates

“Need money before pay day?” asks a Money Mart poster. This is an advertisement for a payday loan, which is a small loan (generally $100 to $300) made on the basis of a cheque post-dated to the customer’s pay day. The cost of a payday loan can range between $15-$25 for $100, which calculated in terms of an annual percentage is between 390% and 650%. While the Criminal Code prohibits charging interest rates of over 60%, no payday lender has been prosecuted, and the industry continues to grow.
Should consumer advocates support rules for payday lenders that will secure their foothold in the financial services sector, or argue for an interest rate cap that would force them out of business? PIAC would lean towards disallowing payday loans, except that several anti-poverty activists have pointed out that many poor people rely on these loans as their only source of credit. It would be better for these people if there were another source of small amounts of credit, but at the moment, there are no other realistic alternatives for people without credit cards or overdraft protection. It is therefore perhaps better to allow payday loans rather than leave many poor people with no source of credit (or only underground ones).
Should consumer advocates participate in the development of rules for payday lenders on the basis that payday loans are a necessary evil? Let us know what you think.