Letter to the Minister of Finance about Financial Service Sector Refrom (December 15, 1999)

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,

Re: Reform of the Financial Services Sector

This letter is to urge you to take action to ensure that the financial sector reform is in fact a true reform for Canadian consumers.
When your paper, Reforming Canada’s Financial Service Sector: A Framework for the Future, was released, we were optimistic about the prospects for major advances to be made in consumer protection for financial services consumers, even though not all of our recommendations were acted upon. We felt the tone of the paper indicated that you take the public interest seriously, which reflected the principles laid out by the MacKay Task Force.
Our recent discussions with your officials, however, indicate that the Bill will actually be the minimum possible interpretation the paper in terms of consumer-oriented provisions. We urge you to take the following steps to ensure that your reform is meaningful:

1. Give the FCA a broader mandate:

Your officials have told us that the new Financial Consumer Agency (FCA) will have a strictly limited mandate. Monitoring and compliance activities are very important, but it would be most unfortunate if the FCA’s hands were tied with respect to emerging consumer issues in the sector. You chose not to legislate many of the MacKay Task Force recommendations on issues that are important to Canadians, and that were also endorsed by the House and Senate committees that studied the Task Force report. But just because they are not legislated does not mean that the issues should be completely forgotten.
The FCA could play an important role in monitoring these issues, and working with stakeholders towards non-legislated solutions such as voluntary codes and commitments, national strategies as well as educational activities. We would like to see the FCA lead a national strategy on ensuring access to banking services in poor urban areas, and rural and remote locations. This type of strategy would address an issue of great importance to Canadians, and may well be supported by the industry. Why prevent the FCA from engaging in such projects?

2. Commit to an approach based on openness and partnership:

The way to ensure that the public interest is part of government decision-making is to involve the public in the decision-making process. This means involving representatives of the public in deliberations, and keeping them informed, not just asking them what they think from time to time. Multistakeholder processes, such as CSA committees, can result in rules that both industry and public interest advocates endorse. For instance there was broad agreement to the CSA Model Privacy Code, which is now the basis of the new privacy law.
Why has this approach not been used for important issues in the financial services sector? Take for instance, the issue that has been at the top of our agenda for financial sector reform for years: the basic bank account. Reforming Canada’s Financial Service Sector committed to 12 transaction for $3 to $4 per month. We have heard that the banking industry is dead-set against the 12 transactions. Apparently, the industry has provided your officials with statistics to prove their point. We do not have access to the industry’s arguments on this point, or their statistics. If there were appropriate sharing of information, we would have a chance to promote the public interest on this important matter. Unfortunately, we are not going to get this chance.
Even on issues such as the basic bank account, consumer advocates are still kept outside the policy-making community. All we can do now is hope that the final arrangement on the basic account, that has been or will be developed in secret, will meet the needs of vulnerable consumers. Of course, we are very concerned that it will not.
On a different yet related issue, we were very disappointed to see one of your officials before the House of Commons Committee on Industry defending the practice of negative option marketing by banks. This is totally out of touch with the needs and opinions of Canadians, and runs contrary to your own expressed intentions to make the banks more accountable to the public interest. It appears that the department decided to simply repeat the banks’ position, and not to bother consulting representatives of the public at all. This incident underscores the need for a complete change in approach, if the financial sector reforms are to have any credibility with consumers.
We hope that you will take decisive action to save your reform process from becoming closed and narrow, and consider the interests of ordinary Canadians in having true reform of the financial services sector.
Yours sincerely,
Michael Janigan
Executive Director
Public Interest Advocacy Centre
cc. Frank Swedlove
Executive Director, Financial Sector Review Group
Department of Finance