Speaking Notes Before the House of Commons Standing Committee on Finance

Public Interest Advocacy Centre
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.