FINA Committee Meeting

STANDING COMMITTEE ON FINANCE

COMITÉ PERMANENT DES FINANCES

EVIDENCE

[Recorded by Electronic Apparatus]

Wednesday, October 4, 2000

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[English]

The Chair (Mr. Maurizio Bevilacqua (Vaughan—King—Aurora, Lib.)): The meeting is called to order.

Mr. Loubier.

[Translation]

Mr. Yvan Loubier (Saint-Hyacinthe—Bagot, BQ): Mr. Chairman, I would like to introduce my colleague from Drummond, Pauline Picard, who will be joining me as member of the Finance Committee for the Bloc Québécois. As of today then, she will be taking part in the proceedings of the Finance Committee.

[English]

The Chair: Welcome. I also want you to know that in our first meeting, Ms. Picard, I welcomed you officially to the committee. We look forward to input at par with Mr. Loubier's, of course, or better, if that's possible. Welcome.

[Translation]

Ms. Pauline Picard (Drummond, BQ): Thank you.

[English]

The Chair: We're going to begin, as you know, with the order of the day, which is Bill C-38, an act to establish the Financial Consumer Agency of Canada and to amend certain acts in relation to financial institutions.

We have the following witnesses: T-Base Research Communications Inc., Sharlyn Ayotte, president and chief executive officer, and Len Fowler, chairman; National Anti-Poverty Organization, Laurie Rektor, executive director, and Liz Sutherland, assistant director; Quebec Association for the Protection of Savers and Investors Inc., Monsieur Paul Lussier, president; Option Consommateurs, Jacques St-Amant, analyst, and Louise Rozon, executor director; Coalition québécoise pour le maintien des services bancaires personnalisés, Louise Aubert, Fédération de l'âge d'or du Québec. Welcome.

Many of you have appeared before the committee before. As you know, you have approximately five to seven minutes to make your initial comments, and thereafter we'll engage in a question-and-answer session.

We'll begin in the order that appears on our agenda, with Sharlyn Ayotte, president and chief executive officer, T-Base Communications Inc. Welcome.

Ms. Sharlyn Ayotte (President and Chief Executive Officer, T-Base Communications Inc.): Thank you for the invitation to appear before the committee and speak yet again. It is both an honour and a responsibility that I actually cherish as a Canadian.

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As the CEO of a Canadian company whose client base includes major North American financial services providers and as a consumer of both corporate and personal financial services, the future of the Canadian financial services sector is a matter of serious concern.

Like most business people, I rely on a variety of information sources to keep up to date. However, as a business woman who happens to be blind, opportunities are consistently limited by information sources that are inaccessible. When I am unable to gain access to information that is readily available through the mainstream, it has a significant impact on me, my employees, and the future of our business.

When I was preparing my first presentation to the Standing Committee on Finance in October 1998 to comment on the MacKay report, I called Treasury Board... Not Treasury Board, excuse me. I'm going to forget doing this. It's not working for me. I called Finance Canada to request an audio version of the MacKay report. At that time I was informed that the document was not available in an audio format and was only available in conventional print and on the Internet. My right, as is the right of all other Canadians, to access information in alternative formats is guaranteed through the Canadian Charter of Rights and Freedoms and the Canadian Human Rights Act. In order for me to be able to respond the first time at this committee, I had to engage a client to read an 800-page report aloud.

This year I'm again before the committee, and I now have access to computer technologies and can read and navigate the Internet and do all kinds of amazing things I was never able to do before. The best part of it is that I'm no longer completely dependent on audio cassette recordings to access information about financial services. I can now navigate the Internet.

So when I received the invitation this time to appear before this committee, I was delighted. I got right to work, because I take that responsibility quite seriously, and I went to the Finance Canada website to check out and review the documents I needed to have access to in order to comment on the activities of this committee. Alas, even with new technology and teaching myself how to deal with brand-new voice synthesizer software and voice to text and text to voice, I discovered that some of the documents that were sourced on the Finance Canada website were in a PDF format that was inaccessible and incompatible with the kind of technology that allows me to participate in the decision-making process of government.

The future of the financial services sector as it pertains to people who do not have access to information through conventional means, either on the Internet or in conventional print, is a matter of serious concern, certainly as it pertains to the financial services we all depend on in our everyday lives, the ability to make decisions about mortgages and cash withdrawals and just making financial decisions.

This is actually the third time I've appeared before this committee. Each time I have appeared we've outlined the information, communication, and technological barriers that prohibit approximately 40% of the Canadian population from accessing information about important decision-making processes. Each year we've laid out the statistics, the demographics, and the need for accessible information and accessible technologies. Each year we've laid out recommendations. This year we are going to ask this committee to demonstrate real leadership and to take action in areas where they really can have an impact.

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Len is going to take over and talk about the technology that restricts people from being able to access the financial services sector.

Mr. Len Fowler (Chairman, T-Base Communications Inc.): The issue: What measures can the Government of Canada take to ensure that financial services and information provided to Canadians by the financial services sector are accessible to all?

The Government of Canada publicly endorses the right of all citizens to have equal access to essential services through the Canadian Charter of Rights and Freedoms and the Human Rights Act. Omnibus Bill C-78 and the 1998 S-5 amendment to the Human Rights Act address the equitable delivery of services to the public, with particular reference to people with disabilities.

The task force on the future of the Canadian financial services sector, the MacKay report of 1998, states that financial institutions will only serve all Canadians fairly and well when consumers are empowered and when strict conduct, disclosure, and transparency rules are maintained within a powerful accountability framework. The report emphasizes that financial institutions provide essential services to Canadians and therefore must serve all stakeholders fairly and equitably. The challenge is not to mandate what is provided but rather how it is provided to ensure that all Canadians are served.

The Internet, electronic commerce, and technology: The Internet has gained public acceptance faster than any other communication medium in history. Radio reached 50 million people in 39 years, television reached the same audience in 12 years, and the Internet has surpassed it in only four years.

Internet technology has brought about a massive global revolution and restructuring of the way business is conducted. E-commerce activities that are enabled by advanced online information networking include government services, banking services and financial transactions, retail product marketing and service delivery, research and information retrieval, and more.

Within the financial services sector the implementation of technology is dramatically altering the nature and quantity of services offered, as well as how and where they are available to consumers. The swift pace of technology development promotes healthy competition in the market and offers opportunities for consumers to benefit from new and enhanced products and services. Today the delivery of financial products and services by Canadian financial institutions is enabled by a number of technologies, including automated banking machines, point-of-sales systems, cash counters, account updaters, etc.

Canadian technology developers are world leaders in creating accessible banking technology and in the design of accessible electronic delivery systems. For instance, innovative Canadian technology assisted the Royal Bank of Canada to launch the world's first audio banking machine in Ottawa in 1997. In 1999, two years later, the first talking bank machine in the U.S. was launched in California by the same Canadian source. By the end of this year, Bank of America, Wells Fargo, and Citicorp will have 4,500 talking bank machines deployed for service in the U.S., all utilizing technology developed in Canada.

Making electronic information systems and technologies universally accessible in mainstream applications can be achieved easily and cost-effectively through the appropriate human and machine interface design coupled with accessible program, service, and information design.

What are the problems? The deployment of technology in all areas of service provision is creating a widening gap between people who have access to technology and electronic networks and those who do not. This is known as the “digital divide”. The Government of Canada is committed to making Internet and e-commerce technology broadly available to Canadians in the mainstream through initiatives such as Connecting Canadians and access.ca. But it is not and never will be truly accessible to all citizens unless we make a commitment to break down the systemic barriers that exclude some citizens. If Internet technology is to become a mainstream provider of essential services and significant social, economic, and cultural benefits to Canadians, accessibility issues must be addressed and resolved.

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Although Canadian consumer advocacy organizations representing seniors and people with disabilities and issues such as human rights, literacy, anti-poverty, and others are constantly challenging financial institutions serving Canadians to make their systems and services accessible, progress is disappointingly slow. The process supporting human rights in Canada depends on the individual complaint-resolution process to bring moral suasion coupled with competitive advantage to bear for removing inequities in service delivery within the financial services sector.

Although the world's first audio banking machine was developed and produced in Canada by Canadians, there are fewer than 20 now providing services in Canada. If Canadian technology developers are world leaders in creating accessible banking technology and accessible electronic delivery systems, why is the financial industry in Canada lagging in the deployment of accessible technologies and services?

The success of implementing talking bank machines in the U.S. is due primarily to enforcement of the Americans with Disabilities Act. To ensure that all citizens of Canada are served as equitably as in the United States, there is existing legislation that can be called upon to ensure the equitable delivery of services—that is, the Canadian Human Rights Act. The significant difference is that in the U.S. legislation requiring the provision of accessible services is proactively enforced, but in Canada it is not.

As well, Canadian financial institutions are waiting for standards to be provided, a process that appears to have encountered a series of roadblocks in the Canadian standards development process. Because there are no Canadian financial industry accessibility standards and accessibility is not considered a priority in the market economy, clients with disabilities are disadvantaged and likely to remain so until regulatory requirements are amended.

The foregoing clearly demonstrates that the combined moral suasion and competition approach is bankrupt when it comes to the deployment of equitable services in the Canadian financial services sector.

So we have some recommendations. The electronic systems used to deliver information and services in Canada must be designed to accommodate the accessibility requirements of all Canadians to reflect our diverse information and communication needs. Our government must make it mandatory for financial institutions permitted to provide services to Canadians to do so equitably.

Our recommendations:

(1) Request that the Governor in Council, the cabinet, take full advantage of its considerable power under the Human Rights Act to direct the government to develop strategies to address systemic barriers and to resolve inequities affecting the equitable delivery of financial products and services in Canada.

(2) Enforce Canada's existing human rights legislation pertaining to the provision of goods and services by requiring the full compliance of all providers of financial services and electronic commerce in Canada.

(3) Amend the Bank Act and all other relevant legislation pertaining to the regulation of the financial services sector to ensure that the equitable delivery of services and associated information is guaranteed and provided by all federally regulated financial organizations operating in Canada. As well, the Government of Canada should encourage legislators to follow the lead to include equitable service delivery compliance criteria in regulations governing financial services sector organizations under provincial and territorial jurisdictions. Also, it should encourage all self-regulating financial industry associations to incorporate equitable service delivery criteria into their regulations and codes of conduct.

(4) Ensure that the Canadian Standards Association produces comprehensive accessibility criteria for Internet technology, applications, and electronic service delivery systems in Canada and mandate compliance to the standards in the financial services sector.

(5) Develop and provide a “best practices” model of accessible electronic service delivery for use by the financial services sector to assist them in providing equitable services to the Canadian public.

(6) Promote and provide the HRDC publication Guidelines and Specifications for Providing Information in Multiple Formats to all financial services providers operating in Canada.

(7) Provide Canadian consumers of financial services with adequate recourse provisions within the context of the federal government's proposed Financial Consumer Agency of Canada.

(8) Demonstrate the government's commitment to equity for all in service delivery by making all information relating to the financial services sector public consultation process accessible to Canadians with disabilities.

Thank you.

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The Chair: Thank you very much, Mr. Fowler and Ms. Ayotte.

We'll now hear from the National Anti-Poverty Organization, Laurie Rektor, executive director, and Liz Sutherland, assistant director. Welcome.

Ms. Laurie Rektor (Executive Director, National Anti-Poverty Organization): Hi. Good afternoon. Thank you again for the opportunity. We're one of those groups that has had the opportunity to speak to you before, and we appreciate this one this afternoon.

Briefly, the National Anti-Poverty Organization was founded in 1971. It's a national, non-partisan organization that represents just over five million people who live on low incomes in Canada. Our board is representative of the Canadian fabric and includes individuals who are currently living in poverty or have significant life experience of poverty.

NAPO, among other things, advocates the concerns and reality of low-income individuals, especially as it relates to issues of public policy. Our ultimate goal is to see the end of poverty in Canada.

One of the major assumptions that we operate from when we look at Bill C-38 is that access to basic banking services is not a luxury but rather a right. It's a necessity in our society to ensure that individuals can participate equally and fairly as members of the Canadian society. This is an issue that NAPO has been working on for a very long time, at least for the last 15 years. It's an issue of significant concern. We know that at least 8% of families who have household incomes of less than $25,000 do not have a bank account.

Bill C-38 presents a tremendous opportunity to honour our obligation to respect the right to access to financial services, and, taken with the recent recommendations of the Canadian Human Rights Act review panel, we can move to make significant important and necessary improvements in the lives of low-income citizens.

We recognize that it's very difficult for non-low-income individuals to conceive of and understand the realities faced by low-income people, especially with regard to banking concerns. For example, I don't think many people know that a bank card doesn't automatically come with a bank account, that low-income customers are not guaranteed access to a bank card.

Non-low-income people understandably take their experience for granted and generalize it to all individuals. It's not accurate or fair to do this. It's very important that we consider other realities and experiences, especially when we look at the access provisions of Bill C-38, and those are the ones that NAPO addresses its comments to.

Just before I look at Bill C-38, I'll back up to the white paper of June 1999. The white paper made commitments on access based on the findings of the MacKay task force and recognized that consumers, regardless of income, should receive the highest possible standard of quality and service from financial institutions. The paper also gave assurances to all Canadians that they would have fair access to banking services. At the time, NAPO was very encouraged and we looked forward to the legislation that would come forward to implement the commitments that were made.

In terms of Bill C-38, NAPO is encouraged and recognizes that some of the provisions in the legislation go some way toward improving access for low-income individuals. For example, no deposit or minimum balance is required to open or maintain a bank account. The commitment to establish a Financial Consumer Agency to monitor and enforce consumer interests is also significant. NAPO feels very strongly, however, that the Financial Consumer Agency must be headed by a strong consumer advocate in order for it to be effective and credible. Also in Bill C-38, the provision to cash federal government cheques without the requirement that an individual hold an account is an important and significant change.

We do have some concerns. Regarding cheque cashing, we would like to see a commitment from the federal government to extend the same cheque cashing privileges and guarantees to provincial government cheques. Particularly for many—not all, but many—low-income Canadians the main source of their income is welfare or social assistance. This is a provincial government cheque, and without the same guarantee to cash that cheque without a minimum balance being kept, or a bank account, individuals are left without the financial resources they require in order to survive.

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We know of instances where people have gone to a bank with their social assistance cheque with ID to prove who they are and they have been turned away, even when the provincial government cheque was drawn on the bank at which they presented themselves with the cheque. They left with their ID and their cheque in hand and came back with letters confirming they were who they said they were, and still the cheque wasn't allowed to be cashed. So it is a significant concern.

We're also very concerned about the failure of Bill C-38 to legislate a reasonable hold period in keeping with the Canadian Payments Association clearing timelines. This is a very serious gap in ensuring access for low-income people. We know that within a province a cheque clears almost always within 24 hours. It would seem reasonable to legislate an in-province hold period of no more than two days.

Without the guarantee of a legislated, reasonable, and fair hold period, any efforts to improve access for low-income people to banks are not there. If you can't get access to those funds in a reasonable amount of time, you in fact don't have fair access. The failure to legislate a reasonable hold period also gives banks the opportunity to deny service to low-income consumers and gives them a way to do it without saying why they're denying service. You don't need to discriminate against someone if they can't get access to their funds; that's it, you don't have to say anything else.

With regard to a low-cost account, the June 1999 paper committed to legislate a low-cost bank account. Bill C-38 fails to do this. Instead, it's working with the self-regulatory approach and will work with the banks through MOUs to implement low-cost accounts. NAPO believes that at this point in time we have ample and significant evidence of the failure of self-regulatory solutions and that a low-cost account must be legislated. We know that banks don't voluntarily work to ensure that the needs of low-income consumers are met.

In 1999 the CCRC conducted a survey on how well the 1997 voluntary code was working, and 96% of the banks it looked at at that time violated the code in some way. That was more than two years after that agreement was made.

We've also looked briefly through the Canadian Bankers Association submission to this committee. Their paper indicates that banks feel they've been unfairly targeted with consumer protection measures while other financial services are not being included. I feel quite strongly that this statement indicates that banks perhaps do not understand the obligation and responsibility they have as chartered institutions to treat all consumers fairly, and will not likely do so without legislation.

In addition to legislating the basic account, NAPO believes the basic account should not be a low-fee account but rather a no-fee account with a guaranteed number of monthly transactions, including electronic and in-branch transactions. Banks have argued, and will continue to do so, that the impact of a no-fee account would be significant on their profitability. With all due respect, I do not believe Canadian society needs to be concerned about the six institutions whose combined profits from August 1999 to July 2000 were $9.5 billion.

Finally, with regard to branch closures, we have some concerns with the fact that they're being dealt with through regulation rather than legislation. We believe the rules around branch closures must be legislated. They have to be legislated soon before we don't have any branches left in low-income and rural communities. Just this week the Public Interest Advocacy Centre released a study that indicated that almost 50% of rural bank branches had been closed in the last 10 years in the communities they surveyed.

Banks have and continue to profit tremendously from protective legislation and regulations and therefore have an obligation and a responsibility to provide service to Canadians. We're particularly concerned about the length of periods of notice for the closure of branches and the responsibility of banks to provide to communities where they intend to close a branch the documentation and sound rationale for the closure of that branch. If and when a bank is closing the last branch in a community, NAPO believes the bank needs to be legislated to work with the community to find a mutually acceptable alternative before that financial institution is lost and that lifeline is taken from that community.

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Our other issues of access are addressed in the paper we've provided, entitled “Banking on Justice”, as are some of our other recommendations.

In closing, I would just like to ask this committee to consider the obligation that we as a society have to all of our citizens. Banking is an example of one sector that is failing to treat low-income Canadians fairly or to work with them at all. In considering the witnesses that you will hear from and that you have heard from, I would ask that you please recognize the tremendous resources the industry has to bring to facilitate their interventions compared to the resources, relatively smaller, that consumer groups and organizations have and to please weigh the presentations accordingly.

Thank you.

The Chair: Thank you very much.

We will now hear from the Quebec Association for the Protection of Savers and Investors Inc., Monsieur Paul Lussier, president.

[Translation]

Mr. Paul Lussier (President, Quebec Association for the Protection of Savers and Investors Inc.): Mr. Chairman, APEIQ, the Quebec Association for the Protection of Savers and Investors, is an advocacy group, a non-profit organization. It is the only such group in Canada exclusively concerned with the protection of savers and small investors with savings in financial institutions and investments in Canadian companies and, very often, in banks.

We have over 1,500 members and we have had some success with banks and some other widely-held corporations, at the annual shareholders meetings, in dealing with proposals to improve matters relating to corporate governments and communication with shareholders.

Unfortunately, our representations to the regulatory bodies, and in this particular case to the federal government, have not produced the expected results. We believe that our presentations to your committee in 1998, to the MacKay Task Force in 1997 and the Senate committee in 1998 were well received, and met with a certain degree of sympathy, but it would appear that our recommendations have not been given the appropriate follow-up in the form of the results that we were hoping for, at least at the government level.

The APEIQ presentations relate mainly to 15 points, all dealing with the most basic matters of corporate governments, in line with the position taken by many other organizations and even committees such as the Dey Committee of the Toronto Stock Exchange, in 1995 I believe, some of whose recommendations were the same. We are surprised to see that the government has not seen fit to follow-up on these recommendations in Bill C-38, and we wonder whether Canada will not soon appear to be a banana republic as far as corporate governance is concerned, particularly in light of what is now taking place south of the American border.

Our main recommendations deal with about 15 points. The first recommends separating the positions of board chairperson and chief executive officer of banks and large corporations since the same recommendations are made in relation to the Canadian Business Corporations Act. A similar recommendation was made in the report of the Dey Committee as well as in the MacKay report. We do not understand why the government has not seen fit to follow up on this.

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Our second proposal is to make it easier to elect, to boards of directors, candidates chosen by shareholders as a whole, rather than by the existing board and management of the banks exclusively. At the present time, one must hold at least 5% of the shares of a financial institution or a public company, or have the control of such shares in order to nominate a person to the board of directors. Do you have any idea of how much 5% of the shares of the Royal Bank would amount to? It is $900 million. I don't know many small or even large savers who are in that category.

Our third proposal is to limit the number of boards on which a director may sit at any one time. Right now, it's an old boys' club; I appoint you, you appoint me, we appoint each other. In this way, boards of directors are becoming less and less efficient, and less and less representative of shareholders. In our view, the number of boards of directors on which one person may sit should be limited, and we mean very limited, because in order to do a good job, a certain amount of time is required along with some commitment. These recommendations are in no way reflected in the bill.

Fourth, we recommended the implementation of more democratic mechanisms for electing directors, using both separate and cumulative voting, without restricting the pre-established list. This mechanism is provided for in the Bank Act but it is not applied because banks would have to adopt internal governance regulations in order for it to apply. Under this mechanism, each shareholder could have the same number of votes as the number of people nominated for the board of directors and could give all his votes to a single candidate. This would give the shareholders at least one opportunity to let the company know their assessment or perception of the work being done by the bank directors. There is no reflection of this in the bill. On the contrary, it increases the ceiling for the application of such a mechanism should it be adopted as part of the bank's procedures, when 20 per cent of more of the bank ownership is in the hands of a single person or a single group.

Our fifth recommendation dealt with eliminating potential conflicts of interest between the directors and suppliers of services. There is no provision in Bill C-38 to this effect except for the general provision relating to very general conflict of interest. We know that both in United States and Canada shareholder meetings have already had some success in adopting, often against the wish and recommendation of the management of banks and certain corporations, a requirement to disclose at least the fees paid to external auditors for auditing services as well as those for general consulting services. As you can imagine, a consultant who receives a million dollars for auditing books and who, in addition, receives $10 million for different kinds of consulting services may experience some difficulty in writing a critical report as an internal auditor.

A proposal was made to the U.S. Securities and Exchange Commission. The president, Arthur Levitt, has himself proposed a requirement to have such services provided exclusively by external auditing terms. It may not be necessary to go that far. In any case, we do not yet know what measure will be adopted in the United States. Nevertheless we think that we should take advantage of this opportunity to amend the Canadian legislation so that shareholders can obtain a better report, a more objective report from external auditors.

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Sixth, with respect to the requirement to submit financial statements for review and discussion at annual shareholders' meetings, the present act and the bill can be interpreted as through the bank were required only to table financial statements even though the shareholders may ask questions. Bank directors interpret the legislation and will continue to interpret it in this way, since there is no change, as if they are not required to answer the shareholders' questions, which strikes us as quite impertinent and unacceptable.

Seventh, we have made proposals relating to the submission of management policy for the remuneration of directors to shareholders for approval. In the case of banks, which are basically public services, as Ms. Rektor implied, and which are in a very protected environment in relation to other private sector businesses, we consider that the remuneration levels for senior executives are outrageous. Of course we are quite familiar with the process whereby they may receive very positive recommendations for such and such a level of remuneration. Nevertheless, the final outcome is that the directors of these institutions do not necessarily receive a basic salary but rather an overall remuneration package with a very generous system of options, which is unacceptable.

Our eighth recommendation relates to the adoption of a code of procedure for shareholders' meetings. Certain banks, more specifically the Laurentian Bank, have voluntarily adopted such a code of procedure but there is no requirement to this effect in the bill.

Our ninth recommendation is that businesses be required to prepare full minutes of all shareholders meetings and provide them to all shareholders. Although some have already started this practice since we made our proposals, there is not yet any requirement in the bill.

Tenth, we recommend the lessening of restrictions to the shareholders' right to submit proposals at shareholder meetings. At the present time, as you know, the act and the bill provide that the management of a bank may refuse a shareholder's proposal whose main purpose is to serve general aims of an economic, political, racial, religious, social or similar nature. In other words, they may refuse almost anything and there's no public pressure, so to speak, requiring banks to accept shareholders' proposals. This same provision is to be found in the bill. The least that can be said is that it strikes us as an anachronism.

Our eleventh recommendation is that we give securities commissions the power to decide the admissibility of shareholders' proposals. It follows to some extent from the previous proposal. If there is no specific organization, then perhaps the securities commissions could arbitrate on such matters.

Mr. Chairman, let me remind you that the previous speakers went beyond the time allocated to them.

Mr. Yvan Loubier: You are right.

Mr. Paul Lussier: Thank you.

[English]

The Chair: You're right, unfortunately. I wish everybody would stick to their time.

[Translation]

Mr. Paul Lussier: In any case, I shall conclude.

Twelfth, we recommend limiting management's proxy powers with respect to shareholder proposals not yet put forward at meetings or extending these powers and providing the corresponding tools to all shareholders who have submitted a proposal. That is not in the bill; I will not explain to you the meaning of this proposal.

Thirteenth, all shareholders should be given access to the names of all other shareholders because at the present time it is necessary to constitute coalitions in order to present proposals that can be adopted.

Fourteenth, the law should be made more flexible in order to facilitate communication between shareholders; once again, there is no provision for this in the bill.

Fifteenth, businesses should be prohibited from making contributions to political parties or movements. The bill quite clearly demonstrates that the bank lobby is far stronger than consumer and shareholder advocacy organizations.

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Sixteenth, on the matter of the rules governing bank ownership, we do have some proposals, which I mentioned in my letter of August 4, relating to the National Bank and the Laurentian Bank in Quebec. It is our view that the takeover of these financial institutions by investors other than multiple investors, that is through widely-held shares as is now the case, can constitute a problem in Quebec because of the special role played by these two banks. They are very much Quebec businesses, and any transition from a widely-held status to ownership by a single shareholder should, in our view, be the subject of a far more extensive regional consultation than what is provided for in the bill before allowing the Minister of Finance to take a decision. Thank you, Mr. Chairman.

[English]

The Chair: Thank you very much, Mr. Lussier.

We're now going to hear from Mr. Jacques St-Amant and Louise Rozon, from Option consommateurs.

Mr. Jacques St-Amant (Analyst, Option consommateurs): I'll defer to Ms. Rozon.

The Chair: You will?

Ms. Louise Rozon (Executive Director, Option consommateurs): Thank you.

[Translation]

Mr. Chairman, ladies and gentlemen, Option consommateurs has been playing an advocacy role for consumer rights to banking services for about 10 years now. Among other things, we have investigated phenomena such as the difficulty of obtaining access to basic banking services, branch closings as well as the efficiency of complaint review procedures.

Bill C-38 is therefore of great interest to us and we wish to thank you today for giving us this opportunity to point out that, in spite of its many qualities, it does contain a number of over- sights that could easily be corrected. We have provided you with a rather full list of them in our brief, which we sent to the committee this August. Today we wish to focus on two aspects: the monitoring of banking practices by the new agency and by complaint review mechanisms as well as the framework for bank mergers and similar operations.

As far as the agency is concerned, in June 1999, the government proposed the creation of what is now called the Financial Consumer Agency of Canada. We thought it was a very good idea. In June 2000 we were, however, very disappointed to see the bill itself. The scope of the agency is limited to the application of a few legislative provisions and possibly a few codes of practice. Its powers are restricted. We hope to see an agency that was able to exercise some influence and control over banking practices. The bill gives the impression that instead of setting up a watchdog it will merely authorize the issuing of parking tickets.

For example, the agency will have not power to say or do anything about such important matters as the legibility of contracts, the application of the Canadian Payments Association's rules on pre-authorized debits, the holding of funds—as mentioned by our colleague from NAPO—and difficulties that may arise between clients and bankers over the coming years and will not have been dealt with by the "consumer provisions" to be applied by the agency.

The agency will not be able to evaluate the complaint review policies implemented by the banks. It will be responsible for "supervising the implementation of codes of conduct" but will have almost nothing to say about such codes, even if their content is poor. Nor will it be willing to provide assistance to a given consumer in settling a specific problem since that is not its mission. Quite clearly, there is no reason to believe that its powers and prestige will convince bankers to make any change to harmful business practices for their clientele.

Consumers and associations feel the need for a single service for information and action on a whole range of issues to advance consumer rights. They were expecting the agency to play this role and that is what Canadian consumers need. But the agency will not fit the bill.

Yet the bill could be easily amended to extend the agency's scope to include at least the monitoring of overall relations between banking groups and consumers. Without such amendments, we remain very pessimistic about the impact this agency will have on banking practices.

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As far as review of complaints is concerned, the bill calls for the creation of the ombudsman of financial services in Canada. We consider this approach to be acceptable. We have far more difficulty with the internal complaint review mechanisms within financial institutions since most of them are quite inadequate. Unfortunately, the bill does not make any proposals to improve things.

Every week we receive complaints from consumers about existing review practices in financial institutions. These consumers note that the mechanisms are too cumbersome and many consumers wear themselves out in their efforts and come to the conclusion that the banks' ombudsman is in fact partial.

This discourages consumers and only serves to discredit the entire complaint review process, including the future role of the ombudsman of financial services. Moreover, the bank is supposed to invite consumers to address their complaints to the agency although such a step will be basically useless since the agency has no role to play in the review of complaints.

In our view, it is therefore essential for the agency to be given the power to approve bank policies for the review of complaints and to oversee their application.

A few words now about the supervision of bank mergers. We know that several large Canadian financial institutions dream about mergers. We also know that such operations can have a very significant impact on consumers and the economy. These operations should therefore be scrutinized very carefully according to fair, consistent and precise criteria.

The Minister of Finance has made public a policy for the evaluation of bank mergers whose content we consider to be adequate. Unfortunately there is nothing in the bill that provides this policy with the necessary stability. We therefore recommend that the bill contain a provision such as a regulatory power allowing for the adoption of an evaluation policy for mergers and similar operations.

We also wish to draw your attention to several other items. We note that the new version of section 448.2 of the Bank Act gives the government the power to adopt regulations requiring a bank to provide an account at an affordable price. We would have preferred to see this requirement in the act itself, with the regulations specifying the characteristics of such accounts.

We know that the rules of the Canadian Payments Association play an important role in the operation of the payments system in Canada and have an effect on consumer rights. Yet consumers do not have any efficient method of complaint when a bank infringes these rules. We therefore recommend that the government extend access to the sanction mechanism of the CPA and stipulate that any client may invoke such rules.

In conclusion, in the brief submitted by the Canadian Bankers Association to the committee—as was also mentioned by NAPO—the association says that certain consumer protection provisions that apply to the banks in particular are unjust. Yet the reasons are quite understandable, the banks are the main deposit institutions and intermediaries for payment in Canada, hence their essential economic role. But they are increasingly reluctant to play this role for a segment of the population which now feels it obtains better service at Money Mart than at a bank.

The government of Canada is requesting Parliament to put a stop to this ridiculous phenomenon. We are in agreement and we also request that you enact a few legislative amendments without which the government's aim cannot be achieved within the foreseeable future.

We thank you for your attention and will be pleased to answer your questions. Thank you.

[English]

The Chair: Thank you very much, Ms. Rozon.

Now we'll hear from the Coalition québécoise pour le maintien des emplois et services bancaires personnalisés, and Ms. Louise Aubert.

Welcome.

[Translation]

Ms. Louise Aubert (Spokesperson, Quebec Coalition for the Maintenance of Jobs and Personalized Banking Services): Mr. Chairman, ladies and gentlemen, we wish to thank you for giving us this opportunity to explain to you briefly our reactions to Bill C-38. We go along with the general thrust of the bill but we are convinced that a number of amendments are necessary in order for this bill to meet the government's aims to ensure access to banking services consistent with the needs of citizens.

As you know, our coalition has approximately 20 member- organizations representing almost all Quebec social agencies. Every day our members are in contact with the disadvantaged, seniors, youth, consumers in cities or in the countryside who are increasingly discovering that the level of banking services they receive is inadequate. We will first of all say a few words about some of the positive initiatives and then turn to our particular concerns, namely delays in releasing funds and branch closings.

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In this bill, the government has rightly chosen to counteract certain trends resulting in the deterioration of service. We may note as examples the new versions of sections 448.1 and 448.2 of the Bank Act requiring banks to open accounts and to provide affordable accounts. With the exception of a few technical details, these are urgent and essential measures that will facilitate access to banking services. Of course, their impact will depend on the content of regulations that we have not yet seen. Nonetheless, the minister and the department staff have shown their sensitivity to citizens' needs in this area.

As for delays in the release of funds, we note that bankers are capable of a great deal of imagination in coming up with ways of discouraging the kinds of customers they are the least interested in. This is something that must be taken into account when dealing with regulations under section 448.1. The practice of placing a hold on funds is a good example of this. A CROP survey conducted in February 2000 for Option consommateurs shows that 13% of Quebec consumers had had at least one such hold imposed on them when depositing a non-government cheque in the past two years. This proportion amounted to 21 percent among young people between 18 and 34 years old. In half of these cases, the longest holding period imposed on them was six days or more; at least 10 percent said they had undergone a delay or holding period of 10 days or more.

This is not a new problem. The MacKay Report already referred to delays in the release of funds. In November 1998, the Liberal caucus task force recommended that banks be forbidden to set holding periods in excess of the time required to clear a cheque. In practice, however, the situation is worsening.

In its present version, the bill does not propose any real solution to this problem. Of course, a regulation made under the new section 459.4 of the Bank Act could require a bank to disclose its policy on hold periods. But what will actually happen? It will be announced that the "normal" holding is a week, for example, then exceptions will be made for good clients. In this way all those that they do not want will be eliminated. Of course, and this is very good news, the new section 458.1 of the act will require banks to cash federal government cheques. But this provision will only serve those who are not considered customers rather than the thousands of low-income citizens who cannot afford to wait a week to have their paycheque cashed.

It is illusory to think that the Canadian Payments Association may do something about this. It does not have any power over the internal policies of banks on the period required for the release of funds. That is where the problem lies. If ever the management of the CPA should appear before your committee, we would urge you to put this question directly to them.

In the United States, the problem was settled to a large extent by adopting legislation establishing the maximum period for the release of funds. This was in 1987 under the Reagan administration. Thirteen years later, will our Parliament be less concerned with settling this question? It could be easily done. It would simply require an amendment to the present bill giving the government the power to adopt regulations in this area. Option consommateurs has made a precise proposal to this effect, which we support.

Then it will be up to the government to discuss the matter with the banking industry, as it is now doing with respect to the low-cost accounts. It would then have at least one lever for negotiations that it does not have right now. There can be no justification for waiting another five-year period while Canadian citizens remain unable to have access to their funds for days on end.

Another problem facing us are the dozens of bank closures in Canada in Quebec. A recent study done by the Public Interest Advocacy Centre has measured the extent of this phenomenon and its impact in certain rural areas. Fifteen percent of Montreal area residents said in February 2000 in a CROP survey that their branch had shut down in the two previous years and 10 percent said that another branch where they had an account closed during the same period. That is enormous and it has consequences both for citizens and the economy.

In the case of citizens, service is becoming less and less accessible. However, the same CROP survey done at the beginning of the year shows that the average Quebec consumer still visits his financial institution twice a month and that 17 percent of Quebeckers never go to the ATM and that this proportion rises to 41 percent among those aged 55 and older. People want and need personalized service.

Unfortunately the measures contained in the bill are not sufficient to deal with the problem. A bank wishing to shut down a point of service will simply be required to give an advance notice and it may be invited to a meeting with the new Financial Consumer Agency of Canada, and, perhaps, with representatives of the local community. The amount of advance notice is supposed to be set through regulation.

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Clearly, these measures are insufficient to slow down the collapse of the bank branch network in Canada. At the very least, there should be a compulsory meeting with the agency and, in virtually all cases, consultations with the affected community. The wording of the legislation should target the closure of all service points which allow the withdrawal of funds by a natural person, and not just branches in the technical sense of the term, as is currently the case. Those changes are quite easy to implement.

Moreover, the coalition maintains that in cases where the closure of a point of service would have a significant impact on the community, a compensation mechanism must be established. When a bank closes a branch, it may be saving money, but it is sometimes causing the community as a whole to incur significant costs, and it is not up to people in rural communities or in poor urban neighbourhoods to pay the price of restructuring decisions made on Bay Street.

Here are our conclusions. Right now, we are seeing the number of Insta-Chèques or Money Mart outlets increase all across Canada. These allow you to cash a check without a waiting period, pay bills and even, increasingly, borrow money. This is a parallel quasi- banking network, which is unregulated and very costly. It is developing because the banks offer ever-fewer basic services and the public is increasingly dissatisfied. We find this phenomenon extremely worrisome, because it creates second-class citizens and exploits them, and because essential economic transactions are being left up to an unregulated and inefficient industry.

To counter these trends, certain aspects of Bill C-38 must be improved. It is with profound conviction that we invite you to do this. The purpose of our coalition is to insist that anyone in Canada have access to personal banking services at a reasonable distance from their home, with adequate business hours. That is still far from being the case.

Thank you.

[English]

The Chair: Thank you very much.

We'll now also hear from William H. Loewen, president of TelPay, a division of CTI-Com Tel Inc.; and Brian Denysuik, director of payroll trust funds, Ceridian Canada Ltd.

As you probably know, you have approximately seven minutes to make your presentation, and then we'll go into a question-and-answer session. Welcome.

Mr. William H. Loewen (President, TelPay Bill Payment Service): Thank you. And thank you for allowing us to make our presentation.

The changes that are proposed in Bill C-38 at first glance seem to be very promising. As we get further into analysis and reactions to questions, our concerns grow. One of the stated objectives of the bill is to increase competition. In 1980 that was the objective as well. At that time major changes were made and trust companies and credit unions were allowed into the Canadian Payments Association. Trust companies have all but disappeared since, and the credit union centrals—of necessity, I suppose—have become members of the club.

In 1980 foreign banks were invited into Canada. Over 50 of them did come into Canada, with virtually no impact. Allowing insurance companies and mutual funds into the CPA will have no effect either under the present bylaws, as they simply become indirect clearers. It's the direct clearers, mainly the five major banks, who will still call the shots. Opening up foreign entry will not likely be effective either. And that's not just my opinion. When I related this to Helen Sinclair, a former chairperson of the Canadian Bankers Association, she referred to the situation as déjà vu.

Most of the restraints on competition arise from the direct clearers' control of the payment system. The changes in Bill C-38 give the appearance of changing direction and control, but when you ask questions or look at the fine print there is a strong possibility that Bill C-38 is no more than window dressing. An example is the ability of the minister to designate payment systems in order that the minister can provide direction to the operation of that system. So when you ask if Interac is to be designated a payment system, the answer is no. Apparently the banks don't want it.

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Service providers such as TelPay can be the real answer to the need for competition. Comcheq Services Limited, a company I was involved with, is an example of how small companies can provide real competition to the banks. But when it came to needing government assistance to carry on competing, that was lacking.

We can compete against the banks, but we can't compete against the banks and an indifferent government. TelPay does compete with the major banks right now. It can and does also provide enabling services that allow smaller financial institutions to compete against the major banks. To continue, we need to have assured support and even the determination of the government to see that the banks cannot continue to stifle our operations through their control of the CPA.

We can see the hands of the banks are already involved in the drafting of Bill C-38. We presume that their hands will be deeply involved in the writing of the regulations now being drafted. However, we will not be allowed to see them until December at the earliest. If you want the current bill to be effective, it will only happen if the regulations ensure that smaller operators are given at least equal opportunities to the direct clearers.

Our particular need is the ability to allow our customers to initiate online debits to their accounts in a cost-effective manner. We already initiate overnight debits, but they have significant disadvantages for us. Give us the right to make online debits and we can assure you that we and the smaller financial institutions we serve will be very competitive.

To achieve that, we need a meaningful dialogue and full backing of the government on how those debits are to be processed. We need meaningful discussions with the government officials and the CPA. A solution can be found; you simply need to insist that the parties involved find it. We can't accomplish that without your full support.

Thank you.

The Chair: Thank you very much.

If we're ready, perhaps we could also hear from Ceridian Canada Ltd. Go ahead.

Mr. Brian Denysuik (Director, Payroll Trust Funds, Ceridian Canada Ltd.): Ceridian Canada Ltd. is one of the largest payroll providers in Canada. We pay over 2.3 million Canadians. The efficiency of the payment system in Canada is very important to us. We issue over 60 million payroll payments and handle over $60 billion in payroll-related funds annually.

The changes proposed in Bill C-38 covering ministerial power over the Canadian Payments Association are very encouraging to the private sector. Payroll providers like Ceridian Canada Ltd. have a key interest in the payment system, and we currently do not have the necessary influence in working with our banking community. The payment system has to serve all concerned, including the end user, the employee receiving their paycheque, for example.

Interac is an electronic and efficient system that does not fall under the CPA. We believe that all payment systems need to fall under the CPA. Through Interac the banks can easily remove money from your bank account for purchases. However, when we look at the system for depositing funds to your account this is not the case. Depositing of funds via direct deposit, for example, is a system that does fall under the CPA.

The banks don't need a warehouse to exchange payment transactions using magnetic tapes and couriers. These items include payroll direct deposits, tax refunds, insurance debits, payroll debits, bill payment transactions, and many other types of items. This is not utilizing technology in the most efficient way. If this manual exchange of transactions fails, the employee, for example, does not get paid. This employee can be left standing at a cashier as their debit card transaction informs them that there are no funds in their bank account. The reason is that the courier exchanging their payment had a car accident and the tape did not get processed by the receiving institution.

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In the payroll service industry the two largest providers are debiting employers' bank accounts for over $120 billion a year for payroll funds. With a broadened scope and the political influence, the CPA could be willing to assist corporate users of the payment system in minimizing settlement risk.

In our current environment it could take several days to find out that a debit for a payroll payment has not been honoured. If we could have a process where we are debiting corporate accounts online and then processing payroll payments, we can eliminate over $120 billion of settlement risk in the system.

As a corporate user of the payment system in Canada, we want assurances that the political power is available to continue the development to the payment system to promote efficiency, safety, and soundness and to advance public interest.

We don't want to cast blame on the inefficiencies we currently have in the payment system. We want to work with the financial institutions and governing bodies to ensure we continue to build a payment system to meet the technological changes of today and the future. Without the finance department's influence the payment system will not reflect the requests of private businesses outside of the banking community.

As a significant user of the payment system, Ceridian Canada Ltd. wants to ensure that their input and requirements are taken into consideration as the payment system evolves. And we hope that the changes to the mandate of the CPA with Bill C-38 can provide just that.

Thank you.

The Chair: Thank you very much, Mr. Denysuik and Mr. Loewen.

I will now hear also from the Co-operative Trust Company of Canada.

In case you're wondering, I'm adding some witnesses in this round because we're going to be called for a vote and I don't want the witnesses to be waiting later on. So I hope you understand.

Mr. King and Mr. Deirker, welcome.

Mr. C. Wayne King (Vice-President and Corporate Secretary, Co-operative Trust Company of Canada): Thank you, Mr. Chairman.

Mr. Chairman, members of the standing committee, I'm accompanied today by our lawyer, Mr. Joe Dierker.

I want to take a moment to express appreciation for the opportunity to appear here today in support of this piece of legislation. Co-operative Trust has had the pieces that are important to us examined, and we certainly support significant amendments to the financial institution legislation as proposed by Bill C-38.

As a short background, Co-operative Trust Company is a major supplier of support services to credit unions throughout Canada, assisting them in providing services to their members and increasing economic success. This support is provided in all provinces and all territories. The credit union system owns 90% of Co-operative Trust, with the two Canadian cooperative insurance companies owning the remaining 10%.

Co-operative Trust supports extensive retail banking services in association with credit unions. These services encompass activities ranging from tax-deferred products, the typical RSPs, RIFs, RESPs, through to wholesale mortgage funding. This is being significantly enhanced at the present time by a new program that will see Co-operative Trust provide small business commercial banking functions, including lending. These enhancements will assist credit unions in providing needed service to their members.

It's important to note that all services are provided in a fashion that solidly positions a member relationship with the credit union. We do not position ourselves in dealing directly with the member.

Bill C-38 permits the establishment of a cooperatively structured retail association that can provide retail financial services under the Co-operative Credit Associations Act, the CCA Act. Bill C-38 does not permit Co-operative Trust to continue its operations as a retail association and use the provisions of the Cooperative Credit Associations Act.

In working with credit unions, Co-operative Trust requires the ability to adopt a corporate structure that will be most effective in permitting it to provide services required by constituent credit unions.

Under Bill C-38 Co-operative Trust has an option to continue its operations as a trust company or become a chartered bank. Bill C-38 provides for extensive restructuring flexibility for banks in the planning and supply of retail services. Co-operative Trust must be on a level playing field in planning its future activities.

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Co-operative Trust, through our submission, requests that your committee support amendments to Bill C-38 that will permit us to have appropriate restructuring flexibility.

The Trust and Loan Companies Act now recognizes the unique ownership of Co-operative Trust and provides exceptions to the standard rules applicable to trust companies so as to permit Co-operative Trust to maintain a cooperative governance structure. Co-operative Trust requests that your committee support an amendment to the Trust and Loan Companies Act to permit election to continue as an association under the Cooperative Credit Associations Act.

While the restructuring flexibility requested by Co-operative Trust is a more urgent issue for attention by the committee, we request that the committee address the other issues that were raised in a submission supplied to the committee dated October 2, 2000. Co-operative Trust thanks the chairman and the committee for their attention to this request.

We would certainly be most anxious to respond to any questions that may arise.

The Chair: Thank you very much, Mr. King.

Everybody will get ten minutes. We'll start with Mr. Epp, followed by Mr. Loubier and Mr. Cullen.

Mr. Ken Epp (Elk Island, Canadian Alliance): I appreciate all of the presentations and the time you took both to prepare them and to actually come here and talk to us personally. It's always nice to have that.

I have a number of different questions, and I hope to get through them in my ten minutes. First of all, I want to talk to Sharlyn, who I remember from a previous presentation, and it was nice to hear her again. I want to ask you or your assistant—I didn't catch his name—exactly what you are asking for. Quite obviously, at least to me, it seems that you're asking for the ability to do banking through the technology, as opposed to going to the counter and talking to a person. Am I right in that? You want the technology to be adjusted so that you can do ABM and/or computer banking just like other people. Is that right?

Ms. Sharlyn Ayotte: Essentially, within the context of Bill C-38 we're asking for accessibility to be considered within the entire bill, that new programs, services, and technologies being deployed for the delivery of financial services be designed in such a way that people who are blind can use them and that people who are disadvantaged because they're in remote rural areas can use, say, electronic automatic teller machines. If you have a literacy issue, you can use sound-based automatic teller facilities. If you have access to a community access centre, those community access centres should provide the possibility of doing financial services through accessible technology. So we're asking that accessibility not just be considered but be incorporated into the bill.

Mr. Ken Epp: Do you have any idea how many people are affected by this?

Ms. Sharlyn Ayotte: Do you mean generally?

Mr. Ken Epp: Yes.

Ms. Sharlyn Ayotte: I'll give you a number. The number of people impacted by inaccessible information and communication technology is approximately 40%. There are 8% of Canadians who have a communication barrier based in disability. From the international literacy survey that was done in, I think, 1997, 48% of the Canadian adult public has difficulty reading print. You have new Canadians to the tune of approximately 250,000 people immigrating to Canada every year where the spoken language is understood before the written language. Then you have an incredible number of people at the other end of the life experience as you age developing disabilities and being unable to use technology that's currently available.

Mr. Ken Epp: Is it reasonable, do you think, to expect people who have trouble reading to learn a technology such as using a computer or an ABM?

Ms. Sharlyn Ayotte: ABMs have been designed to deliver the information in sound. People who experience literacy difficulty participate quite well within the mainstream of society, where most people don't even know they have a literacy issue. The only difference is that they are processing the information using sound, in the same way that I do. Is the problem literacy, or that systems aren't designed to accommodate different information? You can remove the label of literacy disability if you just broaden the criteria around the system.

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Mr. Ken Epp: I would really like to talk more to you, but I have many other questions, and my time is running out.

Ms. Sharlyn Ayotte: Okay.

Mr. Ken Epp: Thank you very much.

To Ms. Rektor, I am very sympathetic to what you say about accessibility to banking by those who are less affluent than the average Canadian. First of all, I would like to ask you how you define a low-cost account. Do you disagree with what's being projected in Bill C-38 on that account?

Ms. Laurie Rektor: In terms of the cost, we would like it to be a no-cost account with a number of transactions that are sufficient to get through the regular banking required to pay the rent, the bills, and things like that, and a combination of in-branch and electronic transactions to do that.

Mr. Ken Epp: So you envision the government passing a law that mandates that the banks must provide a free service to people who because of the nature of their banking would basically provide no profit or revenue for the banks at all. Am I reading you correctly?

Ms. Laurie Rektor: I wouldn't say that it would provide no profit or revenue for the banks, but I do feel that there is an obligation for the banks—given the privileged position they occupy, as we've heard from other witnesses today—to allow that a basic number of transactions be available universally free of cost to any consumer who requires that account.

Mr. Ken Epp: I also have a question with regard to the administration of these low-cost accounts, and that has to do with the waiting period for the access to funds. A number of you brought that up today, and maybe some of the others would want to comment after I've asked this question.

I presume—and we'll ask the bankers when they appear—that when the banks hold funds, it's because they have some doubt that funds are going to be honoured or there's some technological reason for them not to be able to ascertain quickly that they will be honoured. I know, of course, that when people have in hand a government cheque, that should be questionable. Yet at the same time, we know that people misplace cheques and sometimes they are robbed, so you have people walking into a bank to cash a government cheque when they don't even own the cheque. Is it reasonable to give the banks less time? How much time? I think you mentioned a day, or perhaps it was another group that said maybe one day of holding the account would be adequate.

Ms. Laurie Rektor: I had suggested two days for a cheque that's written in-province, because from what we know, it takes 24 hours for it to clear the Canadian Payments Association system. So that's a reasonable amount of time.

I think you're quite right that some of the other groups would like to comment on this as well, because this is probably one of the biggest barriers or loopholes in Bill C-38 in terms of access. We have heard of hold periods of ten days or longer that were completely arbitrarily given regardless of what ID a person could provide or how quickly that cheque would clear the payment system. So it does provide—I think it was Louise who mentioned it, but I'm not sure if I'm correct—the many creative ways that we know financial institutions will find to deny service to low-income consumers, and this is one of them.

Mr. Ken Epp: You can rest assured that when the banks appear before this committee, we'll ask them for their excuses, and maybe you'll be interested in hearing what they have to say.

Louise, did you have something to add to that, or one of the others—Jacques?

Mr. Jacques St-Amant: I'd be glad to.

I'm also involved as a member of the advisory council in the workings of the CPA. I can see no reason whatsoever for 6% of consumers in Quebec who answered the CROP survey in February 2000 saying that they have experienced in the past two years holds on funds longer than 21 days. There's no technical reason whatsoever that can justify that, none. There is no reason to doubt the efficiency of our payment system. It is to me quite unlikely that there would be such a huge amount of fraud in the payment system that it would justify that kind of policy. It just makes no sense. It is used, and I have experienced it, as a barrier to access payment services.

• 1655

A couple of years ago I went to a bank, which I won't name, to open an account. The teller told me that for the first three months or so there would be a hold on my funds for at least ten days. I said that was not really conducive to me moving my business to their bank. She said to wait and she went to her supervisor. She came back and told me that since I was a lawyer there would be no hold at all. That happened to me two years ago in Montreal, and it's a common experience of people who call us to complain. There is no reason to justify that, besides a systemic discrimination against a part of the population.

The Chair: Ken.

Mr. Ken Epp: I have 30 seconds, don't I?

The Chair: Yes.

Mr. Ken Epp: Okay.

Mr. Lussier, you indicated in your brief that you would like to see a stopping of contributions to political parties by financial institutions. Why on earth would you come up with that?

[Translation]

Mr. Paul Lussier: Not just businesses in the financial sector, but all businesses. To my knowledge, private individuals have the right to vote in Canada, not corporations. If the employees of a bank or some business want to make individual contributions, they should be free to do so. However, corporations should not have the right to make contributions because that skews the democratic system. As a matter of fact, years ago, the government of Quebec adopted measures to prohibit corporate contributions to political parties in Quebec. Democracy in Quebec is doing very well.

I may be engaging in slander, or at least malicious gossip, but we believe that the current revision of the Bank Act favours financial institutions, largely and probably because of their very close links with political parties. I don't have the amounts here with me today, but Canadian financial institutions are the largest contributors to political parties in Canada, particularly the Liberal Party and the Progressive Conservative Party.

Mr. Yvan Loubier: We have those amounts.

[English]

Mr. Ken Epp: Well, you raise an interesting point.

I'd like to talk more, Mr. Chairman, but I concede the floor.

The Chair: If you don't mind, I'm going to take a quick presentation break here. We'll move away from the question and answer session and go to the Honourable Doug Peters for his presentation. We'll then go back to the question and answer session and everybody will get equal time once again.

Welcome.

Mr. Douglas D. Peters (Individual Presentation): Thank you very much, Mr. Chairman, members of the committee, ladies and gentlemen. I presume you have had a copy of our brief. It was prepared at the request of the chairman of the committee and it contains the views of my co-author and myself. We did not try to represent the views of any others.

My co-author, Dr. David Peters, would have liked to have been here, but he is a long distance away, teaching at his university.

We would first of all compliment the Department of Finance for producing an enormous document, almost a thousand pages of legislation. It is not my intent today to criticize that legislation page by page. Rather, our brief looks at two important aspects of the legislation: what it fails to do according to the government's own white paper, and secondly, where the financial institution legislation should go for the 21st century.

The white paper that preceded this legislation stressed that Canadian financial institutions should have flexibility to adapt, that vibrant competition was necessary, that consumers should receive the highest quality of service and that regulatory burden should be lightened. We feel this legislation fails on all of these counts.

The legislation fails to give consumers the benefit of competition in both insurance and automobile leasing and instead retains the anti-competitive rules that benefit only the insurance companies and the largely foreign-owned automobile leasing companies.

Instead of reducing regulatory burden, it greatly increases it with the proposal for the new Financial Consumer Agency of Canada to deal only with the banks and not with other financial sector institutions where consumers are clearly in greater need of protection. Examples are mutual funds, leasing contracts, and securities trading and regulation.

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A concern must also be expressed over the vastly increased array of matters that will now be left to the discretion of the minister. We have comments on the subject of increasing complexity in our brief, both the replacement of the 10% ownership rule as well as the complexity of capital structures brought about by the holding company proposal.

The MacKay task force made many recommendations, but key among them was eliminating the anti-competitive rules that prevented banks from selling insurance in branches as well as selective advertising and the rules against deposit-taking institutions leasing automobiles. Canada is about the only developed country limiting competition in that way.

This legislation vastly increases the complexity of ownership rules. I wonder if anyone has measured the number of pages in the new legislation that deal with the complexity of ownership rule and the 10% rule that we've had for over 30 years and has worked well. We feel it should be retained.

Incorporating banks with very small amounts of capital—only $1 million—is also, we feel, fraught with danger and cost. The record of small deposit-taking institutions in Canada is abysmal. Attempting to set up a number of these would add to the costs of supervision and the potential for losses. It is clear that the new financial consumer agency of Canada and the new federal ombudsman are substantial increases in regulatory burden on Canadian financial institutions. There will now be six separate federal government agencies regulating financial institutions. The potential for confusion is great.

We include in our brief some of the key areas that should move to federal regulation. These are areas that have the greatest degree of consumer problems, are national in scope and yet are still under provincial jurisdiction. The major problems in Canada for the consumer of financial services lie in such things as insurance contracts, mutual funds and their commission structure, lack of any standard in automobile leasing contracts, and securities trading and regulation.

Our final comment refers to the process for the approval of financial institution mergers. The suggested procedure might have been useful in recent proposed mergers where the partners were viable existing financial institutions. But in the past, mergers were marriages of convenience where one institution was in deep trouble. We suggest that there must be some procedure available to approve such a merger if one such incident were to arise in the future, as we think it probably will.

Thank you, ladies and gentlemen, for your attention. I'll be glad to answer any questions you have.

The Chair: Thank you very much. It is an interesting perspective from a former Secretary of State for Financial Institutions.

Mr. Loubier, you'll get an extra five minutes. That's fifteen minutes for each round and then we'll go back to Mr. Epp for an extra five.

[Translation]

Mr. Yvan Loubier: I have many questions to ask, but I would like to address my initial remarks to Mr. Lussier of the APEIQ. Our party will take action so that your demands regarding the archaic system bank management can go forward. Therefore, we are adopting your proposals regarding the operation of boards of directors and the salaries and benefits of directors. I find that horrible. It does not make any sense. In addition, the almost feudal aspect of what is imposed on small shareholders who want to make proposals makes no sense, and if memory serves me, Bill S-19, which is currently being considered by the Senate, reached the same diagnosis. Therefore, this system makes no sense and things have to change.

The same goes for Ms. Ayotte. Our party is very sensitive to your requirements, especially since for the deaf and hearing impaired, for example, we were the first to ask that closed captioning be made available on all television channels and become standard practice. We are very sensitive to the needs of the visually impaired. We will become the spokesperson for your demands.

I have a few questions about Option consommateurs and for Ms. Rektor, who talked about bank closures. I remember when the Minister of Finance announced his positions, his plans. It was on June 24. He did not even respect the national holiday of Quebeckers, which is even more disappointing.

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If memory serves, Option consommateurs was satisfied with the Minister of Finances' plan. In fact, the minister cited your organization to say that consumer group representatives were satisfied with the department's orientation.

Yet, we, on our side, have evaluated the closure of branches, for example, as something horrible: six or four months' notice, depending on the region, to announce the closure of a bank when this means that in the short term, there will be no more service in a remote rural area and in the poor districts of large cities in Quebec and Canada. In short, we did not find that this was a step in the right direction.

I am wondering, therefore, if you changed your mind. Are you prepared to say today that we have no guarantees regarding the services provided to rural populations and to the neediest populations? Take certain neighbourhoods in Montreal such as Hochelaga—Maisonneuve, which is represented by someone you know, Réal Ménard of the Bloc Québécois, where there are virtually no bank branches left. Pawn shops are offering dubious banking services.

I would like you to elucidate that aspect of the issue. I would also like you to tell me—Ms. Rektor could also participate in this discussion—what would have been desirable in the bill so that services be maintained, even in regions where it is not economically profitable. What should the bill have contained to provide personalized high-quality service, as you put it so well, Ms. Aubert?

Mr. Jacques St-Amant: In June 1999, we noted that the Minister of Finance was taking steps that the government of Canada had not taken in almost 30 years. There were a number of things, such as banks having an obligation to open an account, that were indeed, to us, a step in the right direction.

However, both Option consommateurs and the Coalition québécoise pour le maintien des services bancaires personnalisés stated that there were other problems that needed to be solved, notably the closure of bank branches. A reading of the policy paper of June 1999 had given us the impression that the government would establish an agency that had some teeth.

Yes, we were disappointed in some respects when we read the bill in June 2000. We were also disappointed by other things that are no doubt of interest to you: for instance, the whole procedure for assessing the impact of a merger or similar operations cannot be found in the bill.

Yes, we do have criticisms that we did set out. We also made specific recommendations for the rewording of certain legislative provisions. You will find these in detail in the brief that we sent the committee. We would need far more than the 15 minutes allocated to us to explain them all.

Mr. Yvan Loubier: I would like you to clarify one point. On the issue of branch closures, do you have any proposals to make? I think that the supervision of bank mergers is important, but the closure of branches is just as important. In terms of service, when there is no more branch, there is no more service. Do you have specific proposals in this regard?

So, based on community re-investment by a branch, or by examining deposits made and the loans or advances provided in a given region, could we ask a bank to keep a branch open and would it have the power to do so?

Ms. Aubert, earlier you stated that with $9.5 billion in profits, the banks could practice some sort of equalization between isolated rural regions and poor neighbourhoods in large cities. Would that be one avenue to consider?

Mr. Jacques St-Amant: To my knowledge, Option consommateurs was the first organisation in Canada to quantify the phenomenon of bank-branch closures in this country. Not too many people have attacked that problem since, except the Public Interest Advocacy Centre, more recently.

We have indeed made specific proposals. It seems to us absolutely essential that the affected communities be consulted, that there be sufficient notice and compulsory consultations of the affected communities. At least this would enable people to say that this won't do, to react and to find other methods, as experience has shown in certain regions of Canada.

Quite obviously, the implementation of community reinvestment mechanisms in Canada would be desirable. It was our understanding, in light of debate over the past two or three years, that this would not be included in this legislative amendment. We did not insist on that because, our resources are somewhat limited. But in principle, we always stated that we were in favour of this notion, and we have to examine how it could be applied in Canada.

• 1710

Mr. Yvan Loubier: Could this constitute a response to reduce services in certain regions?

Mr. Jacques St-Amant: We have to see how it would be applied. In the United States, for example, bank branch closures are not formally prohibited; it is taken into account in the assessment of a merger process, for example. So a bank is not prevented from closing a branch, but such policies are taken into account. Such a measure is not really sufficient in Canada; so we would really need to adapt it to our needs.

Mr. Yvan Loubier: Thank you.

Mr. Peter, how are you? We have not seen you in a long time.

You talked about ownership rules. I would like you to clarify your thinking on this because, during your presentation, I did not really understand what you find wrong with the new ownership rules, as compared to the old ones. This is a question of great interest to me with regard to one of the issues Mr. Lussier described earlier; that is the takeover of the medium-size banks, those with equity of under $5 billion, including the National Bank and the Laurentian Bank, among others. What do you think of this 65 percent rule? Do you agree or disagree with it?

Earlier you referred to going back to the original rules. Could you explain your thought on this issue?

[English]

Mr. Douglas Peters: Thank you very much. It's very nice to see you here.

In our brief we did mention these particular questions. The Laurentian and the National Bank are clearly in the section of banks that are allowed to be 100% owned by individuals.

The other question is that very large banks would now be allowed to go to 20% ownership, which does cast questions on the degree of control that individuals, an individual or a group of shareholders, might have on an individual bank. That's been a question for a long time. Widely held ownership is no guarantee of good management or bad management. But it does prevent the institution, a financial institution with deposit insurance, which puts the government imprint on it, from being at risk. It does insure that an individual cannot operate that institution for their sole benefit.

We have had some problems with that ownership in the past in Canada. I don't need to list the names; I'm sure you're aware of it.

My feeling, and a feeling that my co-author had as well, was that we can work very nicely in the banking institutions at the 10% rule. It has limited the effect that one individual or a group of shareholders can have on the management of the institution, and the effect it may have on the financial viability of that institution.

[Translation]

Mr. Yvan Loubier: If you don't agree with the fact that we are going from 10 to 20 percent for the major banks, you certainly don't agree with the fact that we are going from 10 to 65 percent ownership by a single individual for the medium-size banks.

[English]

Mr. Douglas Peters: Absolutely, yes. That is the risk when you get up to those levels that are clearly there. An individual or a group of shareholders can indeed affect the liability of the financial institution, if some of their other ownership becomes questioned. That's the key.

[Translation]

Mr. Yvan Loubier: Mr. Peters, what you are saying is of enormous interest to me. The Minister of Finance referred to greater flexibility for banks with equity of under $5 billion. He said that new rules provided that flexibility and that we could have greater interest for investors. I asked the minister how the fact that a single investor could hold 65 percent of the shares of an institution instead of 65 people who had 1 percent each could increase flexibility. I did not get an answer and I probably would never get one because there is no difference except for the danger you mentioned.

Don't we have reason to fear when we hear, as in the case of the National Bank, that the possible takeover of a bank by a single individual, in total disregard of the principle of diversified ownership, can be dangerous, not only for the bank itself—which is the largest bank in Quebec and currently serves small business very well—but also in terms of how a single shareholder could compete with borrowers doing business in the same industry as that shareholder?

• 1715

Are our fears well-founded, or are we exaggerating somewhat, as some have told us? I'd like to hear your views on this.

[English]

Mr. Douglas Peters: I think it's a well-founded fear in this question. I do not want to see the banks have problems raising capital, but for 33 years now the 10% rule has been in effect. None of the banks have had difficulty raising capital. Indeed, I think they've had 33 years of enormously good times in raising capital and such, so there is not a problem of raising capital.

In terms of the risk you take on the other side, I believe it was before a Senate committee some years back that the chairman of one of the banks said that he could have moved the total capital of his bank outside the country to another area, to another business, in something like 24 or 36 hours and with only two or three people knowing it. There's no superintendent who's going to catch that; there are no bank inspectors who are going to catch that. You're going to be a year late if that should happen. I'm not saying it will happen, but it is a risk that is there with the single ownership.

[Translation]

Mr. Yvan Loubier: Thank you, Mr. Peters.

[English]

The Chair: You have another minute. Would you like it, or do you want to catch it later?

[Translation]

Mr. Yvan Loubier: Mr. Chairman, you're so generous to me! It's beyond reason. Mr. Peters is like a gift from on high.

Mr. Peters, I have a question for you. You followed the whole debate. At one point, you were even responsible for tracking this issue and we've had the pleasure to work with you too. There have been many proposals to precisely increase the flexibility of small and medium-sized financial institutions.

Would the new opportunities for strategic alliances, for example between a bank, a trust company, an insurance company, etc., overseen by a holding company, be an answer to the absence of a merger, which always leads us to fear the power of the megabanks? Would that be a response to the banks and financial institutions that want to reenforce their position to face international competition without having to merge with the megabanks, given how unpopular that would be? Isn't that a way to get the desired flexibility, even for the medium-sized banks, without having to worry about ownership rules?

[English]

Mr. Douglas Peters: That's a good question, and it is mentioned in our brief. There are three types of mergers: there are mergers of like institutions, two banks that merge; mergers of similar institutions, a bank and an insurance company, congeneric mergers they're called; and mergers of vertical and horizontal... vertical mergers where you supply everything.

The congeneric mergers do not have the risk of reducing competition in the same way that horizontal mergers have, with one bank taking over another bank. So moving to a similar, not the same but a similar, product mix of insurance and banks can have positive effects on the profitability and marketing and various other things, and are much less of a problem for competition than would be the mergers of two institutions that are exactly the same.

The Chair: Thank you, Mr. Peters. Thank you, Mr. Loubier.

[Translation]

Mr. Yvan Loubier: Don't tell me I still have 10 minutes. I wouldn't believe you.

[English]

The Chair: You can ask questions when everybody leaves.

Mr. Cullen.

Mr. Roy Cullen (Etobicoke North, Lib.): Thank you, Mr. Chairman.

[Translation]

I'd like to thank all the witnesses for their presentations.

[English]

Mr. Peters, I had other questions for other witnesses, but I'd like to lead off with you. I presume you're not suggesting that because we've had rules in place for 33 years this necessarily means we have the right rules going forward. If you look at the industrial sector I came from, the forest products industry, and many others, companies were forming strategic alliances, joint ventures, swapping shares, and this was really the only way, or the most reasonable way, to grow or expand the business.

• 1720

In terms of your facts, you indicated that a national bank could be 100% owned by one individual—

Mr. Douglas Peters: It's 65%

Mr. Roy Cullen: It would go up to 65%, yes.

Mr. Douglas Peters: That is for control. That's what I'm saying. It's control.

Mr. Roy Cullen: Yes. I'm coming back to my main point. If we're trying to allow the banks and the financial institutions to be more competitive to grow and to expand, why would we want to limit them to this rule, which has been around for 33 years?

Mr. Douglas Peters: The answer is that it has worked pretty well. You haven't had a great deal of trouble with the banks raising capital. You haven't had problems with the banks making strategic alliances. I can remember strategic alliances being made as far back as the sixties, when Midland and international banks were a consortium of four banks that went into the international lending markets in the sixties and seventies with one of the earliest group-banking operations out of London, England.

I don't think the rule has in the past restricted the banks in their operations, and I don't think it will restrict them very much at all, if at all, in the future. Yes, industrial companies do have a different plan, a different set of rules, from the financial sector. The financial sector does have one thing. It does have deposit insurance, and the risk factor is clearly much greater than you have in an industrial company.

Mr. Roy Cullen: Yes. I appreciate that, and the prudential rules would always apply. But I think you probably would accept that we are living in a very different world. I know it's the oft-touted phrase, the global economy, etc., which we are somewhat sick of, but when you're looking at swapping shares and doing that kind of alliance, I think the banks and the institutions will be a little more challenged if we limit them in that way. Nonetheless, I do hear what you're saying.

I'd like to go if I may, Mr. Chairman, to Ms. Ayotte and Mr. Fowler, who talked about a very serious and important issue also.

You mentioned, Miss Ayotte, the audio banking machine. I can understand that. If you'll excuse my ignorance, if we're looking at a world of Internet banking, computer-based banking, Internet technologies, where people will do a lot of their banking on their computer at home, perhaps, or in an other environment, could you describe for me what technologies we have or will have, or what methodologies will we have, for people like yourself, who are blind, whereby they would be able to access those services no matter what rules we put in place? You'll have to excuse my ignorance, because I don't know what tools are there right now.

Ms. Sharlyn Ayotte: Actually I'm going to let Len answer this one. He's our technology guru.

Mr. Len Fowler: Today the answer is very few, because the service delivery technology for the most part is not designed to interact with commonly available, accessible technology such as screen readers and those sorts of devices.

In addition, there's the very information. If a person who is blind can actually get to the website, then the very documentation in that website is generally in a PDF-type format these days, which is totally inaccessible to the screen writer, very much like the information delivered by this very committee.

Mr. Roy Cullen: That was my point. If we put something in this legislation that would provide those opportunities or establish that principle, do you see technologies that will be there that will... I'm dealing with Internet-based banking, obviously audio banking. I'm trying to get a sense of what's out there, what could be out there.

Mr. Len Fowler: The technologies available to date allow people to interact with Internet systems that are properly designed. If they're designed to be accessible, then they are accessible even for people who don't have the technology, don't have the resources to personally buy the technology.

• 1725

Industry Canada has 10,000 CAP sites that are publicly accessible sites—they're moving to making those sites accessible. But you can have all the accessibility you want built into the CAP site or the technology people use at home, and if the service delivery system is not made to interact with them, it does no good whatsoever.

Mr. Roy Cullen: Okay.

Ms. Sharlyn Ayotte: And as we move toward more electronic service delivery—electronic benefits—what happens to that portion of the population who can't get access to it? That's the digital divide. We have it taking place here in Canada, and it's getting bigger, because we're not looking at that piece of the puzzle yet.

Mr. Roy Cullen: Okay, I certainly understand the problem. I'm not sure I understand the solution yet, but if you have any further thoughts in terms of where that might go, I would certainly appreciate hearing them.

I had a question for the National Anti-Poverty Organization, Ms. Rektor. Certainly you've raised an interesting point about the deposit of provincially drawn cheques. I know in my riding of Etobicoke North I have a lot of Somali refugees who are often on welfare, and it becomes very problematic for them.

You said to the government, expand the list of acceptable identification. I know this is always a problem. You seem to imply that we have a list of acceptable identification. Do we?

Ms. Laurie Rektor: In the 1997 agreement there was a list of acceptable identification that was identified.

Mr. Roy Cullen: But would we not propose to expand that? Certainly that would be my desire, but of course there's an issue around... The member opposite brought out the question of fraud. What kind of identification would you recommend that would be acceptable in a pragmatic sense that the banks might also reasonably accept?

Ms. Laurie Rektor: At this point we don't have a piece of identification to recommend. We've talked to our board members and some of our organizational members who represent low-income people, and what we would recommend is that we have the opportunity through consultation with them to come forward with some ideas that would work.

When you go through the list that was identified in 1997, many of them presume a certain level of economic affluence—for example, a driver's licence, bank card, credit card, or passport. It's understandable to have those pieces of identification on the list, but they do presume a certain level of financial privilege in one's life. We would like to have the opportunity to consult with members on our board and have suggestions for some other pieces to add.

Bill C-38 legislates the 1997 agreement in the sense that it says a bank can ask for only two of those pieces. So we wouldn't have a lot of work to do to come up with one or two other pieces to add to that list, which would then fully broaden it and make that part accessible.

The Chair: You have one more.

Mr. Roy Cullen: Sure.

To the Option Consommateurs, Madame Rozon and Monsieur St-Amant, you refer in your brief to the holding of funds for cheques, sometimes for several days if not several weeks. Mr. St-Amant, you provided that example. Are we talking about cheques drawn within the payment system in Canada, through a Canadian bank that would hold funds for that length of time?

Mr. Jacques St-Amant: There may have been a few cases where those cheques were drawn on foreign banks, but I would assume most were drawn inside Canada. We receive complaints regularly in our office from people who experience a hold on funds. They live here and it's a cheque that's treated in Canada.

If you go back to the MacKay report and the Ekos survey done for MacKay, they noted, I think, that 8% of respondents had experienced a hold on a government cheque. I'm fairly sure that situation hasn't improved since. So it's basically a broader problem than the exceptional case where a cheque would be drawn outside Canada.

Mr. Roy Cullen: But if it's a cheque within the Canadian banking system, if it's on hold for that long, it's a hold for more than the funds—it's a hold in terms of any forgery or what have you. What you're saying is that it's somewhat discretionary and someone can hold it for three or four weeks and arbitrarily say “We're going to wait and see if it bounces back, and if it doesn't after three or four weeks, we'll release it”. It seems to be somewhat arbitrary. Is that what you're saying?

Mr. Jacques St-Amant: Yes, that's the experience we have. It's important to note that those issues do not at all come within the ambit of the CPA's powers. The CPA is absolutely powerless, and will gladly tell you so, when it comes to a bank's internal policies. And this is currently a matter of the banks' internal policies.

• 1730

The Chair: Thank you, Mr. Cullen.

Mr. Pillitteri.

Mr. Gary Pillitteri (Niagara Falls, Lib.): Thank you, Mr. Chairman. I have just a couple of small questions.

The Chair: Excuse me, Mr. Pillitteri. I hear the bell. I believe it's a 15-minute bell, but since we're in this building and going to vote upstairs, we'll take 14 minutes of those 15.

Mr. Gary Pillitteri: I don't need 15 minutes, Mr. Chairman.

The Chair: Oh, you need one minute. I was being kind. You can leave after you ask your question.

Mr. Gary Pillitteri: Mr. Chairman, one part of my question is to Louise Aubert.

You did mention something about the clearance of cheques, that in Canada—and we've gone through this before—any cheque can be cleared within 24 hours. But I wasn't quite clear when you mentioned that Mr. Reagan in 1986 or 1987 had made some legislation. When they have a clearing system that is so archaic compared to ours, what legislation could he have put in place to protect consumers here in Canada?

Mr. Jacques St-Amant: It's called the Expedited Funds Availability Act. Quite interestingly, as you say, the payment system in the United States is fairly complex and not very functional. But the act mandates delays of fund accessibility that would shame all Canadian bankers, because in most cases it's two to three days maximum. And it's legally specified. If you require, we can certainly send you a copy of the act. It has been in place for 13 years now. There have been proposals for review—I believe last year—and essentially it was found that the act worked fairly well and there was no need to change its provisions. But the delays regarding holds on funds are clearly explicitly specified in the legislation itself, and it deals with all the various cases, including the weird cases of the Virgin Islands. It's a very detailed piece of legislation.

Mr. Gary Pillitteri: So part of what you're saying is the legislation would benefit us here in Canada?

Mr. Jacques St-Amant: I believe so. It would benefit, as other people have said, those people right now who do not have savings, who need their welfare cheques or their recent paycheques to pay the rent, and that money is frozen for a week. So what they do is go to Money Mart. They pay the price—2% of the value of the cheque—but they have the money. Then they turn around and tell us they prefer the service they get at Money Mart.

What they're currently doing is building a parallel financial service that's totally unregulated, extremely costly, and totally dysfunctional.

Mr. Gary Pillitteri: My second question is to our good friend Mr. Peters. Welcome back to this table.

There are two things I want to ask, Mr. Peters. One is that in your brief presentation you made comments about auto leasing and insurance selling by the financial institutions. As we all know, in the United States the lending institutions, specifically the banks, do sell insurance—I don't know about insurance, but they do auto leasing. And really, when you take a look at the amount they're charging and so on, the savings—we did this as part of the study when we were looking at bank mergers—were not really that much in the United States. The banks were competing with each other on the auto leasing.

You also stated that these companies are a benefit to these individuals here in Canada, where they are foreign-owned, meaning every different... General Motors, Ford, Chrysler, and so on. The headquarters are in the United States. But also we see that each and every one of those, even right now, is offering 0.9% or 0.0%. So I think there's some compatibility there for individuals wanting to lease.

However, Mr. Peters, the question is more this: Canada Trust was in the auto leasing business here in Canada. As we see, at one time they were across the country, then they centralized in one area—the large areas like Toronto, Montreal, and so on—and let go of all of the other areas.

• 1735

What it really means is that some of this would disappear, really. Some of them would benefit in the large areas, but in the rural parts of Canada or in smaller communities there would be no benefit if they were to get into the auto leasing or insurance business. What do you think of that?

Mr. Douglas Peters: That's a very good point.

I think it would be very useful to take a look at what happened in the mortgage market in Canada when the banks were allowed into real estate mortgages in the 1950s and 1960s. In every rural area in Canada where mortgages were not available prior to that time through the insurance companies and such, they were all of a sudden available at prime rates in every community in Canada after the banks got in. That's what happened when the Government of Canada let the banks into the mortgage area.

I think the same thing happened with personal lending. Personal lending rates or individual lending rates were in the high 20% range. When the banks went into it, the rates dropped substantially across Canada.

I think that's exactly what would happen with auto leasing and with insurance. There would be an improved service to the Canadian public. If they didn't provide the services, people wouldn't buy them. I would say to give them the ability to provide the service. Let's see what they can do.

The Chair: Thank you, Mr. Pillitteri.

Ms. Bennett.

Ms. Carolyn Bennett (St. Paul's, Lib.): Thank you, Mr. Chairman. I have a question for the witnesses from T-Base Communications.

In the recommendations you have for us, some of them are actually government housekeeping or a tightening of things. I think probably recommendations 3, 4, and 7 would be the ones most related to Bill C-38. I guess I want to know whether you think...

In your recommendations you say to amend the Bank Act, ensure the Canadian Standards Association's criteria, and, in recommendation 7, “Provide consumers...” Are these things you would hope would be in the regulations of the bill in terms of how the Financial Consumer Agency would work? I guess I'm wondering if recommendations 5 and 6 are ones you would forward to the CBA, and 1, 2, and 8 are ones you want the government to deal with through its human rights avenues.

So I guess the real question is, in 3, 4, and 7, are those things that you think could be done within the regulations in terms of ensuring a set of standards the consumer agency would look for? Or are they things that you actually want changed in the bill?

Mr. Len Fowler: I think recommendation 7 is one that should certainly be addressed in the bill. It has been clearly demonstrated that moral suasion—asking the financial institutions to make their services accessible—generally only works when they're having a human rights audit or something like that. You get a flurry of activity and then it just dies off, because there's nothing there to enforce things and to make them go forward.

Ms. Carolyn Bennett: I think that is the purpose of the bill. There would be penalties. I think that's in there.

Mr. Len Fowler: What we're saying is that, yes, the penalties are there, but we don't see anything that addresses the equitable delivery of services. In other words, people with disabilities are not necessarily addressed in here. We would like to see their rights addressed specifically to ensure that all of the services and the information that supports those services are made accessible to the portion of the population that is classified as handicapped. That includes not just blind people and people with disabilities, but also the very low-income group, for which the literacy rates are significant issues, and older Canadians for whom literacy is an issue.

• 1740

Ms. Carolyn Bennett: Using the PDF format as an example, you are saying that institutions should not provide things in PDF format, and neither should we as a committee or as a government. Are there web-based solutions to deal with this, or is having it available only in PDF something we must avoid in trying to put out information? Eventually, do you see web-based solutions like those we're aiming for in health care, where anybody can talk to anybody regardless of how it's formatted?

Mr. Len Fowler: There are currently web-based solutions to resolve the majority of the problems. Basically, they're ignored or they're not known because the people in charge of the websites and the people giving directions to the web masters don't make it a part of their policy that web accessibility has to be adhered to.

In the future, sure, things are going to be more accessible. Or so we hope. But it's guaranteed that they won't be more accessible if, in things like Bill C-38, it's not built into them that they need to be more accessible.

You have a zillion acts governing the financial services sector. None of them refer to how services need to be delivered. They're generally about what services can be delivered and the boundaries for that service delivery. But in terms of what portion of the population you are allowed to leave out because you choose to ignore it, there's nothing about whether it's an essential service or not. That portion of the population tends to be the lower-income people and people with disabilities.

Ms. Sharlyn Ayotte: There's kind of a shift in that right now, because the people who are now developing disabilities are also people getting older who have had affluence and who have money. They're now starting to be denied services, and it's no longer appropriate.

Ms. Carolyn Bennett: So are you saying the ombudsman or the banking consumer agency should have a proactive audit capability, rather than just a complaint-based system?

Ms. Sharlyn Ayotte: Absolutely.

Mr. Len Fowler: Absolutely.

The Chair: Thank you, Dr. Bennett.

Mr. Epp, you have the final question.

Mr. Ken Epp: I have one quick question for Mr. Loewen.

I remember when you were at the committee before, when we were talking about MacKay. You indicated you were greatly hampered because you cannot be part of the payment system directly. Can you now, under Bill C-38? Is it your understanding that you are now able to participate in the CPA?

Mr. William Loewen: No, we're not.

Mr. Ken Epp: You're still not?

Mr. William Loewen: No.

Mr. Ken Epp: So you're unhappy about that?

Mr. William Loewen: I'm not too sure we want to be able to participate as a member. As I sort of indicated, I don't think being an indirect member buys you anything.

We do want to have the ability to do online what we are now doing in batch. We already process, on a batch basis, millions of dollars worth of payments. If we could do that immediately online, we could remit faster to the payees. We would not have to hold back payments because we are concerned about the payment actually clearing. Basically, we'd improve the efficiency of our system and the financial system. I think we'd have a considerable impact on the other banks with which we compete, because we'd raise the level of service considerably.

Mr. Ken Epp: Okay, thank you.

That's it for me, Mr. Chairman.

The Chair: Thank you, Mr. Epp. That was the final question.

On behalf of the committee, I'd like to thank you, panellists, for your participation. You have certainly been quite helpful to this committee. You'll probably recall that we issued a report, The Future Starts Now. It was on financial institutions, and you were part of that process. This has been a very lengthy process that has culminated with Bill C-38. But, then again, here are some other examples today. We have some excellent ideas, which we certainly have to look at seriously to improve the bill.

• 1745

On behalf of the committee members, thank you. As you probably noticed, there are a number of observers here following Bill C-38. I'm sure they'll go back and tell their groups the types of insights you have provided to the committee. Thanks very much.

The meeting is adjourned.