Comprehensive Audits, and New Financial Consumer Watchdog Groups Needed For Effective Bank and Financial Services Industry Accountability
"It is essential, for deterrence, to have strong penalties that we know will be enforced."
Prime Minister Stephen Harper
CTV National News, February 26, 2009
Tuesday, December 8, 2009
OTTAWA - Today, as the last of Canada's big six banks reported
their new record profits totalling $14.34 billion, the
Canadian Community Reinvestment Coalition (CCRC -
Canada’s largest and leading bank accountability coalition)
called on the federal Conservatives and opposition parties to implement
measures that will actually protect financial consumers from gouging
and arbitrary cutting of credit, loans and services by banks and other
Recently, Finance Minister Jim Flaherty has proposed only a
voluntary, loophole filled draft code of
conduct covering business relations between retail companies and
credit card and debit card companies.
And three of the eight credit-card
proposed in July by the Conservatives
change only credit-card-disclosure requirements, another proposal only
addresses consumer consent for increasing a credit limit, and another
only limits debt collection practices in one way.
None of these
five proposed regulations will do anything to prevent gouging, nor does
the Conservatives' Task
Force on Financial Literacy (which is
redundant given the
of the 8-year-old Financial Consumer Agency of Canada (FCAC) among
and provincial financial education agencies).
And while the other three proposed credit-card regulations (a
21-day interest-free period (which doesn't come into effect until
a restriction on one fee, and payment allocation requirements) will
few customers from a few charges, none of the proposals will decrease
excessive credit card interest rates (which are especially galling
given the Bank of Canada's prime lending rate has dropped to its
lowest level ever), nor the extra interest rate and fee hikes the banks
other companies have unilaterally imposed in the past year, nor their
overcharging for various credit card and other banking services.
And none of the Conservatives' proposals will hold the banks accountable for cutting off credit for people and businesses that have made their payments consistently for years and are very creditworthy.
Conservatives' so-called "Economic
Action Plan" offered huge, public-funded subsidies to the big
banks of more than $200 billion, but the Conservatives (just as past
Liberal governments did) continue to fail to require the banks to do
anything in return, especially to ensure the banks charge fair prices
and treat all customers fairly.
To their credit, both the federal NDP
and the federal Liberals
have proposed in recent months more effective gouging-protection
measures, but unfortunately they have not worked together and with
other MPs to pass a bill imposing these measures on the big banks and
other credit card issuers, nor have they proposed an industry-wide
audit which is needed to determine whether banks are treating all
customers fairly and what are actual fair prices for all banking
services, nor have they proposed any effective financial consumer
empowerment initiatives such as creating the watchdog groups using the
low-cost method proposed by the CCRC.
proposed credit card and debit card codes and regulations are too
little, too late to protect
financial consumers from gouging by the big banks and other companies,"
said Duff Conacher, Coordinator of
Chairperson of the CCRC.
"To help the Canadian economy overall,
and to ensure the big banks serve everyone fairly at fair
prices, the federal government must stop protecting the banks from
accountability and instead facilitate the creation of consumer watchdog
groups, and require independent audits to
determine if the banks are reaping excessive profits through gouging
interest rates and fees, and the arbitrary cutting of some customers'
and communities' credit and services,"
"Every dollar of excessive
profit for the banks, and every person and business the banks
unjustifiably cut off from credit, costs the Canadian economy because
it means that the banks are overcharging for their essential services
and loans, and choking off spending and job creation," said
Every survey done in the past decade has
90 percent of Canadians believe access to banking services and credit
The Canadian Community Reinvestment Coalition (CCRC),
and made up of 100 citizen groups from across Canada with a collective
of more than three million citizens, called on
Finance Minister Jim Flaherty to work with opposition parties for
effective bank and financial institution accountability by:
Financial service industry customers and investors are
currently gouged with extra charges that companies in the industry use
to pay their more than $200 million annual costs for industry advocacy
efforts (advertising, lobbying, political donations and gifts).
The most effective way for the federal government to balance the
marketplace is to implement the pamphlet method to give customers and
investors an easy way to fund their own advocacy watchdog groups.
"No corporation has a right to gouge or unjustifiably cut
when providing an essential service such as banking or trying to recoup
losses like the banks are suffering from, but the Conservative
is continuing the negligence of past federal governments by subsidizing
the big banks and other financial institutions with hundreds of
billions of taxpayer dollars while failing to effectively require them
to maintain loans to creditworthy customers and serve everyone fairly
and well at fair prices," said Conacher.
"The best thing the federal government can do to help the
Canadian economy overall is to ensure effective, ongoing financial
services industry accountability by
requiring banks to prove their loan and investment interest
are fair, by auditing bank lending and competition levels in
across Canada and, as recommended by the 1998 MacKay Task Force
and House and
committees, by requiring financial and investment companies to
a pamphlet in their mailings to customers and investors that invites
to join a citizen watchdog group to watch over the financial industry
federal government," said Conacher. "At little or no cost
the federal government or the financial services industry, consumers
investors across Canada can be given a very easy way to band together
to help and
themselves through forming and funding their own watchdog groups."
The CCRC proposes first that the
government empower and mandate the Financial Consumer Agency of Canada
to examine for at least the past 10 years, and annually in the future,
profit of the credit card and basic consumer and small business loan
of the banks and other federally regulated companies, as well as
basic banking service charges.
Second, the federal government must order the
Bureau to audit the lending records of the banks (by tracking number of
number of approvals/rejections, and number of called loans in all
and small and medium-sized business loan categories), and to evaluate
actual level of basic banking service competition in communities across
for the past 10 years.
In addition to having the Financial Consumer Agency of Canada (FCAC) examine profit levels for credit cards and service charges for the past decade and annually in the future (To see details about this proposal, click here), and the Competition Bureau examine lending records and competition levels across Canada for the past decade and annually in the future (To see details about the U.S. requires this under the Community Reinvestment Act (CRA), click here -- To see details about the $4.5 trillion in reinvestments that have resulted from the CRA since 1977 (in a PDF-format document), click here -- To see the CCRC's position paper describing how this bank accountability system should work, click here), the federal government should finally actually regulate Canada’s banks and investment companies through the following actions:
For more information contact:
To see the CCRC's analysis of the flaws in Bill C-37, which changed the Bank Act and other federal financial institution laws in April 2007, click here
Canadian Community Reinvestment Coalition
P.O. Box 821, Station B, Ottawa, Canada K1P 5P9
Tel: (613) 789-5753
Fax: (613) 241-4758
Copyright 2009 Canadian Community Reinvestment Coalition