Thursday, March 22, 2007
OTTAWA - Today, the Canadian Community Reinvestment Coalition (CCRC) called on the Senate Banking Committee to add several measures to Bill C-37 to require banks to prove their branch closures are justifiable, to prove their credit card interest rates and service charges do not amount to gouging, to prove they lend to all individuals and businesses that are creditworthy and reinvest in community development across Canada, and to increase penalties and disclose violators of federal laws (To see the CCRC's submission to the Committee, click here).
Federal Conservative Finance Minister Flaherty introduced Bill C-37 (which changes federal financial institution laws including the Bank Act) in the fall but included only one partial consumer protection measure and no significant bank accountability measures. As a result Canada’s banking laws will continue to have key gaps that were closed 20 years ago in the U.S.
"U.S. governments have recognized that no corporation has a right to gouge, withdraw or withhold service unfairly, especially when providing an essential service such as banking," said Duff Conacher, Coordinator of Democracy Watch and Chairperson of the CCRC. "But the federal Conservatives have continued the Liberals’ negligence by allowing Canada’s super-rich big banks to treat 20 million Canadian bank customers pretty much however they want, to do whatever they want with Canadians’ money, and to take over other companies even if it isn’t in the public interest."
Every poll conducted in the past decade has shown that 90% of Canadians believe banking is an essential service similar to heat, electricity, and phone service, but while companies providing those services are required by law to prove their prices are fair and to provide services fairly across the country, the federal government continues to allow Canada’s big banks to charge whatever they want for most services, to close branches in many, mostly low-income communities (creating a huge growth in gouging cheque-cashing outlets), and to escape accountability by keeping secret their lending and investment records.
In contrast, in the U.S. banks have been required for years under the Community Reinvestment Act and related laws to disclose detailed information annually proving that their service, lending and investment records are fair, and if they have a poor record they are not allowed to expand and must take corrective action -- To see details about the Community Reinvestment Act (CRA), click here -- To see details about the $4.2 trillion in reinvestments that have resulted from the CRA (in a PDF-format document), click here.
As well, more than 30 U.S. states regulate credit card interest rates by preventing them from increasing more than a set percentage above the prime lending rate in the state. In addition, federal U.S. law requires financial institutions to give customers access to their money as soon as a cheque clears.
Royal Bank , Bank of Montreal and TD Bank all own U.S. banks and operate successfully under the U.S. legal requirements, and TD has cut one U.S. service charge that they continue to charge in Canada.
Bill C-37 also does nothing to ensure that a public interest review occurs whenever a bank proposes to expand by opening branches, taking over another company, or merging with another financial institution. In contrast, under the Community Reinvestment Act and related laws the U.S. government reviews most expansions, mergers and takeovers by banks to determine whether service, lending and investment (especially small- and medium-size business lending, and community development lending and investment) will improve. If the banks involved have a poor service, lending or investment record, the expansion, merger or takeover can be rejected and/or the banks required to take corrective action and set measurable targets before the expansion, merger or takeover proceeds -- To see details about the Community Reinvestment Act (CRA), click here -- To see details about the $4.2 trillion in reinvestments that have resulted from the CRA (in a PDF-format document), click here.
In contrast, Canada’s Bank Act and other financial institution laws contain maximum penalties of only $100,000 (much too low to encourage compliance, given the banks altogether make more than $80 billion annually), and no bank has ever had to pay anywhere near that amount as a penalty.
Bill C-37 also does nothing to ensure that the public knows about banks and other financial institutions that treat customers poorly. Currrently, the federal government’s Financial Consumer Agency of Canada (FCAC) can only disclose the identity of a violating bank or institution if it prosecutes, and even then it has the choice whether to make the disclosure.
The FCAC has been negligent since it was formed in late 2001 in informing the public, failing to disclose the identity of the violating bank or other financial institution in 118 of 120 known cases (many other cases were likely settled behind closed doors). In fact, the FCAC found through a survey more than 800 bank branches violating federal law in 2003, and did not prosecute or publicly identify any of the banks involved. When the survey was done again in 2005, the FCAC let the banks off the hook by not including questions in the areas in which the banks had done worst in 2003.
"Bank and financial institution customers and investors have a right to know which banks and institutions violate the law, and so the federal government’s Financial Consumer Agency of Canada must be required to end its secret deals and to disclose the identies of violators," said Conacher.
The CCRC is pushing the Senate Committee to make the following changes to Bill C-37:
For more information contact:
Canadian Community Reinvestment Coalition
P.O. Box 1040, Station B, Ottawa, Canada K1P 5R1
Tel: (613) 789-5753
Fax: (613) 241-4758
Copyright 2007 Canadian Community Reinvestment Coalition