New financial consumer watchdog groups needed to watch banks and investment industry

Par Duff Conacher le 15 janvier 2009


OTTAWA - With Canada's big banks reporting a total of $16 billion dollars in losses and writedowns mainly because of their irresponsibly risky investments, Canada's leading bank accountability coalition called on federal Finance Minister Jim Flaherty to work with opposition parties and protect financial consumers by requiring banks to prove their credit card, other consumer and small- and medium-sized business loan interest rates and service charges do not amount to gouging, empowering the Competition Bureau to evaluate the lending record and competition level in basic banking services nation-wide, and requiring banks and other financial institutions to facilitate the creation of watchdog groups.

The Canadian Community Reinvestment Coalition (CCRC), established in 1997 and made up of 100 citizen groups from across Canada with a collective membership of more than three million citizens, proposes first that the federal government empower and mandate the Financial Consumer Agency of Canada (FCAC) to examine for the past 10 years, and annually in the future, the levels of profit of the credit card and basic consumer and small business loan divisions of the banks and other federally regulated companies, as well as profits from basic banking service charges.

The FCAC would keep key company information confidential, reporting only the profit margin for these divisions of each company. If the FCAC found excessive profits (above the corporate average of 15-20 percent), the public would know, and likely that pressure alone would cause interest rates and service charges to drop.

Second, the federal government must order the Competition Bureau to audit the lending records of the banks (by tracking number of applications, number of approvals/rejections, and number of called loans in all consumer and small and medium-sized business loan categories), and to evaluate the actual level of basic banking service competition in communities across Canada, for the past 10 years.

Third, the federal government must require the banks and other federally regulated financial institutions to enclose twice each year in their mailings to customers a one-page pamphlet that invites them to join a financial consumer watchdog group. The federal government must also do the same for all federally incorporated companies, requiring them to enclose a one-page pamphlet in their annual mailing to individual shareholders that invites them to join an investor watchdog group. This method has been used successfully in four states in the U.S. to form broad-based, self-sustaining watchdog groups for utilities. 

Federal Finance Minister Jim Flaherty has talked a lot about ensuring Canadians are charged fair prices for banking, but has done nothing except meet with bankers behind closed doors a few times, and give them a no-strings-attached $95 billion total subsidy.

No corporation has a right to gouge or cut services, especially when providing an essential service such as banking or trying to recoup self-caused losses like the banks are suffering from, so the least the Conservative government can do is protect Canadians from being gouged or losing their loans by requiring banks to prove their consumer and business loan interest rates and charges are fair, and by auditing bank loan records and banking competition in communities across Canada. Every survey done in the past decade has shown 90 percent of Canadians believe banking is a service essential for functioning in society.


To balance the marketplace and lobbying power of Canada's big banks and investment companies, the federal government must also, finally, implement the recommendations of the 1998 task force and House and Senate committees by requiring financial and investment companies to distribute a pampblet in their mailings to customers and investors that invites them to join citizen watchdog groups to watch over the financial industry and federal government. At little or no cost to the federal government or the financial services industry, consumers and investors can be given a very easy way to band together to help and protect themselves through forming their own watchdog groups.

According to Fortune magazine's 2007 Global 500 report (based on FY 2006 annual reports), Canada's big five banks were all within the top 35 banks in the world in terms of profits as a percentage of revenues, and profits as a percentage of assets (before their irresponsible investing led to billions of dollars of losses and writedowns in the past two 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, and the Competition Bureau examine lending records and competition levels across Canada for the past decade and annually in the future, the federal government should finally actually regulate Canada's banks and investment companies through the following actions:

* If FCAC study shows gouging in the past decade, require banks to refund customers; 

* If the Competition Bureau shows lack of competition in any community, require banks to open branches or subsidize credit unions opening branches; 

* Every government in Canada contracts money-handling and credit card business to the banks, and should award contracts based on which bank serves the most people well;

* As proposed above, facilitate the creation of a Financial Consumer Organization (FCO) and an Individual Investor Organization (IIO) to help consumers by requiring banks and other financial institutions to enclose an FCO or IIO pamphlet in their mailings to customers, inviting people to join the watchdog groups, and;

The federal government has allowed a two-tier banking system to operate in Canada where the people who can least afford it pay more for essential basic banking services and basic credit. Any government that wants to help Canadians with low incomes, and help the Canadian economy overall, will regulate Canada's big banks to ensure they serve everyone well at fair prices..”



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