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25,000+ petition House Finance Committee to recommend key changes to stop gouging and abuse of big bank consumers

Finance Minister reviewing Bank Act right now – petition calls for creation of financial consumer group, turning FCAC and Ombudsman from lapdogs into watchdogs, audits of profits and lending, and increasing penalties

Big Six bank profits up to $20.6 billion already this year – were $37.35 billion in 2016 ($2 billion higher than in 2015, and more than double their 2010 profits) – higher than comparable banks in all other countries

Tuesday, June 13, 2017

OTTAWA – Today, as the House of Commons Finance Committee has just finished its much too short three days of hearings in response to CBC’s reports of employees at all of Canada’s big five banks breaking the law, and as Finance Minister Bill Morneau reviews the Bank Act and other financial sector laws, Democracy Watch called on the Finance Committee to strongly recommend the changes called for by its Bank Accountability Campaign and petition that more than 25,000 people have signed.

Democracy Watch’s submission and the petition call for the following key changes to stop bank gouging and abuse:

  1. Require banks, trust and insurance companies to promote in their mailings and emails to customers that they can join a national Financial Consumer Organization (FCO – as recommended in 1998 by the MacKay Task Force, and the House Finance and Senate Banking committees);
  2. Strengthen key consumer protection rules, and require the Financial Consumer Agency of Canada (FCAC) to do unannounced, mystery-shopper audits to find violations, and to identify violators and fine them (the FCAC hasn’t done unannounced audits since 2005, and tipped off the banks in March about their current audit);
  3. Require all banks to be covered by the Ombudsman for Banking Services and Investments (the Conservatives let TD and Royal leave OBSI and choose their own complaint judges);
  4. Require the FCAC or Competition Bureau to conduct regular independent audits of the profits in each banking division, and savings from withdrawal of services, and require banks to lower prices and interest rates wherever excessive profits are found (i.e. profits higher than 15% annually in any division);
  5. Require the banks to disclose detailed information annually about their service and lending records (as the U.S. has required banks to do for 30 years), and require corrective action whenever banks discriminate against customers, and;
  6. Given the big banks each make billions in profit annually, increase the meaningless maximum fine of $500,000 for violations to $50 million.

According to Finance Canada, despite the lowering of barriers to competition 15 years ago under a World Trade Organization agreement, Canada’s big banks control 93 per cent of all banking assets, and are more profitable than comparable banks in other countries, and than small banks in Canada, and Canada’s corporate sector overall. The big banks control of the market essentially allows them to gouge and abuse customers with excessive fees, high interest rates (especially on credit cards). As a result, government regulation is needed to stop them.

In 2016, Canada’s Big Six banks continued to gouge out excessively high profits of more than $37 billion (6% higher than in 2015, and more than double their profits in 2010) – in part by firing thousands of people, cutting services, and hiking fees and credit card interest rates. And their profits in 2017 are headed even higher — the Big Six banks (including National Bank) have already made $20.6 billion in the first six months (a double-digit percentage increase compared to 2016). Canada’s big banks also paid their CEOs about $10 million each in 2015, and gave them bonuses that totalled more than $10 million (51% higher than in 2008).

“Will the federal Liberals continue to protect big bank executives and their multi-million salaries or will they make real changes to protect 30 million bank customers from gouging and abuse, especially by requiring banks and insurance companies to promote a national financial consumer group in their mailings and emails to their customers,” said Duff Conacher, Co-founder of Democracy Watch. “At little or no cost to the federal government or the financial services industry, financial consumers across Canada can be given a very easy way to band together to help and protect themselves through joining a national financial consumer organization they fund and run – all the federal government has to do is require the banks and insurance companies to inform their customers about the group.”

The Financial Consumer Agency of Canada (FCAC) has a very weak enforcement record since it was created in 2003. It has made only 125 compliance rulings, is prohibited from naming a law-violating bank unless it prosecutes the bank, and it has only prosecuted 2 banks (neither of them a Big Six bank). The FCAC not only lacks resources by comparison to the similar watchdog agencies in Britain and the U.S., it is also clearly a lapdog compared to these two other agencies. According to a recent article by Reuters, the FCAC has issued fines totaling just $1.7 million since 2001 (the maximum fine allowed under the Bank Act is $500,000, which is meaningless to the big banks who each make more than $10 billion in revenue annually). Since 2013 when it was created, Britain’s FCA has already issued penalties totalling more than US$3 billion, and since 2011 when it was created, the U.S. CFPB has already imposed fines of more than US$5 billion.

“The fact that the media revealed the latest wrongdoing by the banks instead of the Financial Consumer Agency of Canada shows that the agency is a lapdog not an effective watchdog, and the banks are not even required to be covered by the Ombudsman for Banking Services and Investments,” said Conacher. “The FCAC must be required to conduct unannounced mystery-shopper audits regularly, and all banks must be covered by the OBSI, and both agencies must be required to identify and penalize banks that violate the law with multi-million dollar fines”.

Incredibly, the Financial Consumer Agency of Canada (FCAC) announced in March that it was going to inspect the banks’ selling practices in April. “The FCAC made a big mistake announcing an inspection a month in advance as they tipped off the banks and gave them time to cover up and clean up their wrongdoing,” said Conacher. “It’s as bad as the police giving advance notice that they are setting up a speed trap on a highway — you don’t catch anyone violating the law that way.”

According to the Bank of Canada, the banks currently have about $1.3 trillion in business loans. That makes the recently announced, so-called Canadian Business Growth Fund of (eventually) $1 billion a sad joke as it will amount to only 0.1% of total bank lending. Given that the fund is a joint initiative of Finance Minister Morneau and the big banks, it is clear that the federal Liberals are trying to fool Canadians into applauding the banks for this largely meaningless initiative.

“Instead of helping the banks promote a very small loan fund to help grow entrepreneurial businesses, the federal government should do what the U.S. government did 30 years ago and pass a community reinvestment law requiring the banks to disclose detailed information that will allow the public to judge whether they are discriminating against borrowers such as women entrepreneurs, and requiring the banks to take corrective action whenever discrimination is found,” said Conacher.

“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 Conacher.

The federal government bailed out the banks with $114 billion in mortgage purchases during the financial industry fraud crisis in 2009. It hasn’t required the banks to do anything in return for that bailout, or for the protections from foreign competition that the government gave the banks in 1967, and continues to maintain.

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Duff Conacher, Co-founder of Democracy Watch
Tel: (613) 241-5179
Cell: 416-546-3443
[email protected]

See more details about the federal government’s negligence in ensuring banks serve everyone fairly
and well at fair prices and interest rates in this 2012 news release.

Democracy Watch’s Bank Accountability Campaign