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Standing Senate Committee on Banking, Commerce and the Economy (BANC) (May 30, 2014)
ANNEX C: Past FCAC appearances at BANC and recent BANC business

Relevant quotes from recent BANC business:

SEN. GIGNAC (translated): This I think is probably the most delicate portion of the Act. It is something that Quebec is very sensitive to – jurisdiction in banking. The Credit d’impôt can join if they so choose, provincial institutions can join if they so choose. How can you say that you can ensure the protection of the consumer given this fact?

JUDITH HAMEL, DIRECTOR-GENERAL, FINANCIAL SERVICES DIVISION, DEPARTMENT OF FINANCE CANADA (translated): Well, we have been working on this for some six years now in the department… We’ve consulted with most of the provincial governments and their departments of finance, but as was explained this is voluntary. The entities that will have to participate will be federally regulated banks, under federal jurisdiction…

SEN. GIGNAC (translated): One last question: you say you are creating a new position of senior deputy commissioner for consumer-driven banking. Would they be regulating the Caisse Desjardins? How would they be able to provide consumer protection for consumers in Quebec? We know in the past when attempts were made, they did not go through.

HAMEL (translated): Well, this was for entities that are federally regulated, but those provinces and provincial institutions that are interested... it would be limited only to consumer-driven banking services. They would not be subject to any other type of banking requirement.

SEN. MIVILLE-DECHENE (translated): Member of Parliament Mr. Garon is saying that this is a framework that would be imposed upon Quebec institutions, and therefore consumer protection legislation at the Quebec level and Bill 25 would no longer apply...

HAMEL (translated): Well, in the bill we are dealing with here today, you have seen the elements with respect to consumer protection. None of what you are talking about is included in what we are speaking about today. This is just intended to provide a framework for banking services in this specific instance. So, the answer is businesses will certainly have to comply with provincial regulation, they’ll have to continue to do so. My colleagues and I consulted provinces and the regulatory bodies of the provinces and the departments, but we want to ensure all is in order.

SEN. MIVILLE-DECHENE (translated): Is the Government of Quebec in agreement with this?

HAMEL (translated): We have consulted the working group, most of the provinces.

SEN. MIVILLE-DECHENE (translated): Is the Government of Quebec in agreement with this, with what you are doing and the way in which you are setting up your framework?

HAMEL (translated): To my knowledge...this is a federal bill.

SEN. MIVILLE-DECHENE (translated): Yes but in consultations did you obtain the agreement of Quebec?

HAMEL (translated): We didn’t get the agreement per se, but we didn't obtain their disagreement either.

On Criminal Rate of Interest and the Consumer-Driven Banking Framework - BANC May 23, 2024 Study of Bill C-69, the Budget Implementation Act 2024 – Victoria Mainprize (Director, Legal, Policy and Compliance and Assistant General Counsel), Canadian Credit Union Association (CCUA)

On criminal rate of interest:

On consumer-driven banking:

SEN. BELLMARE (translation): A question about Section 16. You’ve said that you’ve got serious problems – can you comment on the reasons for your concerns about Section 16 of the bill. In particular, it would seem that it would promote more open banking institutions to be set up. Do you have concerns about this, or is it because of relations between the federal and provincial levels that you have concerns?

MAINPRIZE: Our concerns are really that there is collaboration and discussion between federal regulators and provincial regulators, in this case especially when it comes to the governance structure. And, how consumer protection will be dealt with in the Consumer-Driven Banking Framework. What we have seen is that during the initial working groups that we’re dealing with accreditation, liability, privacy and security, the provinces were included, and provincial regulators were included. We haven’t seen as much inclusion in this next step, and we want to ensure that there is inclusion, as has been noted. The majority of our members are provincially regulated, and we need to ensure that the regulatory environment for them remains reasonable and proportionate and is fair for them, especially given the differences between federal regulation and provincial regulation. That is our primary concern, is making sure that there continues to be consultation and dialogue and cooperation at both levels of government.

SEN. LOFFREDDA: You said you’d like to have the policy in place, or the framework in place, as soon as possible. We talked about reduced costs and (increased) efficiencies for the consumer...why would your association be in such a hurry to implement it? Would it not reduce margins in the banking sector? Two, when Senator Martin asked the question on consultation you did express satisfaction that the government did consult with you...the government has been contemplating open banking for 6+ years, and you did epxress serious concerns in your opening...why were provincial regulators not consulted over 6 years? Why is the government not aware of those concerns at this point in time? Because, we’ve heard similar concerns from other provinces, not just Quebec with respect to the Caisse and Desjardins and other co-ops who want to be invited...

MAINPRIZE: Our understanding is that the provincial regulators were included in the four working groups and have been consulted throughout the last round of consultations. What we haven’t heard is how they will be integrated and consulted in relation to this next level, and in particular in relation to the recent announcement about the expanded mandate and role of the FCAC, and how that will impact provincially regulated credit unions as well as federally regulated institutions.

On Mortgage Renewals - Study matters relating to banking and commerce generally – May 1st, 2024 – Tiff Macklem and Carolyn Rogers, BoC

The Chair: What, if anything, does the bank do in preparation for what all of the experts are predicting — a tsunami of mortgage renewals in 2024-25, that there will be huge rates of defaults among people who bought a house when the interest rates were near zero and now have to renew at 5%? This will be a huge crisis.

Ms. Rogers: Yes. We have been watching mortgage renewals really closely.

I would caution you at some of the headlines. I have read them too. I get alarmed, but I look at the data, and the data is a better indicator of what is going on.

What do we know so far? If you go back to the start of the rate increase cycle, about half of the mortgages that were due to renew have renewed. Mortgage default rates are still at historical lows. Arrears rates — so late payments — have come back up. They were also at a low rate through the pandemic. They’ve come back up to about their pre-pandemic level. If you look at those as an indicator of credit stress in the mortgage market, they don’t tell a story of a high level of stress.

In fact, when we look at other credit data, we see a bit more pressure. If you use arrears or default rates, we see more pressure in non-mortgage holders, so renters. We talked about this; rent is a pressure as well. The data is not telling us so far that we have a mortgage crisis, as the headlines would tell you.

Now, we do know that there is a little more than another 40% of mortgages to renew. We also know that for those mortgages, the difference between what their payment was when they took the mortgage out and what their payment will be is bigger than the ones that have renewed so far.

What banks are telling us is they are reaching out proactively to those borrowers, and most of them are preparing. We see people holding larger savings or liquidity buffers. What we can surmise is that they are preparing to either buffer those payments or maybe pay down the principal of their mortgage. We have seen wage increases. That will help. People are curtailing their spending. What we see is Canadians are being prudent, and they are proactive.

Now, will there be pressure? There will absolutely be pressure. Will there be people who find that pressure is too much and that they need to make decisions about extending their mortgage —

The Chair: If there is 40% to go, then we are kind of in a wait-and-see mode on that?

Ms. Rogers: Yes. We are going to wait and monitor carefully, yes.

On open banking - Study matters relating to banking and commerce generally – November 9, 2023 – Canadian Bankers Association and Canadian Credit Union Association

Senator C. Deacon: Thank you, witnesses, for being here.

I’m sure as most economists, you believe in increased competition as being a really important way to make our economy more resilient and productive.

I would like to ask Mr. Meyer about mortgage markets. I’m a really big believer that we have to increase competition in our mortgage markets through providing more digital technologies and more access to all financial institutions, provincially regulated credit unions as well as federally regulated financial institutions, or FRFIs. This is to ensure that we are getting the most competition in terms of the regulated products that are being offered and also the easiest ways to compare between products for individuals. That requires those individuals to have access to their financial information to be able to share with other institutions through open banking regimes and other means.

Are you seeing barriers within your organization in terms of enabling that to occur? Is there agreement or support from your organization to see consumers securely getting better access to their data under a federally regulated open banking regime so that they could actually have an easier job of comparing the best rates for them in their community and the home they are buying?

That question is for Mr. Meyer, being the markets person, or whichever.

Mr. Ciappara: I’ll begin and then Mr. Meyer can help me out.

In terms of competition in the mortgage market space, according to the CMHC, there are about 250 insured lenders that can provide insured mortgages. This includes banks. There are about 40 banks that can provide insured mortgages. Beyond that, there are credit unions or caisses populaires. With caisses populaires, Desjardins is the largest mortgage lender in Quebec. Credit unions are some of the largest mortgage lenders in Western Canada. We have mortgage finance companies, provincially owned financial institutions such as ATB Financial. Then you move beyond the insured space. There are mortgage investment corporations, private lenders — there is a tremendous amount of competition within the mortgage space.

In terms of utilizing technology for the purposes of mortgage lending, I alluded to income verification with the CRA. That can be a technology-based solution to reduce mortgage fraud and thus help with mortgage costs. If we have consent from the taxpayer, we can ask CRA for the income number to put into the mortgage application to improve the process in terms of obtaining a mortgage, to reduce costs and to reduce fraud.

Aaron Meyer, Advisor, Household Finance and Mortgage Markets, Canadian Bankers Association: Thank you for the question, senator. Specifically on open banking, I think the industry has been working with the federal government on input into a federal government consultation on that subject. I believe that report will be published in the near future, and the industry is eager to see the results of that report.

Senator C. Deacon: My question is really about consumers having access to their data, not their financial institution controlling their data, so that they can use that to potentially negotiate a better mortgage situation and do so easily rather than going from institution to institution to do a comparison across institutions using the same information which their bank currently controls.

Mr. Ciappara: I will just reiterate what Mr. Meyer has said. I think what you are alluding to is open banking. We’re supportive of getting the report out, seeing what the report says. We’ve been engaged on that entire process the entire time. We provided our feedback to the government, but the report is with the minister, and we eagerly await that report.

I will say mortgage borrowers are among the most educated. There is a lot of information out there on the internet. Surveys have shown that mortgage borrowers come well-educated, even before they come to their financial institutions to request a mortgage. There is probably no greater financial product than mortgages where customers are educated on this. They educate themselves as well.

On Mortgage Relief Measures and FCAC - Study matters relating to banking and commerce generally – November 9, 2023 – Canadian Bankers Association and Canadian Credit Union Association

Senator Gignac: Just on this conversation on the variable rate, fixed-payment mortgages. When I was younger, that product did not exist. It was a variable loan with variable rate or fixed rate, and that’s it. So that product suddenly comes to the market.

Since some people will have difficulty, particularly first-time buyers, I know the Financial Consumer Agency had a look at that.

So what is the position of Canadian Banking Association for people who go with that product — being the disclosure, the risks or the customer being fully aware two or three years ago when they go with that product — what it could mean if the interest rate goes up by 3% or 4%? How will be the Canadian Bankers Association be flexible and accommodating so that people are not forced to sell their houses?

Mr. Ciappara: Yes, absolutely. There is a lot to unpack there. I’ll try to do that.

First, on the variable rate, fixed-payment product, those products have been around for quite some time, long before the increase in interest rates and the global financial crisis of 2007-08. So they have been around for quite some time.

Frankly, the product differentiation is a product of competition in the marketplace. You have different financial institutions providing different products.

But to the point around helping those consumers that will have to deal with rising interest rates at renewal, my members and banks are proactively reaching out to those individuals to help them out, so they are not waiting until renewal to hear from them. They are proactively reaching out to them and providing them with options in terms of a plan that they can implement to manage the increase in payment. That plan can include a lump-sum payment, increased mortgage payments or going into a fixed-rate mortgage. Those are all on the table.

So banks are very flexible in terms of helping their customers, and they are doing so proactively. No bank wants to own a house, so they would do everything in their power to help their customers out to deal with increases in payments.

In terms of disclosure and education, our members speak to and disclose to members and educate them on the different options for them before they take out a mortgage. Disclosure is critical, and informing them is critical.

I will repeat something I said earlier: Mortgage borrowers come to the conversation really well-prepared. There is a lot of information in the marketplace. So we’re able to have that conversation at a higher level than, say, maybe 10 years ago when information wasn’t as readily available.

I hope I have addressed your question, senator. Please let me know if I have missed anything.

Senator Miville-Dechêne: I’m going to ask you a more specific question in the same vein as my colleague Senator Gignac.

I imagine you charge fees when renewing mortgages. What would you be willing to do to relieve the holders of these loans and for consumers who, at the moment, are in dire straits?

Could you drop these fees — or perhaps have minimal fees? I confess I’m asking this question without knowing exactly where financial cooperatives stand on the issue of mortgage renewal fees.

[English]

Mr. Hatch: Credit unions have been very proactive in working with their members who may be facing distress, who may be facing repayment difficulties, who, in many cases, of course, are facing higher interest rates — like we all are — over the past couple years as renewals come up. They’re working proactively with their members to find the right product for them at renewal, to work with them to make sure they’re able to handle the new rate of interest.

It’s in no credit union’s interest — if I can use that word — to see their members in financial distress. Again, I’ll point to the lowest mortgage default rate across the entire sector, which we continue to enjoy.

With regard to fees, my answer is going to be similar to my predecessor with the Canadian Bankers Association. We’re prohibited by law from getting together and discussing fees with our members due to the Competition Act, and it’s not our role.

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From:

2025-09-12