FCAC appearance at the House of Commons Standing Committee on Finance (FINA)

Delivered by Lucie Tedesco, Commissioner of the Financial Consumer Agency of Canada

June 5, 2017

Check against delivery

Thank you Mr. Chair and good afternoon. Thank you for inviting us to speak on the role of the Financial Consumer Agency of Canada, or FCAC, with regard to bank sales practices.  Joining me is my colleague Richard Bilodeau, who is FCAC’s Director of our Supervision and Promotion Branch and leading our industry review into bank sales practices and Jeremie Ryan who is the FCAC’s Director of Financial Literacy and Stakeholder Engagement.

As a federal agency, FCAC is responsible for protecting consumers of financial products and services. We deliver on our mandate through two distinct, but complementary programs.  The first is through the oversight of federal financial entities and the second is through strengthening the financial literacy of Canadians. 

These programs allow the Agency to contribute to the federal financial oversight framework of promoting public confidence in a strong, stable, and competitive financial system.

Our oversight function is exercised over three types of entities.  The first type is federally regulated financial institutions, which are comprised of banks, federal credit unions, federal insurance companies and federal trust and loan companies; the second is external complaint bodies and the third type of entity we oversee is payment card network operators, such as Visa, MasterCard, American Express and Interac.

Federally regulated financial institutions are supervised to ensure compliance with their market conduct obligations under various federal statutes. 

External complaint bodies, or ombudservices as some might call them, are monitored to ensure their compliance with the applicable regulations.  These organizations are mandated to deal with consumer complaints that are not resolved to the consumer’s satisfaction through the financial institution’s complaints handling process.  All banks must be members of an approved external complaints body.

Payment card network operators are overseen by FCAC to ensure that they comply with their obligations and adhere to the commercial practices that are intended to protect merchants.

Complimentary to our Supervision and Promotion mandate is our mandate to strengthen the financial literacy of Canadians and enhance their financial well-being by helping them make the best decisions for their situation.

With that said, I will now turn to the subject of bank sales practices.

When the Wells Fargo story broke in the US in September of 2016, we conducted an analysis of the complaints we had received, during the previous three years, from consumers alleging they had received products or services for which they had not signed up or for which they had not received the required disclosure.  What we found, at that time, was that the number of complaints received with respect to these two issues had remained stable year over year.   Nonetheless, we continued to monitor incoming complaints and decided to make bank sales practices, related to credit cards, the subject of our 2017-2018 industry review.

Industry reviews are conducted annually to supervise compliance with market conduct obligations and help us identify emerging trends and issues that may impact consumers of financial products and services. 

In addition, in a letter dated February 3, 2017 to the banks, we reminded them of their legal obligations to provide consumers with the required disclosure and to obtain their express consent when selling products and services to them.  We also issued a consumer alert on the same day, informing consumers that banks must obtain their express consent before they can issue credit cards.

Then, following media reports alleging questionable sales practices by Canada’s big banks, I announced that we would be examining bank sales practices in relation to express consent and disclosure.   That was on March 15, 2017.

Since then, our Supervision and Enforcement team has been hard at work reviewing and investigating complaints.  They are looking at any and all factors that may be contributing to non-compliance and have been instructed to take appropriate enforcement action for all breaches they uncover. 

I have also instructed my team to accelerate plans for the broader industry review of bank sales practices, which is now in full swing.  Through the review, we are assessing whether sales targets and incentives are contributing to sales practices that may be leading to poor outcomes for consumers.  We are doing so by:

• interviewing consumers and speaking to consumer groups to gain a broader understanding of the sales experience from the consumer perspective
• reviewing the banks’ compensation programs
• examining their internal controls
• meeting with all relevant bank personnel, regardless of their role or level.

The initial findings of our review will be made public by the end of 2017.

I want to emphasize that we will thoroughly investigate all breaches of consumer protection that we uncover during this review and we will enforce compliance with the tools at our disposal.

This industry review is an example of FCAC’s approach to supervision. That approach is based on three pillars.

First, we promote responsible market conduct.  
Second, we monitor market conduct.  
Third, we enforce market conduct obligations.

Last year together with the first 4 months of this year, through this very approach, close to $15 million dollars was reimbursed to consumers by Canadian financial institutions. 

With that I will conclude my remarks. Thank you for the opportunity to appear before you and I and my colleagues look forward to answering any questions you may have.