Media Release
DEMOCRACY WATCH CALLS ON GOVERNMENT TO ENACT BANK ACCOUNTABILITY MEASURES

Thursday, September 26, 1996

OTTAWA - Today, in testimony before the House of Commons Finance Committee, Democracy Watch called on the federal government to enact measures to help consumers hold banks accountable. The Committee is holding hearings on the Department of Finance discussion paper on the 1997 Review of Financial Sector Legislation.

"In return for the protection and privileges banks have received for decades from the government, Canadians have the right to know what banks are doing with their money, how banks make their money, and to be protected by strong laws" stated Duff Conacher, Coordinator of Democracy Watch.

In its brief to the Committee on the discussion paper, Democracy Watch called on the federal government to amend the Bank Act, Trust Companies Act and Insurance Companies Act by enacting:

• regulations to prevent the misuse of personal information;
• requirements to state service charges fully, in advance, in a uniform manner, and to disclose the cost of providing services, not just the amount charged for the service;
• requirements for banks and trusts to open an account to any person who requests; to cash government cheques without charge; and to limit the hold on all deposited funds;
• requirements to state the cost of credit fully, in advance, and in a uniform manner, and to disclose the cost of credit card operations, as compared to the revenues generated from these operations;
• prohibitions on tied selling;
• the creation of a Financial Consumer Organization (FCO) and an independent financial services ombudsman;
• requirements for banks and trusts for detailed disclosure of lending statistics for mortgage, commercial and consumer lending;
• reinvestment requirements to correct any lending discrimination revealed by the disclosure of statistics; and ¥ restrictions on self-dealing and conflict of interest within financial institutions;
• requirements to ensure that consumer and community interests are represented on financial institution boards and to ensure that shareholders can propose social responsibility measures at shareholder meetings; and
• a requirement that re-establishes the reserve requirement for financial institutions which was mistakenly abolished during the 1992 review.

In order to ensure that financial institutions comply with these measures, Democracy Watch called for the creation of independent, well-resourced and effective enforcement bodies.

ÒAll the banking ombudsmen in Canada are selected, paid and directed by the banks, and are lapdogs for the banks, not effective watchdogs for consumers,Ó said Duff Conacher, ÒWe need a truly independent ombudsman for all financial institutions and a broad-based organization to help consumers with their complaints.Ó

Democracy Watch also called for the creation of a Financial Consumer Organization (FCO) as a key step toward helping bank customers hold banks accountable on issues such as service fees, credit card interest rates, deposit insurance, privacy, tied-selling, corporate governance and complaint handling mechanisms.

The FCO would be created by the federal government requiring federally-regulated banks, trusts and insurance companies to enclose a flyer when they mail out their bank statements, credit card bills, and insurance premium statements. The flyer would invite customers to pay an annual membership fee ($10-15) to join the FCO. This mechanism has been used very successfully to help residential utility ratepayers band together in four states in the U.S. to hold utilities accountable to their interests.

If only three to five percent of financial institution customers signed up, the FCO would have between 600,000 and one million members and an annual budget from membership fees of between $6 million and $15 million. The FCO would be governed democratically by the members and would represent financial consumers before the government, agencies and the courts. It would also provide consumer education services such as comparative price surveys on service charges, credit cards, and advice on questions to ask mutual fund and insurance brokers.

"The proposed Financial Consumer Organization would create a self-sustaining, broad-based and representative organization that will help financial consumers and encourage competition in the marketplace," said Duff Conacher, "at little or no cost to government, taxpayers or financial institutions."