Canada's Consumer Protection Watchdog Could Get More Bite With New Code

OTTAWA — The woman who is proud to be called the country's consumer-protection czar remembers her first encounter years ago with the questionable actions of a debt-collection agency.

 

Lucie Tedesco, a law student at the time, received a phone call from the debt collector after she missed a minimum payment on a retailer's credit card. They threatened, she recalled, to garnish her wages if she didn't pay up.

 

But thanks to her studies, Tedesco said she knew full well they needed a court order to pluck cash from her paycheque. So she called their bluff.

 

The experience also opened her eyes.

 

"That really made me angry and I saw that there were perhaps practices out there that were not benefiting consumers," said Tedesco, who became commissioner of the Financial Consumer Agency of Canada in September 2013.

 

Not only is the agency a key piece of the Harper government's consumer agenda, Tedesco's already-powerful office could become even stronger once the Conservatives introduce a long-promised comprehensive financial consumer code that would replace the existing patchwork of legislation and regulations.

 

Since coming to power in 2006, the Conservatives have taken steps such as lowering retail credit-card fees, reining in cancellation penalties on cellphone contracts and pushing the broadcast regulator to cut cable and satellite TV charges while giving consumers more channel-choosing flexibility.

 

The government has also been gradually expanding the mandate of Tedesco's agency, which monitors the activities of more than 350 federally regulated financial institutions. 

 

On top of that, its funding has doubled since 2006 and its enforcement branch now has more bite.

 

"I never imagined myself as being a watchdog, but consumer protection for me is extremely important," Tedesco said in a recent interview.

 

The agency ensures financial institutions, such as commercial banks and life-insurance companies, comply with federal laws and their own voluntary codes of conduct as a way to protect consumers from being ripped off.

 

For financial institutions that break the rules, Tedesco's office can slap them with anything from letters of concern, to violation notices, to penalties that can reach as high as $500,000 per offence. Before moving the maximum penalty up to its current level in 2012, the Tories increased it to $200,000 from $100,000 in 2007.

 

Between 2009-10 and 2013-14, the agency said it levied more than $1.7 million in monetary penalties and more than 50 violation notices. 

 

In 2010-11, it investigated 660 cases of possible compliance violations. That number rose to 1,268 investigations in 2011-12, 1,526 in 2012-13 and 1,358 in 2013-14.

 

Tedesco said the 14-year-old agency has morphed from being "somewhat reactive" in its early years, when it basically ran a call centre that received and investigated complaints from the public.

 

Her office now has about 80 employees and an annual budget of $17.5 million — increases that are mostly linked to its growing responsibility to promote financial literacy. The Conservatives played a role in expanding that reach, she said.

 

"They certainly believe in what the agency does," Tedesco said, adding her office has received support from all political parties.

 

The regulator's beefed-up presence has caught the attention of banks.

 

"The agency is very clearly and firmly in the mindsets of the banks in Canada," said Terry Campbell, president and chief executive of the Canadian Bankers Association.

 

"It has been since the get-go, but I think the outreach that the new commissioner is taking is intended to strengthen and cement that."

 

Campbell credited the agency for doing a good job of communicating its expectations to the banks. He said the institutions have a "high level of compliance" with its legislation.

 

Others believe the government should do more to protect Canadian consumers.

 

NDP finance critic Nathan Cullen said the government has talked a lot about consumer-friendly rules, but he said promises remain undelivered while some rules that were implemented are too weak.

 

He said one example is last fall's non-binding deal reached by credit-card-issuing companies to lower the "swipe" fees they charge to businesses. Questions have been raised about whether consumers would actually save money.

 

"The rhetoric doesn't seem to match the actions," Cullen said of the Tories' consumer-first agenda.

 

In the 2013 federal budget, the government promised to introduce a "comprehensive financial consumer code" it said would provide better protection for Canadians. 

 

At the time, it said the code would cover risks in the digital age, such as remote banking.

 

To develop it, the government launched consultations in late 2013, but it's unclear what the new framework will look like.

 

It's also a mystery when it will be unveiled.

 

Asked if the code could be included in the 2015 budget, Tedesco said, "It could be."

 

In the meantime, the agency is putting a lot of energy into improving the financial knowledge of Canadians, such as helping people make responsible daily spending choices and solid plans for their retirement.

 

The government recently appointed a "financial literacy leader" to create a national strategy. 

 

"It's a daunting task," Tedesco said of teaching people to change their behaviours to better manage their finances.

 

She said it's "very humbling" to oversee the country's consumer-protection framework. A newspaper article from a year ago said her role as commissioner essentially makes her Canada's consumer-protection "czar."

 

"I'll take that moniker," Tedesco said.