Proceedings of the Standing Senate Committee on
Banking, Trade and Commerce
Issue 11 - Evidence
OTTAWA, Thursday, May 3, 2001
The Standing Senate Committee on Banking, Trade and Commerce, to which was referred Bill C-8, to establish the Financial Consumer Agency of Canada and to amend certain acts in relation to financial institutions, met this day at 11:00 a.m. to give consideration to the bill.
Senator E. Leo Kolber (Chairman) in the Chair.
[English]
The Chairman: Honourable senators, I see a quorum. We are here to continue the testimony on Bill C-8, to establish the financial consumer agency of Canada and to amend certain acts in relation to financial institutions.
We will have two witnesses this morning. Our first witness will be Mr. John Mountain. Please proceed with your presentation and we will have questions for you later.
Mr. John Mountain, Vice-President, Investment Funds Institute of Canada: Honourable senators, the Investment Funds Institute of Canada, known as IFIC, wishes to thank the committee for this opportunity to appear before you concerning Bill C-8. This represents one of the final stages in a review process that has been going on steadily since the last major changes to the Bank Act in 1992.
IFIC is the national association of the Canadian investment funds industry. As of August of last year, our membership included 83 mutual fund managers, managing 1,468 publicly offered mutual funds that hold, in the aggregate, $438 billion in assets. These assets represent nearly 100 per cent of all investments in Canadian mutual funds. IFIC also represents 144 firms that distribute mutual funds to retail investors and 76 affiliate members, representing law, accounting and other professional firms that provide service to the industry.
Our membership would like to demonstrate support for this legislative package. Our members believe it is an important step forward in improving Canada's financial institutional framework. It is important that this legislation comes to fruition as quickly as possible.
We would like to focus our comments today on the Canadian Payments Association provisions of the bill. We believe that expanding membership in the association is a wise step. It reflects the rapidly evolving nature of the financial services sector and should serve to strengthen this basic component of our economy's infrastructure.
IFIC is pleased to see that money market mutual funds appear on the list of potential Canadian Payments Association members found in clause 223(2) of the bill. We are also pleased that our members fall into the category outlined in clause 227(2) for the purpose of electing directors of the board from representatives named by members of that class.
IFIC's only concern with these provisions, at this point, is with the requirements for membership that will be set out in regulation. We trust that these requirements will be such that they will yield a class of members and representatives truly able to speak for interests of money market mutual funds. However, we have not yet seen the draft regulations, so it is difficult to assess what the content will be.
Our second point is more general and involves the governance of the association. It will be important for this new and expanded association of financial services providers and its various committees to work collaboratively. A spirit of trust and cooperation must reign among all of those contributing to the goals of the association. For that to occur, it will be important that the association as a whole be guaranteed a certain independence in its deliberations.
It would be unfortunate if such a key component of our economy became needlessly politicized in any way. In this regard, I would draw the attention of honourable senators to three features of the new association that have the potential to frustrate the emergence of a collaborative culture at the CBA.
The first feature in question is the minister's direct appointment of three non-member representatives to the 16-person board. The second feature is the appointment, in consultation with the minister, of 18 of the 20 members of the stakeholder advisory council. And the third feature is the right of the minister to delay or disallow any bylaw, rule or standard for the sake of the public interest. We are also concerned with the senator's right to issue positive directives to the association, obliging it to make a certain bylaw, rule or standard.
Given the new dynamics of the expanded membership, IFIC believes that these three provisions are excessive. Each could be curtailed while at the same time preserving the minister's ultimate and heavy responsibility for the safety and soundness of the payment system. Combined, we are afraid that these provisions constitute a vote of non-confidence concerning the ability of financial services providers, under the chairmanship of the Bank of Canada, to regulate the payment system on their own.
One of the association's explicit duties is to take into account the interest of users. This goal is likely to be achieved as the result of the competitive mix around the board table. At the same time, nothing should be done to dampen the full and committed participation of all members. An arms length degree of independence would foster collaboration as well as generate the necessary leadership to tackle changing conditions.
IFIC does not recall so much discretionary power being given to the minister. Nor does it recall that the minister's discretionary power had been contemplated by the Bank of Canada or the Department of Finance in their discussion papers on governance of the association, which were published in December 1997.
We would encourage members of the committee, before they report to the Senate, to canvass other financial service providers in order to review their views on governance of the association. If at that point the committee still believes that amendments are not necessary, we would hope that the committee would indicate in their report the nature of our concerns. We would further hope that the government, when drafting its regulations, would take our concerns into consideration.
With regard to the status of designated payment systems, the minister is given considerable discretionary power to direct the affairs of any payment system he or she so designates. It is not clear to IFIC, from the text of the bill, how such a designated system will interact with other members of the CPA. For the moment, the status of the payment systems appears to be in limbo.
Finally, in addition to the requirements that money market mutual funds must satisfy for the membership in the CPA, there are other key elements of the governance structure that remain to be determined by regulation. These elements include the size and composition of committees of the board; the number of directors to be elected from each class of members; the number of votes that a member is entitled to cast for election of directors; and the dues payable by members.
Passage of Bill C-8 is the penultimate step in what has been a long process for all involved. These upcoming regulations will be a crucial stage in that process. Any direction that the committee can offer the government, in the spirit of our comments, would be greatly appreciated.
The Chairman: Thank you very much.
Senator Kelleher: Good morning. Have you discussed your concerns with the Department of Finance?
Mr. Mountain: I have discussed them with certain officials at the Department of Finance, yes.
Senator Kelleher: I assumed you would have. What was their response? What feeling did you come away with in respect to your concerns?
Mr. Mountain: The Department of Finance appears to be very consultative at this point and we are appreciative of that. However, we have not seen the draft regulations, nor have we had the opportunity to comment on them. As a result, we are not sure what we will be confronted with.
Senator Kelleher: I gather from your presentation that you are not necessarily looking for amendments to the act, but that you are concerned about the regulations of the act.
Mr. Chairman, it might be helpful if the Investment Funds Institute of Canada could specify in a letter to us what they would like to see in the regulations.
The Chairman: That is a good suggestion.
Mr. Mountain: I would be very pleased to set out our thoughts in a letter.
Senator Kelleher: Would you be in favour of having whatever regulations that are proposed tabled with appropriate House and senate committees for review before they are passed by the government?
Mr. Mountain: I believe that would be appropriate.
The Chairman: Is it possible to have regulations tabled first? I know they are gazetted.
Senator Kelleher: They could send us a draft copy of them. Although I do not quarrel with the principle of this bill, so much of it is being left to regulations.
The Chairman: That is true of almost every bill we have seen.
Senator Kelleher: The best thing we can do at this time, given the time constraints imposed upon us, is to ask for an opportunity to review the regulations before they are gazetted. There is nothing illegal, improper or unusual about that. That is where the power is, in this bill.
The Chairman: Mr. Mountain, please send us your proposed regulations and we will see what we can do. I do not have an answer at this point. I understand what you are saying and we will have a look at it and consult as a committee on what can be done.
Senator Meighen: You take the position in your brief that, in at least three areas, you feel that the ministerial discretion is a bit broad. Some of my colleagues raised, at second reading, the issue that there is indeed a great deal of ministerial discretion given in the regulations. Some of my colleagues believe that it is too much, so, to some extent your words fall on fertile ground in this committee.
Is it your suggestion that the three particular rights of the minister, as set out in the bill, should be eliminated or have you drafted something to amend the proposed ministerial discretion?
Mr. Mountain: I have nothing drafted, senator. It is not our view that these rights should be eliminated. Our concern is that any one of them, in isolation, might be an appropriate power but that the three of them in combination are beyond what is appropriate in fostering a new payments association culture.
Senator Meighen: We have the same concerns as you do about the breadth of ministerial discretion permitted under this bill. We cannot simply ask the minister not to use the discretion. We must come up with something more concrete than that. If upon reflection you come up with something more concrete, perhaps you could advise us.
Mr. Mountain: Certainly.
The Chairman: The quicker you do so, the better.
Senator Tkachuk: You mentioned the Stakeholder Advisory Committee. What is that?
Mr. Mountain: The Stakeholder Advisory Committee is a committee of users of the system. It is part of the legislated framework of the Canadian Payments Association.
Senator Tkachuk: It exists now?
Mr. Mountain: It does exist now, although I do not believe it has formal status at this time.
Senator Tkachuk: Who appoints the members of it?
Mr. Mountain: That is a very good question. That was a matter of discussion at a recent meeting of the committee. It is very unclear how appointments are made. I serve on that committee now and I have no idea how my organization got to be there. We were advised by phone that someone had decided that my organization should be at the table.
Senator Tkachuk: This is a committee of the Canadian Payments Association?
Mr. Mountain: Yes.
Senator Tkachuk: Would the Canadian Payments Association not then make the appointments?
Mr. Mountain: Yes, but I do not know whether appointments are made by the board or by staff.
Senator Tkachuk: Would it come from the Bank of Canada?
Mr. Mountain: I do not believe so. I believe it has been a very iterative process to assemble the people who are now around the table.
Senator Tkachuk: When the appointments are done in consultation with the minister, who will advise the minister of the potential candidates for appointment?
Mr. Mountain: I believe the board of the CPA will put forward a slate of names to the minister.
Senator Tkachuk: Has it been explained to you why 18 are appointed in consultation with the minister? That seems to be a large number out of 20. I could understand perhaps half. Do you know why there are 18 out of 20 chosen? Wil the other two be appointed in the present nebulous fashion or will there be a formal procedure?
Mr. Mountain: I believe that two are designated people and the rest are ex officio appointments.
Senator Tkachuk: Therefore, outside of the ex officio members, all of the appointments will be made in consultation with the minister?
Mr. Mountain: I believe that is correct. I am not an expert on this section.
Senator Tkachuk: At the present time are all these problems, even problems such as bylaws, dealt with by the CPA without the minister's involvement?
Mr. Mountain: Yes.
Senator Tunney: I have a question further to Senator Tkachuk's intervention. It is in relation to the governance of the association.
At the bottom of the first page of print, you write:
It would be unfortunate if such a key component of our economy became needlessly politicized.
One of the features is:
the appointment, directly by the Minister, of three non- member representatives...
Do you recommend no representatives or are you concerned about the number, three? Do you want none instead of any number?
Mr. Mountain: No. I believe it is these three provisions together that constitute our largest concern. If, for example, the minister did not have the power to tell the association what it must do and if his power was restricted to disapproving proposed activities or bylaws, then the ability to appoint three non-member representatives would be considered appropriate. It is not the number three, but the number three plus the appointing in consultation of 18 out of 20 to the Stakeholder Advisory Council, and the ability not only to disapprove or delay, but also to issue a positive statement, that concerns us.
The Chairman: Thank you for your time.
Our second witness will be from TelPay, a division of CTI-Com-Tel Inc.
I assume you have an opening statement.
Mr. Brian W. Denysuik, President and CEO, TelPay, a Division of CTI-Com-Tel Inc.: I am representing TelPay. Glen Gowryluk is representing Ceridian Canada Ltd. Don McGuire is representing ADP Canada. We have a joint presentation to make.
The Chairman: Please tell us what the connection is between the three of you.
Mr. Denysuik: These two gentlemen are in the payroll business and we are in the bill payment business.
The Chairman: It is the same sort of endeavour?
Mr. Denysuik: That is correct.
ADP Canada, Ceridian Canada Ltd. and TelPay Incorporated depend on the collection of funds from clients to distribute payments related to either payroll or bill payments.
In the current processing environment, there is significant settlement risk. ADP, Ceridian and TelPay process in excess of $120 billion per year related to their payment distribution services. ADP and Ceridian are the two largest payroll providers in Canada. TelPay is the main independent bill payment processor in Canada. These corporations process payment transactions on behalf of millions of Canadians. ADP, Ceridian and TelPay process in excess of $40 billion of tax remittances annually.
I referred earlier to the fact that there is significant settlement risk in the way we collect funds from our clients. To collect funds from clients, an electronic debit is processed. However, this debit can be returned as insufficient funds several days after the employees or bills have been paid. The process used to collect funds is known as pre-authorized debits and is defined by rules set out by the Canadian Payments Association.
We process electronic debits to collect funds in order to pay employees, government bodies such as CCRA and third parties, and pay bills on behalf of individuals and businesses.
The debits we process are called "electronic funds transfer." However, they are not very electronic at all. The debits are sent from us, the business, to our financial institution. These transactions are first sorted by the bank of destination and then placed on a magnetic tape. The financial institutions then meet, in a warehouse, twice a day, to trade magnetic tapes to exchange the debits and credits that belong to each of them.
In the age of electronic commerce, it is unbelievable that our financial institutions have not moved to an electronic exchange between one another.
What are we looking for to resolve this settlement issue?
We are looking for solutions like Interac. Interac is what I refer to as the payment system that the banks built outside of the payment system.
Interac is an excellent system where a transaction is settled immediately when one uses a debit card to purchase, for example, a pair of jeans. Settlement risk is eliminated for the business selling the pair of jeans.
We, on the other hand, want to eliminate settlement risk for transactions that can range from $10 to millions of dollars.
I would like to give you an example of the timing involved in our business. If we have employees or bills that we are trying to pay on a Friday, the transactions need to be sent to our bank by Thursday at noon in order for the employee or supplier to be paid on Friday. When we give the items to be deposited to the bank, we are required to guarantee payment. If we process a debit on a Thursday, it can be returned to us in three to five days. This is well after we have paid the employees and the suppliers.
Currently, in order for us to minimize our risk in processing transactions, we ask some of our clients to provide us with a letter of credit, which can cost them an annual fee ranging from 1 per cent to 3 per cent of the face value plus an administration charge.
Our clients can provide us also with a wire transfer. However, their bank will charge them fees from $10 to $100. The banks charge both the initiator of wire transfers as well as the recipients. It is extremely costly for a small business to provide a letter of guarantee to have their payroll done or bills paid.
The financial institutions have invested in the Large Value Transfer System, known as LVTS, that has eliminated settlement risk between financial institutions. However, now is the time to eliminate settlement risk and bring it to the business and consumer levels.
We are not suggesting that we build a new system to accommodate on-line processing. The technology is here and exists in systems like Interac. We are processing debits now. All we want to do is accelerate the process.
Interac is not part of the Canadian Payment Association. However, under the new Bank Act, it can be designated a "payment system."
Our objective here today is to bring to light the fact that the settlement risks we are exposed to here in Canada are not necessary and can be easily eliminated if desired.
The incentive to do so does not lie with the financial institution, Interac or the Canadian Payments System, as they are now structured. Only the government, through Bill C-8 and regulations under it, will ensure that changes are made. We are asking for core requirements, for an efficient, competitive evolution into the electronic-payment age.
Ceridian, ADP and TelPay have had several discussions with their financial institutions, the Canadian Payment Association and Interac, about this particular subject. Interac could provide the structure on which to build a truly electronic payment system for payment processors.
Canada has been very proud of its payment system, claiming it to be one of the best in the world.
If we are not open to moving the system forward, we will not be at the forefront of payment processing as the electronic age comes to full life. Businesses like Ceridian Canada Ltd., ADP Canada and TelPay Inc. are businesses trusted by millions of Canadians and thousands of corporations. We look forward to having a payment system, here in Canada, that eliminates the settlement risk. This will bring to Canadians the maximum benefits and efficiencies inherent in on-line transaction proces sing.
Senator Oliver: I appreciate your presentation. I am familiar with the work of Ceridian. Have you talked to the payments association? Have you talked to the government? Have you looked at the act? What is the one thing that is keeping you out? Is it the regulations? Why can you not get in and get this problem of risk resolved? What seems to be holding it back?
Mr. Don McGuire, Chief Financial Officer, ADP Canada: Mr. Chairman, to this point, and until these changes are implemented, the payments association has been restricted to deposit-taking institutions. As we are not deposit-taking institutions, we are not involved in the decision-making process.
Senator Oliver: If Bill C-8 passes in its present form, then what?
Mr. McGuire: Because we have not seen the details of the regulations, we are still not sure. We do not know what opportunities we would have, for example, to ensure that Interac does become part of the regulated payment process.
Senator Oliver: There is nothing in the legislation per se to prevent the resolution of your problem. We will have to wait and see what Senator Kelleher was asking for, that is, the regulations, to know whether or not you have a problem, and perhaps you will not have a problem.
Mr. McGuire: Perhaps we will not have a problem. However, as Mr. Denysuik said earlier, our experience to date has shown that there has been very little interest. We do not see this being resolved with the changes as they now stand.
Senator Oliver: Of course, you do not know what will be in the regulations.
Mr. McGuire: That is right. We have not been successful to date.
Senator Oliver: What is before us today, however, is not the regulations but Bill C-8. You are not asking that anything be changed, amended or altered in any way with the bill per se. You are alerting us to a potential problem with the regulations. Is that correct?
Mr. Denysuik: That is correct. I think it is important that the minister have the powers as defined in the act so that, if it is found that Interac should be designated a payment system, he would have the power to implement it. I think that is very important.
Mr. McGuire: More specifically, perhaps, having Interac fall under this bill, which I do not think is specifically stated in the act as it is now laid out, would be a positive step.
Senator Oliver: The main thing that you want is to eliminate the settlement risks that you have with your business, and that could be done with Interac.
Mr. McGuire: Yes.
The Chairman: Are you privately owned?
Mr. Glen Gowryluk, Vice President, Finance and Administration, Ceridian Canada Ltd.: Publicly traded.
Mr. Denysuik: TelPay is privately owned.
The Chairman: You have shareholders and they try to make money on what you do.
Mr. Denysuik: That is correct.
The Chairman: Is it not possible to settle this yourselves?
Mr. Denysuik: As far as the banks are concerned?
The Chairman: Yes.
Mr. Denysuik: We have tried. We have met with financial institutions and the Canadian Payments Association. There is no willingness to move this forward at this time.
The Chairman: Why?
Mr. McGuire: Essentially, at this point in time, the banks have a monopoly on the payments system through the CPA. They are collecting fees from both ends of the transaction. It is in their interest for the settlement risk to be in our hands as opposed to the banks' hands. There is no motivation on their part.
Senator Kroft: I would like to pursue one area that underlies this discussion. That is the subject of risk. Could you help us to understand the magnitude of the risk? When I look at the fees to obtain a letter of credit here, I see that they are 1 per cent to 3 per cent. I do not know if those are risk related, or if it is simply the person providing the letter of credit is getting everything that he can out of you. What are the real risk elements involved in this business?
Mr. Gowryluk: It is different for all of us, but it is a considerable sum of money. We do incur actual losses for a total payroll not collected.
To put some reference around it, a gross payroll and the required payment to CCRA could be $100,000. Our fee for doing the service for our customer could be $100 to $150. We are exposed to the $100,000, plus our fee, when we submit the electronic payments into the system because we do not have the guarantee that we will get the $100,000. We put these processes in place with customers to ensure that we will be paid this money. For that, our customers are paying a fee to their banking institutions. There are also wire fees, if that is how they choose to make settlement with us.
We are taking precautions. Our customers are incurring costs to ensure that that money is guaranteed. By having this on-line process, when we process the payroll and our customer says it is okay, we will submit that item into the banking system. They tell us instantly, or in a relatively short time, that that money is there. There is then no risk for us in releasing payments to that company's employees.
Mr. Denysuik: It is an unbalanced situation. If we want to pay people tomorrow, we have to send those deposits to the bank today. We debit today. Once that is out of our hands after 12 noon, we have paid the employees. We cannot get the money back. We have absolutely no recourse. The debit enters the system today. By the time it clears the institution on which it is drawn, it can be three to five days before it comes back NSF. We have paid all the employees. It is also possible that we have paid CCRA. Everyone has their money and we are left holding the bag.
Senator Kroft: Your risk concerns the company whose payroll you are paying. You send out the cheques to the employees, but the company does not give you the money to pay it. Is that right?
Senator Oliver: For example, say that they are given a cheque and the cheque is bad.
Senator Kroft: I would like to understand how often that happens. Obviously, it goes to the selection of your clientele and where you set your threshold of risk.
Mr. McGuire: It is accurate to say that, collectively, we are spending millions of dollars per year on NSF situations.
The Chairman: Do you have profits despite that?
Mr. McGuire: Yes, we do.
Senator Kroft: That is the payroll side. I find that astonishing. Presumably, that would involve companies that are in difficulties of one kind or another and choose not to put up the money. On the other part of the business, which is the paying of bills, such as utility bills, et cetera, where is the risk?
Mr. Denysuik: The risk is similar. We are debiting today for an individual paying their bills. We are paying the utility companies, or whomever they have designated. Again, that debit can come back NSF to us.
Senator Kroft: Is it that the person paying the bill may not have the money?
Mr. Denysuik: Correct. It is not just the individuals. We want to get into the business processing of bills. That is where the risks escalate because larger sums of money are involved. We are a small business trying to advance our competition in the marketplace and compete with the financial institutions. It is not a level playing field because they do not have that type of risk.
Senator Meighen: I heard you say that the banks have not made any positive noises or done anything to allow you access to the payments system. Is that correct? Surely, you must have spoken to the Department of Finance and the minister. What is the reaction there in terms of your desire to have access to the payments system?
Mr. Denysuik: The Department of Finance has been support ive in understanding our needs. They strongly recommended that we make our presentation today so that we can have a better understanding of what is required within that payment system. As we move forward, it is critical for us that the minister has the powers. If he can see that the positions are not balanced and competitive, then he can step in to assist.
Senator Meighen: If we were to recommend that the minister have such power, and if the minister then considered that it would be in the public interest to agree with your proposals, then we would have satisfied your appearance here today. Is that correct?
Mr. Denysuik: Yes.
Senator Meighen: In effect, what you are asking is that we ask the minister to consider the situation.
Mr. Denysuik: Yes.
Senator Meighen: This bill, in one form or another, has been before Parliament for a very long time.
Senator Angus: Not really.
Senator Meighen: Its previous incarnation was here last year. It seems to me that it has been quite a while.
I may have a faulty memory, but is this the first time that I have heard of your group seeking access to the payment system?
Senator Kroft: Can I ask if this is the same subject that Bill Leven appeared on last year, making the same point about the same problem?
Mr. Denysuik: Correct.
Senator Meighen: You confirmed my faulty memory. Thank you.
Senator Furey: I wish to follow up on Senator Meighen's question. You are telling us that you want the minister to designate Interac?
Mr. Denysuik: That could be a solution.
Senator Furey: How does that solve your problem?
Mr. Denysuik: Interac has infrastructure set up. It needs to expand to accommodate business accounts so that online debiting can happen for us. Instead of transmitting files to the bank, we transmit them through Interac and the money comes out of the account immediately.
The Chairman: Have you spoken to Interac?
Mr. McGuire: Yes, we have. Interac's response is that they are a retail product only and that they are not available for commercial purposes.
The Chairman: They do not want you.
Mr. McGuire: They do not want us; that is correct.
The Chairman: Do you know of any other business in Canada where the government guarantees itwill be risk-free? That seems to be what you are asking.
Mr. McGuire: My answer would be no to the question. What we are asking for is that we get the same settlement system from one end of the payment system to the other. The example that was used in the brief is that it seems ludicrous that you can buy a package of gum or a pair of jeans and the merchant has finality of payment and there is no risk involved. Yet when you use commercial transactions of hundreds of thousands or millions of dollars, that facility is no longer available when the technology to do that is exactly the same.
As we get into an electronic-commerce world and people want to do more things on-line with finality of funds, et cetera, these things need to evolve with the payment system.
Senator Tkachuk: This does not accelerate the risk as the transfer of funds? That is what you are asking?
Mr. McGuire: I am not sure if it is to accelerate the transfer of funds, so much as to ensure that the money is in the account so that the payment is good, or that the money is not in the accoun,t so the transaction is not good. There is immediate recognition, immediate information, on whether the customer can afford to pay for the jeans or the tractor or to fund his payroll.
Mr. Denysuik: We would have the value sooner. We submit the debit; we get the funds today. We are doing it today. All we are saying, is let us accelerate that and make the pay/no pay decision as that item is processed electronically.
Mr. Gowryluk: It is a business decision of risk.
Senator Tkachuk: That is rather than have magnetic tape hanging around the warehouse. Right?
Mr. Denysuik: Exactly.
The Chairman: You said sometimes you fund a payroll for $100,000 and it comes back NSF.
Mr. Denysuik: In today's situation, yes.
The Chairman: If it came back NSF, would there not have been some problems in the week before? That does not happen overnight.
Mr. McGuire: That is certainly not so for smaller accounts. That may be true for some.
The Chairman: We are talking about a $100,000 account.
Mr. McGuire: That size of payroll, at roughly $2,000 bi-weekly, is not large for the average Canadian company.
The Chairman: I am at a loss here. Should we be doing something to charge different fees to different sizes or have them post a bond?
Mr. Gowryluk: That is what we do in order to minimize our risk. We have risk processes like letters of guarantee and direct wire of funds to our accounts which involve multiple fees. That is an extra cost to our customers. The administrative cost of doing that is also significant. It is costly to manage that risk. If we find out soon enough, though, we can deal with specific issues of risk without facing an abundance of unknown risks that may come three to five days later, after we let the payroll go.
If we know the next day, then there is an ability for us to stop the payroll and to deal with the customer on that day to decide what to do. That narrows our scope. We still have an element of risk with those kinds of customers.
We are asking for quick notification that the funds are good.
Senator Kroft: Who is your competition?
Senator Oliver: The three of them compete with one another.
Senator Kroft: The banks also offer payroll services, do they not? Or do they subcontract to one of you?
Mr. Gowryluk: In reality, the banks were involved in the payroll business. They have sold their interest and are no longer involved in the payroll business.
Senator Kroft: Are they not involved in the facilitation of bill payment?
Mr. Denysuik: They are in the bill payment business, yes. They are my competitors.
Senator Kroft: In that regard, they are inside the system.
Mr. Denysuik: That is right.
Senator Kroft: They have the benefit of the system. You are outside the system without that benefit. You are competing and you must carry the cost of bonding or however else you want to do to deal with the risk?
Mr. Denysuik: That is correct.
Senator Oliver: That would make it anti-competitive if you are right.
The Chairman: Your request is to become part of the payment system?
Mr. Denysuik: That is correct.
The Chairman: Thank you for your time.
Honourable senators, we will have, on Wednesday, witnesses from Nesbitt Burns and from the Consumers Association of Canada. We are working to enlarge that list. Senators were to get back to me on the teleconference for May 15 at approximately 5 p.m.
Senator Tkachuk: I will know today whether we are all available for Tuesday.
The committee adjourned.