Proceedings of the Standing Senate Committee on
Banking, Trade and Commerce
Issue 29 - Evidence - February 6, 2013
OTTAWA, Wednesday, February 6, 2013
The Standing Senate Committee on Banking, Trade and Commerce met this day
at 3:15 p.m. to study Bill C-28, an Act to amend the Financial Consumer
Agency of Canada Act.
Senator Céline Hervieux-Payette (Deputy Chair) in the
The Deputy Chair: Good afternoon and welcome to the meeting of the
Standing Senate Committee on Banking, Trade and Commerce. Today, the
committee is beginning its study of Bill C-28, the Financial Literacy Leader
Act. In other words, we are trying to understand how our own affairs are
In December 2010, after examining the issue for 18 months, the Task Force
on Financial Literacy issued its report. The first of its 30 recommendations
was the appointment of a financial literacy leader.
In that recommendation, the task force suggests that the Government of
Canada appoint an individual, directly accountable to the Minister of
Finance, to serve as dedicated national leader. This financial literacy
leader should have the mandate to work with stakeholders to oversee the
national strategy, implement the recommendations and champion financial
literacy on behalf of all Canadians, as well as, I suppose, the report in
The bill will implement this first recommendation. Today, we will have
two one-hour sessions. During the first hour, we will hear from Mr. Menzies,
Minister of State for Finance, and Ursula Menke, Commissioner of the
Financial Consumer Agency of Canada. Ms. Menke was appointed commissioner in
December 2007 for a five-year term, and in December 2012, she was
reappointed for another six months. I would have liked to say six years.
They are joined by Jeremy Rudin, Assistant Deputy Minister at the Department
You have the floor, Mr. Minister.
Hon. Ted Menzies, P.C., M.P., Minister of State (Finance): Thank
you for introducing the other two witnesses who are here with me today. I
appreciate this opportunity to meet with you and the members of this
committee to speak to Bill C-28.
The legislation proposes to amend the Financial Consumer Agency of Canada
Act to provide the framework for the appointment by the Governor-in-Council
of a financial literacy leader, which you already referred to, whose main
priority will be to collaborate with stakeholders on initiatives designed to
improve the financial literacy of Canadians.
The financial literacy leader will be dedicated to ensuring that
Canadians across the country have the financial knowledge and skills they
need to save, pay their bills and invest in their future.
The true costs of uninformed decisions, as we all know, can be
substantial. This is true for young Canadians who face increasingly
complicated decisions when it comes to applying for a credit card, buying
their first car or figuring out how they are going to pay for their
It is also true for seniors, who must deal with a range of financial
products that have expanded greatly and become more and more complex. It is
just as true for middle-aged Canadians who are saving for their retirement.
The ever-changing world we live in makes it difficult for most Canadians,
in fact, to understand fully the risks or the fees involved in products like
savings accounts, loans and mortgages.
Our government has long recognized that strong financial literacy is not
a luxury; in fact, it is a necessity. For the benefit of Canadian families
and our overall economy, we make it a priority.
With the help of the Financial Consumer Agency of Canada, we have moved
forward with a range of effective consumer measures. Among these were our
recently announced proposed regulations dealing with network-branded prepaid
cards issued by federally regulated financial institutions. We want to be
sure Canadians fully understand what fees and conditions apply to
network-branded prepaid cards so they can continue making informed financial
decisions in their day-to-day lives.
For example, some fees associated with these network-branded prepaid
cards are actually not made very clear to consumers. Our regulations would
require that fees be disclosed to consumers in an information box displayed
prominently on the exterior packaging and that other consumer-oriented
information be provided prior to purchase in a manner that is clear, easy to
understand and not misleading.
Once in force, the FCAC will be responsible for monitoring compliance, as
they are for a range of other measures that make up the consumer protection
framework, such as the requirement for a 21-day interest-free grace period
for credit cards, and banning the unsolicited distribution of credit card
cheques by federally regulated financial institutions.
Through the FCAC, our government is helping consumers make better and
more informed choices, for example, through their existing financial
literacy initiatives and tools for budgeting, calculating mortgage payments
and selecting the right credit card.
The appointment of a financial literacy leader will only strengthen these
efforts and build on the good work already achieved by FCAC and all the
folks that Ms. Menke works with. This will increase financial knowledge for
many Canadians. By both educating the consumer and ensuring financial
institutions comply with federal regulations, they help contribute to a
stronger and more effective financial system for everyone.
To conclude, I strongly believe that the measures in Bill C-28 and the
appointment of a financial literacy leader will greatly benefit the people
of Canada by adding to the competitiveness and the stability of our
financial system. I would therefore encourage all honourable senators to
support the principles of this bill and join the government in our ongoing
efforts to create a more knowledgeable economy.
Thank you very much. I would welcome your questions.
The Deputy Chair: Before I go to questions, maybe I could clarify
one thing. I see that the person receives instructions from the commissioner
and reports to the minister directly, and what the role of the deputy
minister is. What is the level of that job in the public administration?
Mr. Menzies: Within the FCAC, we see it as a fairly superior role,
but certainly not at the deputy level. Perhaps Mr. Rudin, who has dealt more
with the actual structure, can give us a structural chart of where this
person would actually be placed.
Jeremy Rudin, Assistant Deputy Minister, Financial Sector Policy
Branch, Department of Finance Canada: I would be happy to. Formally, the
position has not been classified. Parliament needs to pass the bill and
create the Governor-in- Council position, and then there is a process for
slotting them in.
Mr. Menzies: Him or her.
Mr. Rudin: Slotting the position.
Mr. Menzies: I thought you said ``him.''
Mr. Rudin: I meant to say ``the position.'' That said, the
commissioner will remain the deputy head of the FCAC, and the financial
literacy leader will have a very senior position.
The Deputy Chair: What is the level in your language of public
administration? Is it EX or lower? It is important for us to know how broad
the mandate is and how much power that person will enjoy.
Mr. Rudin: The responsibilities and authorities, to the extent
there are any, of the financial literacy leader will be established by
Parliament, and are set out in the act. The classification will be inspired
by that. That said, this is not part of the Department of Finance and so it
does not correspond to the public service rank, such as the position I hold,
but rather the various Governor-in-Council appointees, of which there are a
The Deputy Chair: It will be decided by the commissioner?
Mr. Rudin: No. At the end of the day, the Governor-in-Council gets
to decide not only who the person is, but how the position is classified and
what the resulting remuneration will be. That said, we would expect, based
on the description of duties in the act, that the commissioner will remain
the deputy head, but this will be a very senior position within the FCAC.
The Deputy Chair: You understand, minister, that for us it is an
important position and that person has a broad mandate. Obviously, for me,
they should be bilingual, because they have to relate with the ministers
across the country. We have to start early if we talk about literacy, to
ensure that that person enjoys not only your support but, at the same time,
has a level that will command the possibility of having an assistant and
working with all the stakeholders in that matter.
Mr. Menzies: If I may, we have had such a good working
relationship with the Financial Consumer Agency of Canada. They have done a
great job. We look at this as the perfect spot to house that person. They
have worked so well in getting this message out. This person will be a
coordinator all across the country, working with groups that you will be
hearing from, with not-for-profits all across the country, working with the
provinces, and the financial institutions certainly will play a very
Senator Harb: Years ago when I was in the House of Commons, the
Canadian Bankers Association played big lead role in financial literacy.
They used to go to schools and continue to do so, I believe. A number of
committees have recommended that we do more financial literacy. I presume
this is along those lines, that this is in response to the task force, as
well as in response to the parliamentary committees that have called on the
government to do that.
Mr. Menzies: Yes, you are right, Senator Harb. There have been
many recommendations, and unfortunately it has taken a lot of time to get
this done. It is the final task force that actually spelled out what we
should do. This is number one. I think, then, the leader will actually be
able to unfold the rest of the recommendations and make them fit.
I met with the Canadian Bankers Association specifically to find out what
they are doing, and it is actually amazing how much they are doing. As you
say, they go into the classrooms, communities, into seniors' facilities as
well. They face the challenge of being accused of having other interests in
promoting financial literacy.
My argument to that is this: The more customers they have who are
informed, the easier it is for them to explain the different options and
then provide the options to those people. People ask better questions of the
financial institutions. They know what to ask and they know what to demand
too, if you will. It is to their benefit, but it is difficult for them to be
out promoting it publicly. Certainly Ms. Menke's team is in a better
situation to be able to promote that.
Senator Harb: Would it be fair to say that the job description of
this position will be developed at some point in time using data
consultation and stakeholder participation to determine exactly how this
position will be complementary to what has already taken place so as to not
work on a parallel track?
Mr. Menzies: Exactly. You have got it. We have many not-for-profit
groups, and I believe you have some of them coming to speak to you. It is
actually amazing. Junior Achievement has done an incredible job of taking
business leaders on their own time and gone into schools to teach financial
literacy, but we do not have a coordinated effort. We are not coordinating
what the financial institutions are doing and some of the not-for-profits
are doing. We are not coordinating what is happening with the First Nations
as well as with new Canadians. The beauty of this position is this person
will be able to coordinate that all together and make a far more effective
Senator Harb: How fast would this position come into play once the
bill has gone through the Senate?
Mr. Menzies: You just reminded us that you sat in the House of
Commons for quite some time. I think you know how slow things move. I would
like to see it much quicker, but I cannot give you a time when this will
happen. The sooner the better, as far as I am concerned.
Senator Tkachuk: The literacy leader will be someone from the
government here to help you. Is that what this is all about?
Mr. Menzies: Let us hope not.
Senator Tkachuk: I want to get back to the chair's questions. Who
will this person be responsible to?
Mr. Menzies: I guess it would be to the Commissioner of the FCAC
who reports back to the Minister of Finance. That has been Ms. Menke's role.
Senator Tkachuk: The position will be responsible to you, Ms.
Menke? Is that the way it will work?
Ursula Menke, Commissioner, Financial Consumer Agency of Canada:
The draft bill as worded right now says ``under the direction of the
commissioner,'' so I guess that means that the leader will be reporting
Senator Tkachuk: They may be reporting to you, but does that mean
responsible to you? In other words, will they take direction from you?
Ms. Menke: Yes, that is what the bill says right now.
Senator Massicotte: If that is the case, why is there a need for
legislation? Why not just hire this person?
Do you want to hold a caucus meeting to get the answer?
Mr. Rudin: The bill establishes this as a Governor-in-Council
position, and this, in the government's view, is appropriate for the profile
and importance of the position. It is important that this person be named by
the Governor- in-Council on the recommendation of the minister so that they
are seen as a representative of the government as a whole, that they can
then be paid the remuneration appropriate for the position, and that this
will make it more likely that we can attract a suitable candidate who can
exercise leadership on a national basis.
As we were just discussing, although the leader functions under the
direction of the commissioner, the legislation also provides that the
Minister of Finance may issue written directions specifically to the
financial literacy leader in connection with his or her responsibilities.
Senator Massicotte: Short answer: PR, image making? That is what
you said. It does not change if one reports to this person. It looks better.
You are able to hire the right person and it gives it more attention. The
bottom line is that when they come to the office in the morning, they report
to the commissioner.
Mr. Rudin: I would say there are a number of organizations for
which the Governor-in-Council appoints more than just the top person but
also appoints some of the senior executives. There is nothing exceptional
about it. It is a government judgment as to whether the decision should rest
with the person appointed by the Governor-in-Council to lead the position or
whether the Governor-in-Council should exercise that responsibility.
The Deputy Chair: Where do we have other examples like that?
Mr. Rudin: With one technical footnote that I will come back to,
both the Governor and Senior Deputy Governor of the Bank of Canada are
appointed with the approval of the Governor-in-Council. That is one example.
Similarly, the Superintendent of Financial Institutions and, if I am not
mistaken, the Deputy Superintendent of Financial Institutions are appointed
by the Governor-in-Council. The superintendent can appoint, in this case,
her assistants directly, but the deputy superintendent, if there is one, is
a Governor-in-Council appointee — at least I am pretty sure it is. If I am
wrong, I will correct myself at the break.
The Deputy Chair: Who will do the recruitment?
Mr. Rudin: The process is coordinated through the Privy Council
Office because at the end of the day the Governor- in-Council will make the
appointment. The Privy Council, which serves the cabinet, takes charge of
the administration of the appointment process.
The Deputy Chair: For those watching on television, it is the
Prime Minister's Office who will appoint that person.
Mr. Rudin: It is the Governor-in-Council on the recommendation of
the Minister of Finance.
The Deputy Chair: The ordinary person at home does not necessarily
know what the Governor-in-Council means, and in this case it means the
appointment comes from the Prime Minister's Office.
Senator Tkachuk: My next topic is the research you talked about
that brought this position to the fore or this question of literacy to the
fore. Maybe you can talk a little bit about that. I do not know who of the
three of you should talk about it.
I would like to know what you found in the research. Was there any
difference in knowledge about basic financial matters as far as demographic
groups or educational groups? How much of this is the responsibility of the
school system? Are university students any more knowledgeable than high
school students? Why are these people so ignorant?
Mr. Menzies: Many fingers could be pointed. As parents, I would
suggest we are all a little guilty of not taking enough time to educate our
children about financial literacy.
Senator Tkachuk: It is easier just to give them money.
Mr. Menzies: As I say, we are all a little guilty, myself
included. It is very interesting.
I would encourage you to look at the report, because they travelled all
across the country and spoke to all sorts of groups — school groups and
people in the financial advisory field — who gave them some pretty good
recommendations. It is very interesting to see some of the dynamics.
Let me give you one example. At one of the events — and I believe Ms.
Menke was there; I forget exactly which one it was — I met a bright young
university graduate. She came here from South Korea to go to university and
graduated at the top of her class. The first thing she needed was a credit
card to do anything, so she got one. No one told her that she should pay
more than just the basic minimum payment. No one provided that information
to her when she got the card, so she paid her basic minimum payment. She
could not understand why all this money was adding up. No one told her, even
the credit card provider.
Senator Ringuette: The credit card requires that specifically in
Mr. Menzies: I am sure that was before the code of conduct. You
have a lot of help here, senator. I am using that as an example. We are
trying to offset those challenges — seniors dealing with these new ways of
paying bills and the lack of understanding for how they pay their bills; and
the responsibilities that come along with a debit and credit card. We have
all seen children go in and buy a small item from a confectionary with a
debit card. They have no clue that there is actually a money exchange at the
end of that.
We have not done a good job of educating. Good work is being done by a
number of these organizations in schools. Some provinces, such as British
Columbia and Manitoba, are mandating it in their curriculum but not all
provinces and not on a uniform basis. Ontario is bringing it in. They are at
different levels in that some are bringing it into high schools, some are
recommending it for the lower grades and some are recommending that it be in
college courses as well because we have missed a generation or two. There
are all sorts of opportunities to insert this and help seniors and, as I
mentioned, First Nations. There is a real challenge to getting that
financial education to First Nations in dealing with money.
Senator Tkachuk: Is it not appalling that we spend all this money
on education for kids in kindergarten to grade 12, and we have universities,
technical schools and all these business leaders out there, but students do
not know the difference between 5 per cent and 18 per cent and that money is
earned and money is spent? Basically, it is adding and subtracting — it is
not that complicated. You should be able to apply for a mortgage when you
finish school, one would think. There should be some responsibility there.
Here we have the government hiring a person to coordinate financial
literacy. It shows the failure of the system dramatically. Maybe we have
Mr. Menzies: I could not agree with you more.
Senator Tkachuk: We may have failed, but we cannot let it continue
or soon we will need a whole department for this.
Mr. Menzies: The financial literacy leader will be able to
coordinate that. I am sure that the educators in the provinces will pull
their hair out and ask, ``When will we be able to fit this into the
curriculum?'' They do not fit it in because the demands to fit everything
into their curriculum are immense. However, the financial literacy leader
could work with the local and provincial school boards along with the
educators to get this into the curriculum.
I had a discussion with a professor from the University of Purdue whose
recommendation was to start educating children at the age of four. He said
that if you have not taught them financial literacy, or in his words
``economic literacy,'' by the time they are 12 years old, you have lost
them. Certainly, there is a need.
Senator Moore: I was a bit confused. Minister, did you say that
the FLL is to report to the Minister of Finance? I made a note of it here.
Mr. Menzies: No; forgive me if I said that.
Senator Moore: He will report to the commissioner.
Mr. Menzies: Yes, and the commissioner reports to the minister.
Senator Moore: If the Minister of Finance asked a specific chore
of the financial literacy leader, then the financial leader would go back to
the Minister of Finance; or would he go through the commissioner?
Mr. Menzies: I think he would follow that generally. That would be
Senator Moore: Part of this provides that the commissioner could
impose an assessment on any financial institution in order to cover some or
all of the expenses associated with initiatives designed to strengthen the
financial literacy of Canadians. I would assume that means a financial
institution would not be doing what it should be doing and, therefore, if
the commissioner says you should be doing X, we will do it for you, I guess,
and charge you so many dollars because you are not doing what we think
should be done. Is that how this will work?
Mr. Rudin: If I may, the Financial Consumer Agency of Canada is
funded principally through assessments on the financial institutions. These
are not fines or punishments but, rather, to pay for the costs of
administering the Financial Consumer Agency of Canada Act in the same way
that the Office of the Superintendent is principally funded through
assessments on the financial institutions.
The existing FCACA, before these amendments are passed, provides that the
Minister of Finance can make payments from the Consolidated Revenue Fund to
the Financial Consumer Agency of Canada in support of financial literacy
activities of the agency as it exists. This bill proposes to expand, to some
extent, the activities and objectives of the Financial Consumer Agency of
Canada. It makes it clear that the commissioner can levy an assessment on
the financial institutions in order to pay for those activities as well.
Senator Moore: Currently, who funds the FCAC, which receives $2
million a year? Is that right?
Mr. Rudin: Yes. It is from the Consolidated Revenue Fund.
Senator Moore: Are there more monies than that going into that
budget? What is the budget for that office?
Mr. Rudin: The government's plan is to fund an additional $3
million a year from the Consolidated Revenue Fund in support of financial
literacy activities. The commissioner will have the legislative ability,
although not the necessity, to recommend to the minister that an additional
assessment be placed on financial institutions to augment those funds.
However, that authority may or may not be exercised.
Senator Moore: Ms. Menke, what is the current total budget per
year of the FCAC?
Ms. Menke: The total budget, including $2 million received
annually from the Consolidated Revenue Fund, is approximately $13.5 million.
Senator Moore: How large is your staff?
Ms. Menke: About 65.
Senator Moore: As well, you will have another person, the
financial literacy leader. Will he or she need support staff or will support
be provided by the existing staff?
Ms. Menke: There will be additional staff. Significant additional
responsibilities will be carried out by the financial literacy leader, which
are not being done now.
Senator Moore: How many staff will be added?
Ms. Menke: We anticipate initially about five or six people.
Senator Moore: You have $13.5 million and you need another $3
million. That totals $16.5 million. Will that be it or will there be another
demand on the Consolidated Revenue Fund for additional monies?
Ms. Menke: That will be it — that is the budget.
Senator Moore: Who does what? I will use an example.
A while ago, mortgages were extended to a 40-year amortization period,
with no down payment and no equity and with low interest rates. People were
grabbing the money. If interest rates go up, we will have serious problems.
The ensuing two years after that 2006 budget, 50 per cent of the mortgages
taken out were of the 40-year-amortization variety. I do not think I heard
anyone speak out to caution consumers about potential issues and financial
problems if the interest rates went up and what they could be in for with a
40-year commitment. I do not think I heard anyone speak out about the amount
of one's annual income required to service debt. I believe that it is 165
per cent of household income. I have heard the Governor of the Bank of
Canada speak out about it but I have not heard your office, commissioner, or
anyone else speak about it. Is it your function to caution consumers? I
thought your function would be to caution consumers. Whose job is it to do
that? I did not hear anyone do that. It sounds like this new person will be
more of a coordinator of the stuff that is out there now, but I never heard
anyone caution consumers about that situation besides the Governor of the
Bank of Canada.
Mr. Menzies: I will start on that and then I will let Ms. Menke
I think we have all been concerned about that. It is a matter of debate
as to when people first started listening to those cautionary statements.
People who wanted 35-year or 30-year mortgages understood what they were
taking on. CMHC just took it upon itself to offer 40 years. It was never
mandated or regulated to do that.
Senator Ringuette: No, no.
Mr. Menzies: We chose to reduce that.
Senator Ringuette: It was not an omnibus budget.
Mr. Menzies: If I can continue answering the question, I would
Senator Moore: I know that you did improve it.
Mr. Menzies: Yes, we have. With that, Minister Flaherty has been
very vocal about cautioning people. It is a blunt statement, but interest
rates only have one way to go and that is up. I think he has articulated
Ms. Menke can explain their role at FCAC. I personally do not see that as
their role. I think it is more a legislator's role to caution people. The
Governor of the Bank of Canada is in a good position to caution people about
that. The FCAC does a lot of consumer advocacy and reaching out to
consumers, I would suggest more so than wagging your finger at them, if I
can put it that way.
Ms. Menke: Well, we do not wag our fingers very much.
I think it has been wonderful that the Governor of the Bank of Canada,
the minister and other politicians have been raising the issue of
indebtedness because it is a significant issue of concern, and it has been a
concern for the agency for some time. We work not quite so publicly; we work
behind the scenes with a lot of agencies. We have a website where we talk
about some of these issues. We have a variety of debt management tools to
help consumers do what is best for them. We have budgeting tools. We have a
terrific interactive budgeting tool that we introduced a couple of years ago
that is very popular with people. We have a variety of debt management
tools. We encourage people to ensure that they know what their situation is
and to plan.
Senator Moore: Before you get into debt management, we want them
to know whether or not they can handle it.
Ms. Menke: We came out with a tip sheet because of this. It is on
a more subjective level, trying to get people to understand the issue of
debt from a more emotional level than a strictly numeric level. For a lot of
people, the numbers do not touch them. We want to try and get people to look
at their debt situation precisely because the concern is that there is only
one way interest rates can go, which is up, and to prepare now for that
eventuality. We have done quite a bit around that. We have used that tip
sheet with a variety of agencies to spread the word on trying to ensure that
people manage their money.
Senator Moore: Do you do that with the banks and the other
mortgage issuers or funders?
Ms. Menke: The banks tend to do their own thing. They work in
their own directions for their own purposes. We work with credit counselling
organizations and local community organizations that have an interest and
are offering information and courses to people. That is where we tend to
work to a much greater extent. Our issue is always getting at people. The
problem with adults is that unless they are interested in the subject, they
are not likely to pay a lot of attention. We focus on where adults go to
look for help themselves.
Senator Moore: One of the things creating the most anxiety is
probably financial pressure. Whatever you or the new financial leader can do
would be helpful. We have seen it in students who have come before this
committee in the past. It is a thing that leads to health issues and family
breakups. I do not need to tell you this, but it is needed.
The Deputy Chair: Might we hope that, when filling the five or six
new positions in your organization, you will give priority to people whose
jobs have been cut in the government.
Ms. Menke: Absolutely. As long as they have the necessary
qualifications, they will definitely be given priority.
Senator Bellemare: Some of my questions have been answered in
response to Senator Moore's inquiries. I would like to know how the results
achieved in terms of financial literacy can be measured. Have you considered
that to determine whether the new position will have results? In the case of
digital literacy or calculations, some tests can be done, but the context is
different here. We still want to reach out to young people. So how do you
intend to measure the results achieved in terms of financial literacy?
Ms. Menke: That is a good question, as this is a fairly complex
area. We are currently doing research to determine the effectiveness of our
courses and the overall effectiveness of courses on financial literacy, to
see whether we can show effective results. The results I am talking about
are not the kind that can be measured through a test — where people can show
they have learned A, B, C, D. I am really talking about results in terms of
So the process is fairly difficult. We are actually now trying to measure
that. A number of other organizations have tried similar tests in the past.
It is not an easy process. We have previously had some results to show that
an education in financial literacy does in fact have a positive result —
although it may not be as positive as we would like. That is why we continue
to develop courses in order to achieve better results. However, we are
testing to determine whether long-term results are involved.
Senator Bellemare: Will you use the sporadic investigation system
to try to gauge whether a specific activity in a given region, sector or
school has had an impact in the medium term?
Ms. Menke: Yes. We are currently gathering the required data for
each group, so that we can gauge the before and after. So all the courses
are provided in a specific region. We test the target group to see whether
progress is being made.
Senator Ringuette: Ms. Menke, over the past four years, you have
appeared either before this committee or the Standing Senate Committee on
National Finance, and we have noted that training and information in
financial literacy are among your priorities.
I have some serious doubts. You have told us many times that you were
doing an excellent job under your current mandate, even though cuts have
been made to your budget over the past three years. All of a sudden, a
financial literacy leader is needed, along with five or six new support
positions. It makes you wonder. That will require an additional $3 million
from the government. I am wondering whether we are not jumping from pillar
to post, both when it comes to your mandate and how it has been carried out,
and when it comes to the success of your objective. You have confirmed that
many times for us.
You said that you were able to fulfill your mandate and do an excellent
job of it despite the cuts to your budget. And here we have before us today
a bill that calls for creating a position appointed by the Prime Minister,
with unknown conditions and salaries, and an additional support staff of
five or six people. And all that to fulfill the mandate you had previously
told us you were carrying out remarkably well.
Serious doubt is being cast on the past statements made before this
committee. We should also ask ourselves some serious questions regarding the
bill, its objectives and the staff. We are told about the task force's
report, and yes, we need to provide information and additional education on
all the financial rackets Canadian consumers are facing.
Basically, Ms. Menke, my question is how Canadians can now accept that,
all these years, you have been saying that —
— you were on top of the issue and were doing a fantastic job and had
enough employees even though your budget had been cut for the last three
years. Now all of a sudden you need probably seven more people and a new
position appointed by the Prime Minister.
Ms. Menke: Perhaps I could start with a small correction. My
budget was never cut over the last period of time. That is one thing.
Remember that financial literacy is a relatively new thing, a relatively new
preoccupation — occupation, preoccupation — for the agency. Over a period of
time we have gone through stages as we have developed along the spectrum of
In the first stage, which roughly corresponded with the first five years
of my mandate and a little bit with the previous mandate as well, we were
focused on financial literacy for youth and we did what we felt was the
biggest need. We did a lot of research and examined what was the greatest
need at that point in time. We felt the greatest need was actual tools for
the school system because at that point in time we were focused on youth.
The greatest need was tools for teachers to be able to teach financial
literacy to young people, and we spent a lot of time developing tools.
We started with THE CiTY, which is a resource for 15- to 18-year-olds to
be taught in the schools, and we promoted that one extensively throughout
the school systems. I am happy to report that all across Canada the tool is
being used in every province in Canada, both electronically and, more
importantly, more so on paper. It was launched in 2008 and has become a very
popular tool, highly praised by the people who use it. We have trained
roughly 8,000 teachers throughout the country who use that tool.
The next tool we developed was called Financial Basics, a slightly
different tool geared at a slightly different audience. It was geared to a
post-secondary audience because we felt that there was a gap because there
had not been that much done in the school system and many young people still
had no training. We developed a five- to six-hour seminar on the basics of
financial literacy, including things like budgeting, debt management,
saving, investing and fraud. It is very popular, particularly at the
post-secondary level. It is also very popular with community groups because
they find it is a relatively compact thing to develop.
The third tool we developed is more of a resource tool than a teaching
tool, but it can be used as a teaching tool as well. It is kind of what
every Canadian adult should know in order to consider themselves reasonably
financially literate. It was launched just this fall by Minister Menzies.
Since the launch, we have had almost 30,000 people on our website looking at
it. We are very pleased. We had no direct advertising of that and already
have had 30,000 hits on that particular tool. Things are going well.
That was the first phase in the development of the financial literacy
program as we saw it. We developed tools that were needed throughout the
The second stage is reflected in this bill where now tools are not as
necessary anymore. The basic tools are in place. Now we need a lot more base
time, awareness building, and coordinating and developing collaboration.
That is the thing we have not been able to do in as organized a fashion as I
would have liked. That is what this is all about. We will get a financial
literacy leader who will really go out and promote financial literacy across
the country in various places and also develop the collaboration.
There is an awful lot of work going on. Many community groups need
materials, and many community groups have produced materials. It is a
question of getting everyone together and getting people to know about that.
That is the next step.
One of the foundation elements of the next phase of financial literacy is
building a repository, if you will, on the Internet of all the tools that
are available, who they are aimed at and what they are for. We have started
to undertake this work with a view to helping the financial literacy leader
do the work that is expected of him or her through this bill.
Senator Ringuette: Of the 65 staff you currently have, how many
are dedicated to the function of developing the phase 1 tools that you
Ms. Menke: I cannot be exact, but it would be less than 10.
Senator Ringuette: What will they be doing?
Ms. Menke: They will be moving over into these functions. There
will still be maintenance. These tools need to be maintained, so there will
still be lots of work on that. However, some of them will be moving over and
helping the leader with the new functions as well.
Senator Ringuette: We are talking about 10 support staff, plus
another 5 or 6 additional support staff and the new leader. Are we looking
at 17 people?
Ms. Menke: Yes.
Senator Ringuette: Do you think we will have better results?
Ms. Menke: It is a slow, steady progress. These things do not
happen overnight. An awful lot of people have to learn, but there is
progress. We can see it. It is not in leaps and bounds, but there is
progress. Yes, I am confident that there will be more progress.
Senator Ringuette: For this new leader, plus the support staff,
how much of their budget will come from the financial sector?
Ms. Menke: It is all from the Consolidated Revenue Fund.
Senator Ringuette: Out of your operating budget, you are getting
$11.5 million from the financial sector.
Ms. Menke: Yes.
Senator Ringuette: Why is this not included in the proportional
Ms. Menke: Financial literacy is all funded through the CRF. There
is other work on consumer education that is also funded by the financial
institutions, but that is more traditional work; that is more information.
It is more specific work. It is not the programs. The programs were all
Senator Ringuette: Contrary to your current mode of operation with
regard to funding, which this year is $2 million from the Consolidated
Revenue Fund and $11.5 million from the financial institutions, will you not
get one penny's worth of all the financial institution credit card companies
with regard to financial literacy for these new positions? Not a penny?
Ms. Menke: No.
Mr. Menzies: There was $3 million set aside in the budget. I think
one thing you are perhaps missing is that the financial institutions are
contributing on a very large scale at the present time. We are not expecting
that to stop. There is a tremendous amount of money from those
organizations. The not-for-profits are continually raising money to help
with this effort. There is no reason that they will zero their budgets just
because we have a leader. This leader will coordinate and help direct the
funding to perhaps make it more effective. For example, one bank provides
programs — $25,000 grants and up to $100,000 grants — for educational
programs in schools. That is not going to stop. This is not the only fund.
Senator Ringuette: We are talking about Ms. Menke and the agency
Mr. Menzies: I am talking about financial literacy writ large.
Senator Ringuette: — and the new positions and financial
requirements that will differ from the current financial structure from the
The Deputy Chair: Mr. Minister, I know you have to leave at 4:15
p.m. You understand that we have left the Senate with permission.
Mr. Menzies: Thank you very much.
The Deputy Chair: The Senate was still sitting when we left for
this meeting. We appreciate that you were able to come.
Senator Maltais: If everyone keeps saying they have one last
question, when will we get the opportunity to ask our questions?
The Deputy Chair: We have another hour left.
Senator Maltais: Oh, all right. That is fine.
The Deputy Chair: For instance, I am giving a funny example, but
if we were getting credit cards through cereal boxes — which I sometimes say
is almost done right now — would you issue a directive to this new person
saying you have to campaign against that? Leaving the private sector and the
market forces to go on, but making sure that if there is an initiative on
the part of the financial institution that would be creating a big problem —
I am not talking about the interest rate or the length of time for mortgage
repayment — when would you expect to intervene?
Mr. Menzies: Not the financial literacy leader, I do not think. I
do not see that as their role. Their role is helping educate people as to
this credit card from a box of Cracker Jacks, the responsibilities and the
challenges that may come along with accepting that card, the cost to the
individual. The financial literacy leader's role is to help educate people,
through whatever means, and to help with the education systems in each
province to look closely at that credit card that may come out of a Cracker
Jack box and not choose that as their credit card of choice.
The Deputy Chair: If they were to do the perfect job, you will
never intervene. However, since you are given the power to give some
instruction to that person in the law, I am asking you: Under what
circumstances will you intervene?
Mr. Menzies: I guess if we found that we were getting credit cards
from Cracker Jack boxes, I would think the Minister of Finance might say to
the financial literacy leader, through the commissioner: Perhaps you should
share with Canadians that this may not be their best choice. That is the way
I would look at it.
The Deputy Chair: That is what I was expecting from you. Thank you
We are continuing our meeting. Joining us is a new witness from the
Department of Finance. We have Eleanor Ryan, Senior Chief, Financial
Institutions Framework Policy, Financial Institutions Division. Welcome to
Senator Maltais will be the first to ask questions, followed by Senator
Senator Maltais: Thank you, Madam Chair. Mr. Rudin, I will not
discuss the curtains, chairs or the colour of the carpet in the new leader's
office, as that does not interest me.
In Canada and all of our provinces, we are faced with a new global
factor, which is information. Information spreads incredibly quickly.
That factor affects two types of individuals: young people, who produce
information instantly, and older people, who do not understand anything
about it. Major financial institutions are increasingly likely to use new
electronic tools. Those older people, who did not grow up with iPads or
iPods, have a very hard time understanding the information they receive from
financial institutions. They do not even understand the importance of having
an ATM card because they have their bank book.
They have not adapted to this new way of doing things, and they need
protection. They do not understand why they have to change, as they would
normally use their bank book. They have not yet made the transition. They
need protection and they need financial institutions to adopt a positive and
facilitating attitude. The law tends to emphasize that issue.
It is well and good to raise young peoples' awareness, but financial
institutions have a duty to inform. When a credit card is issued to a young
person, if they are not careful enough to check the small print, they will
be in trouble.
Would it be possible to put the small print in front so that young people
can be aware? Parents often end up paying their child's bill.
Financial institutions have a responsibility. I have nothing against
credit cards being issued to everyone, even to a dog, as long as someone is
responsible and knows that they will eventually have to pay back the money.
That is a major shortcoming. I spoke in the House about that, and I was
very clear regarding the law. I am in favour of the law. I will not spend
any time on staff and related issues. I am more interested in effectiveness
on the ground.
Visiting educational institutions has been discussed. I agree with that
and I commend that suggestion, as I think those people should be
well-informed. But when it comes to seniors, could not seniors federations
in all provinces be used to spread the word, to inform seniors of financial
Another issue is the fact that financial institutions are harassing
seniors over the telephone. If you are 80 years old and have RRSPs in a
bank, everyone is calling you with the best investments on earth. Seniors
may see less of a difference between those investments and may allow
themselves to be tempted by misleading statements and end up in trouble. Is
there any aspect of the law that could provide them with some protection?
Mr. Rudin: Those are excellent questions. I have two or three
things to say. The government's policy on consumer protection in the
financial services industry is based on three principles. The first is clear
and comprehensible disclosure. In recent years, the government has focused
its efforts on improving disclosure and promoting disclosure that is not
only clear but, as you say, comprehensible, especially when it comes to
credit cards. That helps consumers understand the implications of having a
credit card before they even have one. There is now a requirement to provide
a very clear summary in a box on the first page and to avoid the use of
small print in foot notes.
Another principle is to encourage competition in the financial sector,
but also to promote a third principle on financial literacy. As you were
saying, comprehensible disclosure is one thing, but if users lack basic
knowledge and experience, the disclosure is much less effective than it
could be. That is one of the reasons why the government has adopted this new
policy to encourage education in financial literacy and create the position
of leader to promote and coordinate those efforts.
That work will not be accomplished in one day or one year; it will take
time. The government expects the leader to look into issues regarding target
groups. In addition, part of the leader's mandate is supposed to focus on
seniors, who have their own needs. The government conducted a survey in 2009
on Canadian financial capability, and the results regarding seniors' groups
and needs are slightly different from others. We expected that, but it has
been confirmed by those results. So that is what I have to say about
financial literacy and disclosure.
As for the harassment, the federal government's ability to respond is
somewhat dependent on who is on the other end of the line.
Senator Maltais: I apologize for interrupting you, but I want to
be very specific when it comes to harassment. I want to give you some
examples. Let us consider a 75-year-old couple who are selling their house.
They receive a certain amount of money and move into a smaller apartment to
have a better quality of life.
In three months, those people will have been harassed by pretty much
everyone involved in financial institutions in Canada. The calls come even
from as far as India, at 6 p.m. and 8 p.m. It is awful. I have experienced
Those people have sold their property and invested their money in their
financial institution, and they no longer know what to do. They are worried
they have made the wrong choice, and they do not know what to do. The best
snake oil salesman strikes the deal.
Information disclosure must be protected. I do not know whether that can
be included in this bill, but we should at least provide information, so
that our seniors can be safer. They need protection. They are being
Senator Massicotte: Why even answer the telephone?
Senator Maltais: When the telephone rings, you answer it,
otherwise why even have one? That is like having a dog. If the dog does not
bark, you better get rid of it.
If you are over 75 years of age, you will see what happens between 6 p.m.
and 8 p.m. Have financial institutions that are not governed by the federal
legislation on banking objected to Bill C-28, or will they take the plunge
like the institutions that are covered by that legislation?
Mr. Rudin: Regarding the first question, I will have to obtain
that information. It all depends on the activity. If fraud is involved, it
comes under federal jurisdiction because we would be talking about a
criminal offence. If we are talking about how federally regulated
institutions are behaving, it may be one thing, if we are talking about
other institutions, it may be something else. I will have to obtain that
As for the financial institutions that are not under federal
jurisdiction, they are not at all opposed to the ideas of the federal
government regarding financial literacy, and mutual interest must be
Senator Maltais: Thank you.
Senator Massicotte: Thank you for joining us today. I am wondering
why legislation is needed for this position. At the very least, it provides
us with the opportunity to understand the importance of financial education
for Canadians. That is crucial. All your efforts are appreciated, as this is
an essential need.
Are there any people who are against the bill? Are there any people who
have a valid reason to disagree with this piece of legislation being
Mr. Rudin: No one is opposed to the bill.
Senator Massicotte: The legislation will give this office the
authority to assess financial institutions regarding any initiative the
office wants to implement. Is no one concerned that the $2 million may
become $20 million or $40 million? That is very high. The office could do
anything without parliamentary or government authority and impose on
financial institutions any programs it feels are warranted, no? What kind of
authority is involved? What is the scope of that authority?
Ms. Menke: I want to begin by saying that the $3-million amount
represents a 150 per cent increase in the financial literacy budget. That is
already a great deal of money for a small organization like ours to manage.
We do not plan on exceeding that amount.
That being said, we are nevertheless subject to rules, even though we can
make assessments. I still have to receive the minister's approval to
increase the budget. And these days, the minister is not very generous.
Senator Ringuette: Are you saying that you will have a 150 per
cent increase in the financial literacy budget?
Ms. Menke: The increase is from $2 million to $5 million.
Senator Ringuette: That is not your only responsibility in the
agency. You have 65 employees. Earlier, you said that ten of them were
assigned to financial literacy. The 150 per cent increase does not cover
only financial literacy.
Ms. Menke: I think that going from two to five represents a 150
per cent increase.
Senator Ringuette: Yes, but for all of your agency
responsibilities. Over the past two years, you have been responsible for the
code of conduct for both consumers and merchants. What portion of your staff
is assigned to that task? How much additional funding have you received from
the government to assume those responsibilities?
Ms. Menke: We receive industry contributions for taking on those
Senator Ringuette: That is a conflict of interest. This, however,
Senator Massicotte: Ten employees are involved in the education
aspect. Following the budget increase, how many people will be involved?
Ms. Menke: At the outset, six additional employees will be
Senator Massicotte: So, an 80 per cent increase in staff.
Senator Rivard: I would like to know what results will be achieved
by creating that position of financial literacy leader. Moody's Investors
Service has downgraded the credit rating of six of Canada's biggest banks
owing to consumer debt. The only bank whose rating was not downgraded was
Royal Bank, but its rating had been downgraded previously. So we can say
that the credit rating of seven of Canada's biggest banks has changed. How
will we be able to measure that new department's results in terms of
effectiveness? Do you think that, in the short or medium term, consumer debt
will decrease, and banks' rating will improve as a result?
Mr. Rudin: As I said, the government has conducted a survey of
Canadians regarding financial literacy. That has provided us with basic
information. We can repeat the survey — I am not sure how often — to try to
gauge Canadians' progress in terms of financial literacy in some specific
That being said, any improvement or decline would not necessarily mean
that our efforts in financial literacy caused the shift, as many other
aspects are taken into consideration.
The other key aspect is to try to determine the effectiveness of specific
efforts, and I will ask the commissioner to talk to you about that.
Ms. Menke: You have already been given most of the answer. Every
five years, we conduct a major survey to try to measure the improvement in
financial literacy among Canadians. The first survey was conducted in 2009,
and the next one will be in 2014. I am not expecting any major differences
in the first five years. We are really talking about a long- term project,
and that should be expected because we are trying to change Canadians'
So, as I said earlier, the coordination and awareness-raising efforts
will greatly increase once we have a leader. These activities are very
important, but the surveys will help us determine what kind of results we
Senator Moore: Ms. Menke, you mentioned that the agency received
$11.5 million from the financial sector. Is that banks, credit unions,
mortgage companies? Where does that $11.5 million come from?
Ms. Menke: Those are federally regulated financial institutions,
so banks, trust companies and insurance companies. No credit unions are
federally regulated at this point.
Senator Moore: What are the blocks of money you get from banks?
Ms. Menke: I do not have a precise breakdown of that in my head,
Senator Moore: Can you send that into the clerk, please?
Ms. Menke: Yes.
Senator Moore: I would like to know what the breakdown is.
On another topic, in terms of your advocacy on behalf of consumers — and
this is a matter that Senator Ringuette has talked about and has a bill
before the Senate on — could we address the matter of the fees charged by
credit card issuers to merchants, who do not seem to have any say in it? Of
course they pass on those fees to consumers, whether it is cost of goods or
services, so it has a direct impact on consumers. Is it part of your mandate
to speak out on that issue?
Ms. Menke: The part of my mandate in relation to that issue is
that a code of conduct was developed about two years ago.
Senator Moore: I remember that.
Ms. Menke: We oversee the code of conduct. We monitor the
implementation of that code of conduct and we report to the minister on it.
We have been quite active in doing that, but that is the extent of the
mandate of the agency in regard to that subject matter.
Senator Moore: You do not speak out on behalf of consumers. You
monitor the situation and you give a report to the minister. Have you done
so in this situation where recently the credit card companies have talked
about the fees to be charged to merchants? Merchants have been told they
will receive increased fees. They have no input in that but, of course, will
pass that down to the consumers. Have you done something on that? Have you
reported that to the minister and looked for some action on that, further to
the code? That recent activity by those issuers I do not think is consistent
with the code that the minister envisioned. Do you see change in that
approach, maybe legislation? The minister was very hopeful when he came and
told us about that, but I do not think he is getting the cooperation he was
Mr. Rudin: As we were discussing and as you mentioned, senator,
the code has been adopted, and it is the responsibility of the commissioner
and her organization to monitor adherence to the code. If there are any
issues as to whether the parties who have adopted the code are abiding by it
or if this question needs to be adjudicated in some way — is it inside or
outside of the code? — that is the responsibility of the FCAC.
In terms of the evolution of the code, the government is currently
consulting stakeholders —
Senator Moore: Are you saying, Mr. Rudin, that the FCAC has
officially reported to the minister that this is happening and that we
should be taking a look at it? Has that happened in this instance?
Mr. Rudin: In the instance of?
Senator Moore: I do not know why you are answering and the
commissioner is not, by the way.
Mr. Rudin: Well, I was talking about the government's position
about the code and the division of responsibilities.
You are asking a specific question: Has the commissioner ever made a
report to the minister on adherence of the code? You are right. I will let
the commissioner answer.
Ms. Menke: I have made several reports to the minister on
adherence, on issues relating to the code.
Senator Moore: This would be one of the issues covered?
Ms. Menke: This specific issue has not been covered at this point,
Senator Moore: It has not been?
Ms. Menke: Not at this point in time.
Senator Moore: Is it a matter of the code being revised? That is
an important, universal thing here.
Ms. Menke: The code already addresses this very issue that you are
Senator Moore: It does?
Ms. Menke: It absolutely does.
Senator Moore: But you say that it has not been acted on or that
you have not reported on it.
Ms. Menke: At this point in time, we have not heard anything from
the industry that has given us any reason to. I am not aware — let me put it
that way — that we have heard anything from the industry that has raised a
Senator Moore: By ``the industry,'' you do not mean restaurateurs.
Ms. Menke: I do mean that.
Senator Moore: Would you like some clippings?
Ms. Menke: We have not heard anything. I am not aware that we have
heard of anything.
Senator Moore: I will send you something, Madam Commissioner. I am
sure that Senator Ringuette can give you volumes.
Thank you. I think I have heard enough.
Senator Greene: I really appreciate the work that you are doing.
Certainly, the economy is a priority for our government. I think that the
way that you can ensure a well-functioning economy is if it is a financially
literate one, so I appreciate that.
Could you tell me if there are any tests that you have or are designing
that will tell you whether the level of financial literacy of Canadians is
improving or not? I think that is very important because I would hope that
at some point — and being a Conservative, I certainly hope this — we could
say that Canadians are financially literate enough so that you can disband
Ms. Menke: That would be the objective; I would be very happy if
that happened. Unfortunately, I do not think it will happen any time soon.
Senator Greene: Is it a condition of modern life, then, that a
certain segment of the population will always be illiterate because the
financial tools are changing?
Ms. Menke: I think a variety of factors give rise to that, quite
frankly. The minister alluded to it when he talked about parents. The first
place children should be learning something about financial literacy is from
their parents, which does not always happen. We were joking about the fact
that it is easier to throw money, but that is, in some cases, a fact.
It is like education. There will always be a need to continue to educate.
There will not necessarily always be a need for this office, but there will
always be a need to educate. I think the key thing is that that will
continue at all times.
Do we have any tests? We do. I was referring to the five-year survey that
we do of Canadians, which is a very significant survey. The last time,
15,000 people were involved in it. We want to use that. We have used the
first one as a benchmark. The next one will come in 2014. We will see then
what kind of changes there are. I do not anticipate huge changes, but I do
expect to see some.
We do smaller testing from time to time. For example, we test individual
groups, and then we have surveys to see what changes in behaviour have
occurred. Yes, we do test. We do see small changes, but they are small
changes at this point in time.
Senator Massicotte: May I have a supplementary on that?
Senator Greene: Yes, I give permission.
The Deputy Chair: No, I do not give permission because he always
Senator Greene: I do; he is a good guy.
Senator Tkachuk: Were you finished, Senator Greene?
Senator Greene: Yes.
Senator Tkachuk: He is asking a supplementary?
The Deputy Chair: But it is always a supplementary. Keep your
question because I have Senator Tkachuk, unless, of course, Senator Tkachuk
Senator Tkachuk: Go ahead, Senator Massicotte.
Senator Massicotte: I have a quick question on the same issue. It
is a supplementary. Do we have standards on how we compare to the rest of
Ms. Menke: We have some work that is happening on the
international level. It is not refined at this point in time, so we do not
have rankings, if you will. However, some work is starting to be undertaken
in that regard to get a more refined sense of that. The problem is that not
everyone has exactly the same standard for what constitutes financial
literacy because the rules change from country to country, and financial
literacy and what you need to know in one country are different from what
you need to know in another country.
Senator Massicotte: The OECD has nothing of that nature?
Ms. Menke: The OECD is one of the organizations working on this,
but at this point in time I would say it is fairly rudimentary and very high
Senator Massicotte: Thank you, Senator Greene and Senator Tkachuk.
Senator Tkachuk: I have a couple of questions on consumer debt. We
had quite a conversation about that. Is most of it mortgage debt?
Mr. Rudin: Mortgage debt certainly represents the largest
proportion of consumer debt, yes.
Senator Tkachuk: When you say the largest proportion, how large?
Mr. Rudin: I did not bring those numbers with me, but more than
the majority I am sure.
Senator Tkachuk: The other part of consumer debt would probably be
things like vehicles, trucks, cars.
Mr. Rudin: We think of mortgage debt and other secured debt — debt
against a car, boat et cetera — and then unsecured debt, which is largely,
although not exclusively, credit card debt.
Senator Tkachuk: Right. As far as the amount of debt that
consumers have and the amount of debt that we have incurred in mortgages, a
lot of it is the result of the fact that payments are lower because interest
rates are lower. A person may take out a $400,000 mortgage when they may
have been more prone to take out a $200,000 or $300,000 mortgage because
they are paying at 4 or 3.5 percent mortgage interest tied up for five
years, rather than at 7 per cent. I think that partly explains it. The worry
is not the debt but what will happen if interest rates go up. I think that
is more the concern of the rating agencies than the actual debt itself.
Mr. Rudin: There is no question that, historically, low interest
rates have contributed to residential investment and the overall growth of
mortgage debt. As you said, one of the key concerns in this regard is
whether consumers are well positioned for higher interest rates when they
Indeed, this is a concern of the government in general. As we were
discussing while the minister was here, both the Minister of Finance and the
Governor of the Bank of Canada have urged Canadians to think carefully about
how much debt they are taking on and to look at their capacity to service
that debt if interest rates rise. A typical Canadian mortgage has an
interest rate that is fixed for five years with an amortization period that
is quite a bit longer. Consumers need to think about the realistic
possibility that when they come to renew their mortgage, their interest rate
will be considerably higher than it is now.
In that regard, the rules that the minister has established to govern
high ratio mortgages look to that in a few ways. There is a limit on the
amount of debt service that people are allowed to take on relative to their
income. Furthermore, in calculating this limit for those consumers who do
not have a five-year fixed-rate mortgage, the limit has to be calculated as
if they have a five-year fixed-rate mortgage. For those consumers borrowing
at a lower rate using a floating rate mortgage, their debt service limit has
to be calculated as if they have the higher interest rate. That provides a
certain amount of protection, but it is not a substitute for consumers
thinking ahead about their ability to service their debt, particularly when
their mortgage comes up for renewal.
The Deputy Chair: Do you supply the general information on that
ability to service debt with X or Y or Z income? When there is a change in
the interest rate, can people refer to information from the agency?
Ms. Menke: Yes, we have information like that. We have a variety
of information, but not all of it is about not going over certain amounts
because it is a little hard to be that cut and dried about it. We try to get
people to take a look at those kinds of numbers and how far indebted they
are. Basically, we take a more generic approach. We always try to tell
people that the first debt they should pay is to themselves — in other
words, save. After that, they should take a look at their budget and what
their debt levels are. We strongly encourage ensuring that people actually
put money away all the time in addition to keeping their debts within a
The Deputy Chair: With all the questions we have asked, we did not
talk about the tools you have compared to the other tools that we will hear
about. I was just told by the clerk that you will not come back and the
minister will not come back, but we did not hear much about those tools. Do
you have video games for young people? I feel that is probably the best way
to teach them how to manage. In my time, it was a case of playing monopoly.
Nowadays, I think it is better with video games.
Ms. Menke: You are right; they are very popular. Unfortunately, we
do not have any video games. They are very expensive to develop. However,
such games exist in the market, which is one of the reasons I explained
earlier that we will not be doing developmental work on tools because others
are doing that. We are going into awareness building and coordinating
cooperation. We do not see any need for us to duplicate work that is already
being done. However, we think it is very important that everyone knows about
it so that we can match what they need to what is available.
The Deputy Chair: To make them available, for instance in the
summer, could you have a special student program to train senior citizens?
They could visit with senior citizens' in their homes. Who will take the
initiative? How do you spread the information? That is my concern. I know we
have some tools, but you will want to cover the entire country and all
I agree with Senator Maltais that these are clients at risk.
Single-parent and low-income families are the first to experience
difficulties in emergency situations.
Will those client bases be targeted for intervention? We may be talking
about groups, non-profit organizations or banks. I feel that non-profit
organizations and banks are not part of the same world. If we want to
coordinate everything, people need to go on the ground, and priorities have
to be set.
Ms. Menke: That is where the leader will come in. That person will
start establishing those connections, which are not necessarily there at
Senator Ringuette: There is a fact that I want to restate. I was
correct when I said that your government funding had been cut. This
information comes from your annual report 2010-11. You had $1.9 million
although you had the additional responsibility of oversight of the credit
card code of conduct. In 2011-12, your budget was cut to $1.7 million from
the Consolidated Revenue Fund. I point out that my memory is very good on
Senator Tkachuk: She did not notice it. She got by with less. Good
Senator Ringuette: Those are specific issues that I have at heart.
Senator Tkachuk: We should let her answer that.
Ms. Menke: I am sorry, but I have to correct that. The budget was
$2 million. Senator Ringuette was looking at actual expenditures. They were
less because some things were held up. The budget was $2 million, and it has
never been cut.
Senator Tkachuk: Thank you for clarifying that.
The Deputy Chair: Are you saying that you have not spent it?
Ms. Menke: I have not spent it.
Senator Ringuette: I just received this information from our
researchers, and they received it from the annual report of the agency.
Senator Tkachuk: There is a big difference between budget and
expenditures. She just explained that the budget is the same, but they spent
a little less. You were quoting expenditures numbers.
Senator Ringuette: No, no. We are looking at the funding numbers
from both the Consolidated Revenue Fund and cash received from financial
Senator Tkachuk: I am sorry; please.
The Deputy Chair: The data is available. The Department of Finance
regularly publishes bricks. One recommendation from the task group's report
is implemented through this legislation. Have the remaining 29
recommendations been submitted to your management? They all have to do with
financial literacy. The committee has certainly not been working on creating
a committee and producing 30 recommendations, so that only one of them would
be implemented. I would like to know where things stand.
Mr. Rudin: The most important recommendation for the federal
government is to create the position of leader, and it is really up to
Parliament to decide whether the government can go ahead with the approach
discussed today. As for the other recommendations, some of them are aimed
only at the federal government — not necessarily at the department or the
minister of Finance, but at other departments. Some of the recommendations
are aimed at provincial governments and others at the private sector. So the
federal government feels that the most important step is to fill the
position of leader and allow that person to exercise their leadership to
consider and implement the other recommendations and, potentially, other
The Deputy Chair: So we can hope that the remaining
recommendations will eventually be implemented.
Mr. Rudin: Exactly.
The Deputy Chair: I would like to thank Ms. Ryan, Mr. Rudin and
Ms. Menke for shedding light on this issue, which is certainly important,
not only for the Conservatives, but also for the Liberals. Thank you.