Layton’S Pocketbook Protector Has New Ideas To Protect Consumers

“As Canadians get their credit card bills, endless telemarketing calls or price hikes on their cable or telephone bills, they’re wondering why Paul Martin isn’t protecting their pocketbooks and privacy from his corporate friends,” said Layton. “The NDP believes it’s time the federal government helped – by protecting consumers’ rights and giving them tools that work.”

Layton said Pocketbook Protector responds to consumers’ concerns over prices, privacy and pensions. Among its new ideas are:

• Establishing citizen utility boards. This innovative idea, in place in four U.S. states, requires federally-regulated companies such as banks, and phone and cable companies to fund citizen oversight boards that can challenge fee and rate increases and communicate with other consumers through the company’s bills.
• Protecting Canadians from credit card gouging. The gap between the prime lending rate (4.25%) and the rate most credit cards charge (18.5%) has never been bigger. It’s time to cap credit card interest rates to five points above prime, reducing the interest paid on almost $44 billion in credit card debt in Canada.
• Cracking down on instant loan and cheque-cashing companies. As chartered banks abandon poorer neighbourhoods, Money Mart-type institutions move in to capitalize on the lack of consumer choice. When exorbitant fees are included, these places routinely charge more than 60% interest, a level beyond what the Criminal Code permits.
• Establishing a national “do not call list”. To protect citizens’ privacy, we need a national do-not-call list for corporate telemarketers, while protecting charitable organizations, and tough sanctions against telemarketers who violate the list.
• Respecting the right to know what we eat. Despite endless Liberal rhetoric and massive public support, Canadians’ still have no right to know what they eat. The NDP supports mandatory labelling for genetically engineered food, already in place in Europe, Australia and much of Asia.
• Protecting pensions and investors. In the wake of the Enron and WorldCom corporate scandals, the U.S. Government moved swiftly to force corporations to be truthful with their accounting through the Sarbanes-Oxley Act. Canadian investors have no such protection, despite the fact Paul Martin was finance minister at the time, and it’s time Canadian corporations were required to follow the same corporate accounting rules as American corporations.

  Layton said he welcomed a debate with Martin on how to better protect and empower consumers.

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  POCKETBOOK PROTECTOR: A CONSUMER’S BILL OF RIGHTS New Ideas to Protect Canadian Consumers.

  >Citizen utility boards: Giving consumers clout.

  This innovative idea is already in place in four U.S. states, including Illinois and California, where it has saved consumers millions of dollars. It’s a simple idea that empowers consumers and forces federally-regulated corporations such as banks, telephone companies and cable companies to respond to their consumers.

  By law, federally-regulated corporations will be required to establish and, through nominal fees, fund citizen utility boards, periodically elected by consumers (on a regional basis, in the case of national corporations). Under the NDP’s plan, the board would be entitled to communicate with other consumers to highlight increases in fees, rates or service charges, with information circulated through the corporation’s bills. The board would also be empowered to represent other consumers to regulatory agencies such as the CRTC, and be provided with justifying evidence for increases in fees such as bank service charges.

  As an example, since deregulation in 2002, Rogers Cable in Ottawa has increased basic cable rates from $16.86 to $21.99; Shaw Cable in Winnipeg has increased rates from $15.75 to $21.00; and Cogeco cable in Trois-Rivières has increased rates from $16.72 to $19.72, all well beyond the inflation rate. The companies were deregulated at different times between February and August 2002, but the inflation rate from May 2002 to today is 3.4%)

  Banks can certainly afford to fund citizen boards. In 2003, the big five banks recorded more than $11 billion in profit. (Royal, $3 billion; Scotiabank, $2.4 billion; CIBC, $2.1 billion; Montreal, $1.8 billion; TD, $1.1 billion.)

  >Tying credit card rates to the prime rate: Reflecting economic reality.

  The gap between the prime rate (4.25%) and the rate paid on most credit cards (18.5%) has never been higher, and the Liberals flatly refuse to protect consumers from outlandishly high credit card rates. Two credit card giants alone, Visa and MasterCard, currently hold some $44 billion in credit card debt, a figure larger than Brian Mulroney’s record federal deficit in 1992-93.

  There is scant justification for maintaining high credit card interest rates during a period of steadily-declining interest rates, making the need to cap credit card rates at five points above prime a necessity today.

  The Liberals argue there are lower-interest credit cards available, but too often the people with poorer credit can’t qualify for lower-interest cards. The credit card companies argue that the prime rate has no bearing on the rates they pay, and instead reflect credit card fraud and higher risk – the same credit card companies who flood high-risk Canadians with applications, and which boast that fraud rates are less than 1% of all transactions.

  As part of the NDP’s Pocketbook Protector, the party would also prohibit hidden credit card charges such as foreign exchange fees, which are buried in the shown exchange rate on credit card statements.

  >Cracking down on cheque-cashing institutions: Protecting the vulnerable.

  Particularly in cities such as Winnipeg, chartered banks are abandoning poorer neighbourhoods, leaving lower-income Canadians without access to financial services. In their place, cheque-cashing institutions such as Money Mart are taking root, offering high-cost financial services at outlandish interest rates.

  Under the Criminal Code, there is a maximum allowable interest rate of 60%. But Money Mart-type institutions routinely charge 200%-300% interest when mandatory and largely unavoidable fees are included. The Supreme Court of Canada has ruled these essentially mandatory charges (they are technically not mandatory, but only if payday loans can be repaid before payday, but presumably if someone requires the loan they can’t pay it back before they are paid) as interest, but still Money Marts flourish as banks abandon neighbourhoods.

  A $100 payday loan taken out a week before pay day would be subject to $18.91 in interest, a cheque cashing flat fee of $12.99 to repay the loan, plus a percentage fee of 4.99% on the cheque to repay the loan ($4.99) for a total cost of $36.89, or $5.27 a day. As an annualized interest rate, that is 1923%.

  Though an area of joint federal-provincial responsibility, it’s time the Liberals made enforcing Criminal Code provisions a priority; and made it clear to chartered banks that abandoning poorer neighbourhoods is an unacceptable practise. Without cooperation from the chartered banks to provide services to poorer neighbourhoods, amendments to the Bank Act may be required to guarantee equal access to financial services for all Canadians.

  >Establishing a national “do not call list”: Protecting privacy.

  Canadians are tired of having their privacy and valuable family time interrupted by telemarketing, and need access to a national do-not-call list. Canada’s call centre industry is maturing and increasingly reliant upon incoming calls – such as how-to lines or ordering centres – and we can create telecommunications jobs without intruding on Canadians’ privacy.

  Canadians deserve the right to put their phone numbers on do-not-call lists, and corporations that don’t respect that right should be subject to stiff penalties. Charitable organizations, many of which use volunteer callers, should be exempted from the do-not-call list Respecting our right to know what eat: Mandatory labelling for GE food.

  Despite overwhelming support among Canadians for the right to know what they eat, the Liberals still don’t support mandatory labelling of genetically engineered food. More than 30 countries around the world – the European Union, Australia and throughout Asia – require mandatory labels on GE foods with low thresholds of GE content in order for a food to qualify as “GE-free”.

  Yet, the Liberals dither with committees that environmental, consumer and health groups have long since boycotted, and cling to the principle of voluntary labelling.

  Science permits and consumers demand mandatory labelling of GE foods, and it’s time Canada caught up.

  >Cleaning up corporate accounting: Corporate fraud can happen here, too.

  In the wake of the Enron and WorldCom corporate scandals in the United States, the Bush Administration – not a usually critical voice of corporate America – enacted the Sarbanes-Oxley Act in 2002 to clean up corporate America. Paul Martin was finance minister at the time. Now he’s prime minister, and Canada still has not moved forward on requiring transparency in corporate accounting.

  The NDP would amend the Canada Business Corporations Act to bring federally-regulated corporations’ requirements in line with those in the United States; and work with the provinces and territories towards the establishment of a federal securities commission, first committed to by the Liberals in 1996. These provisions would also require corporations to change auditors every five years; and prohibit auditors from acting as consultants to the corporation.

  The NDP would also send a message to corporate Canada that pension plans and investors deserve protection, by toughening Criminal Code provisions for fraud affecting public markets from 10 to 25 years in jail; and bring Canadian laws in line with Sarbanes-Oxley by increasing the maximum penalty for wire or mail fraud from two to 20 years in jail.

  The NDP also supports increasing the maximum corporate fine for not complying with the auditor reporting provisions from $5,000 to $1 million ($500,000 for an individual and up to 10 years in prison).