Self-regulation okay – but better coordinated regulation a must

Kelly Harris

One of the largest complaints of provincial regulators I fielded while working for the credit union trade association was the swiftness of authorities to resolve issues with unhealthy institutions.

Not underhanded mind you, but institutions whose revenues have flat lined or retracted. Often the institutions, once salvageable, had become more of a burden to rescue than a benefit. If the regulator had the power to act more quickly then the credit union that is taking over the merger could be in a better place.

As we always said the strength of the system is dependent on the strength of its members – the same goes for the strength of individual credit unions. It is the basis for the cooperative model and one of the key reasons credit unions win best in customer service awards year after year.

It is with all of that said that I was heartened by the news of long overdue changes to the Real Estate and Business Brokers Act 2002, announced by the Ford Government Nov. 19. The changes would basically empower the Real Estate Council of Ontario (RECO) to act more quickly to deal with realtors who break the law or act in an unethical manner.

Comments coming from realtors regarding the changes – recommendations from the industry itself – were that the new laws are buyer-seller focused, not simply for those in the real estate profession. Not being any of the three I will take the stakeholders word for it.

Self-regulation has been around for a long time, in some cases it works very well, in others not so much. However, I truly believe that if an industry is to evolve and promote customer service and confidence then it is in the interest of the members of that industry to take a real interest in policing themselves.

For Ontario’s more than 86,000 registered real estate agents, brokers and brokerages they will have the chance to clean up their own house – so to speak — when situations arrive. It is a long time coming as according to many media reports the legislation hasn’t been significantly changed since 2002.

The Credit Union and Caisses Populaire Act has a 1994 date on the end of it. As I have written before it is a relic of the Bob Rae Government and was drawn up before the invention of things like the Internet – where almost all banking happens. It is kind of like having an act for how to store wheat to feed you wagon train for gas stations. After all a station wagon is just a buggy with a motor instead of a horse right?

One of the components of the suggestions by the Ontario credit union system for re-writing the act is self-regulation to deal with customer service. This was a component I championed in my time working in the system and one I still champion.

I still champion it, however, I also champion the idea that credit unions need to regulate each other. It would be incredibly difficult and require a very strong trade association with a mandate to point out issues to credit unions as they arise. The credit union system has no such organization.

That isn’t a shot. I worked for both Ontario and British Columbia provincial associations and was a board member of the national association. They are not set up in a way where they can be critical of credit unions; they leave that up to the sole purview of the regulator.

So while I champion the idea of self-regulation for issues with individual members, self-regulation is not something that works between institutions as they are set up, still one I would like to see.

What I would also like to see is better inter agency cooperation at the regulator level. For example there was a sort of bizarre issue with the idea of credit unions using the terms “bank” and “banking.”

Canada’s Bank Act states that only those institutions chartered under it can use the word “Bank.” However, bank as a noun, not a verb.

Several institutions use the terms “bank” and “banking” to describe the business they do and the services they provide. Of course the term Internet Banking was derived from this – because basically all of it is done on the Internet now. Finance minister you listening?

Then a couple years ago, no doubt through lobbying efforts of the Canadian Bankers Association, the Office of the Superintendent of Financial Institutions (OSFI) sent out a dictate that credit unions remove any reference to the word “bank” from their branches, Internet and other promotional material.

The dictate came from the federal government yet almost all credit unions are provincially regulated. Given the provincial mandate OSFI should have been engaging with provincial regulators if they had issues with their system. And the provincial regulators should have stepped in to protect their institutions as they are the ones with the relationships.

Neither of those things happened, the credit union as a system went to war with OSFI and thankfully the federal regulator backed down. Personally it wasn’t an issue for me, I worked for a place that was proud to call itself a credit union and a boss who wanted to champion the cooperative brand. However, it was a significant issue for other institutions and could have been resolved more easily one-on-one with their own regulator.

This is an example of the need for stronger coordinated regulation, from both a self-regulation perspective and from a government regulator or regulators. So I congratulate Government and Consumer Services Minister Lisa Thompson and the Ford Government for the work with the real estate industry. I hope the new rules clean up any bad actors and communication can be promoted.

I also hope work can continue on credit unions – mentioned in the Fall Economic Statement. And mostly I encourage Finance Minister Rod Phillips to find a way to get regulators working together – for the safety and security of anyone using a credit union and the credit unions themselves.

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