Archived—Project Summaries 2008-2009 - Union des consommateurs (UC)
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1. Consumer Arbitration: A Fair and Effective Process?
Arbitration as an alternative dispute resolution method is widely recognized and used today, in particular in commercial matters and at the international level. The Supreme Court acknowledged, in the Dell ruling (July 2007), that consumer arbitration could be an acceptable means of conflict resolution. More and more companies are trying to impose arbitration clauses in consumer contracts, whereby consumers are forced, in the event of conflict, to go to the company-designated arbitrator rather than the courts. While arbitration, in the view of its apologists, has a number of advantages for the consumer (more flexible procedure, quicker resolution), others question whether, in the context of consumer contracts, it is able to provide certain essential guarantees (independence of decision-makers, transparency of the process, availability of all remedies otherwise available, reasonable cost, right to be represented, procedural equity).
Though some provincial governments have seen fit to legislate to prohibit compulsory arbitration, nothing prevents consumers, when a dispute arises, from sending the dispute to arbitration.
- What are the essential guarantees arbitration must provide if it is to be an attractive conflict resolution mode for consumers and one that consumer advocacy groups can promote?
- Does the arbitration currently available in Canada provide consumers with these essential guarantees?
The research project will develop analytical tools for arbitration bodies, tools consumers will be able to use if they are planning to send a dispute to arbitration, and inquire into whether the bodies consumers must deal with do in fact offer the essential guarantees we shall identify.
Complaint processing services have been instituted to respond to consumers' many complaints about financial institutions. In the case of the banks, for example, in addition to the bank's client service department the client has access to the financial institution's own ombudsman, then, if he or she is still not satisfied with the processing of the complaint, to the Ombudsman for Banking Services and Investments (OBSI). Today, nearly ten years after the institution of the OBSI, all financial institutions have made dispute resolution procedures available to their clients.
It is vital for consumers to know their rights and to have a means of asserting them if they feel aggrieved. Consumer ignorance of complaint processing mechanisms, or a negative perception of these, could limit their access to the services or prevent them from using them.
However, though complaint processing services do exist, it is important to be aware of problems consumers could have in accessing them and to propose any necessary corrections.
The questions are as follows:
- In what situations can consumers approach their financial institution's dispute resolution services?
- Whom should they speak to if they want to file a complaint about a problem with a product or service offered by their financial institution?
- What measures have been taken to facilitate consumer access to complaint processing services?
- Are conflict resolution mechanisms effectively designed to facilitate access?
- In view of other countries' experience and the observations of complaint-processing organizations, are efforts to improve access necessary?
The answers to the questions raised by this study will provide the tools needed to consider any improvements necessary to give consumers better access to complaint processing services in the financial sector.
This research is intended to accurately characterize the situation in Canada in terms of the inclusion in consumer contracts of clauses that allow merchants, at their discretion, to alter the conditions of a service contract to which the consumer consented in accepting the contract. While clauses of this type protect the merchant from unforeseen circumstances or changed situations that could lead it to want to review the contract conditions, it may at first glance seem abusive of consumers, who are bound by a contract whose terms they have not been able to negotiate when it was entered into and cannot alter their own obligations to the merchant nor even refuse the merchant permission to exercise his/her right to alter them arbitrarily.
By conducting this research, Union des consommateurs will be able to examine the unilateral amendment clauses used in certain sectors and determine what motivates merchants to use them. It will allow to examine the potential consequences for consumers of merchants' using the unilateral amendment clauses identified. Finally, the research will allow to analyse the legislative measures applicable to unilateral amendment clauses and, if necessary, make recommendations for the legislative measures best suited to protecting consumer interests.
Consumer advocacy groups that work mainly with vulnerable consumers (the elderly, persons with disabilities, low-income people, newcomers) regularly observe that these groups do not know the various entities they can approach to try to settle a dispute with a company and that they have difficulties that limit their access to the services provided by these entities. Moreover, these groups regularly observe that consumer disputes submitted to certain entities are not settled effectively and permanently.
Thanks to this research it will be possible to list the organizations consumers can turn to when they have been the victims of objectionable practices in one of the sectors identified and to make recommendations as to the best way to enhance consumer awareness of the existence and role of these organizations and procedures to follow. The research will also allow to assess how able these organizations are, given their mandates, rules of operation and capacities, to effectively and permanently resolve recurrent problems, in an independent and transparent manner. Finally, Union des consommateurs will be able to make recommendations as to the attributes and characteristics these organizations need to have to help them provide accessible services to consumers and effectively resolve recurrent problems, in a transparent and independent manner.
Following the withdrawal of the traditional financial institutions from the small loans market, the parallel credit market extends consumers short-term credit and makes credit available to people who, otherwise, would probably not have access to it. The financial institutions usually offer alternative services (credit cards and lines of credit). Considering the high cost of these alternatives, the consequences for consumers are often disastrous, saddling them with an irreversible burden of debt. For consumers, in particular those with low income, who are more vulnerable, the current issue is whether they can gain access to financial products appropriate to their situation and not be forced, as a stopgap, to take the small loans available to them at so extravagant a cost. Among the products these customers need are: small loans at reasonable interest rates.
Since these are not part of the current offering, this study, through an analysis of programs that could meet such needs, will make it possible to propose concrete solutions. Union des consommateurs will look at measures that could be implemented in Canada to solve the problem of consumer access to small loans and to reduce the risk of serious debt problems that is inevitable where no affordable solutions exist.
6. Consideration of Low-income Consumers in the Delivery of Telecommunications Services: How is Canada Doing?
To help ensure the accessibility and maintenance of basic telephone service, the CRTC required the former telephone monopolies to fulfil certain requirements, particularly with respect to low-income subscribers (requirements relating to the down payment that may be charged, spreading the cost of installation over several months, a ban on cutting basic telephone service for late payment of other services, obligation to propose a reasonable payment agreement before cutting off basic telephone service, etc). The former telephone monopolies will still have to comply with some of these requirements in the deregulated markets. However, their competitors are not subject to the requirements relating to accessibility and maintenance of telephone service.
Moreover, only basic telephone service provided by the former monopolies is subject to these requirements. Thus, even though the Internet has practically become an essential service and that a significant number of Canadians, many of whom are low-income, solely rely on cell phones for all their telephone services, supply of these services by all telecommunications companies is not subject to any measure aimed at ensuring the accessibility and maintenance of services for low-income people.
Considering the importance of telecommunications to all consumers and, in particular, for the most vulnerable households, shouldn't special measures catering for the needs of low-income households be instituted and uniformly applied by service providers, to ensure the accessibility and maintenance of services? Have other jurisdictions adopted such measures in the telecommunications arena? Would the measures taken by public utilities be a likely model for the implementation of similar measures in telecommunications?
The study will consider, in particular, how well the services offered meet the needs of low-income households, the accessibility measures they are offered, the suitability of the rate schedules for such services for this category of consumers, and debt collection methods. Building on successful North American and European precedents, this research project will make it possible to draw conclusions as to the specific measures Canadian companies or authorities could apply to low-income subscribers. These reforms could ensure the poorest in society equal access to telecommunications, considered essential services.
More and more authorities, at the national and international levels, are soliciting the participation of consumer representatives: issue tables, economic regulatory agencies (CRTC, energy boards), standardization agencies, self-regulation bodies, etc.
- What criteria are used in selecting the organizations or people whose task will be to advocate for consumers or express their concerns?
- How can we make sure these representatives are competent and independent?
- How can we make them accountable?
- Do the organizations have standardized criteria that will enable them to guarantee the representativeness of those who will be speaking on behalf of consumers?
- Wouldn't consumers be better served if such criteria were widely known and used?
- Wouldn't consumers' confidence be enhanced if they were made aware of these criteria and could be sure they would be applied?
This research should make it possible to begin a discussion in Canada on the usefulness of establishing standardized selection criteria for consumer representatives within the various processes where such representation is requested. Some organizations have developed such criteria. If these are analysed and what seems to be the best approach recommended, key stakeholders are likely to be made aware of the issue and, in the medium term, requirements and modus operandi should change.
This research will enable Union des consommateurs to evaluate the most useful criteria to be used in selecting the organizations or people whose task will be advocate for consumers or express their concerns.
In Canada there are a number of organizations that consumers can consult to obtain budget and credit guidance services. Indebtedness is nevertheless growing at great speed, and cases of serious debt problems are multiplying to a dangerous extent. In Quebec, the Associations coopératives d'économie familiale (ACEFs) have for more than 40 years been offering consumers preventive and curative budget guidance services (budgeting courses and budget counselling). Their caseworkers find that consumers generally use budget counselling services only when their situation has become fairly dire, when it is often too late for preventive action. On the other hand, there are those who enrol in budgeting courses usually seeking to learn how to manage their finances in order to avoid serious debt problems.
Union des consommateurs will, through a case study and a survey of budget counselling organizations, be providing information and statistics to answer the following questions:
- What motivates consumers to consult these organizations?
- Why do some people, in spite of the existence of services provided to them free of charge, wait until they are in dire straits before asking for budget counselling, whereas others will take a preventive approach and enrol in budgeting courses?
- What services do consumers expect to receive there?
- What is their average level of debt at the time of first consultation?
- What are the most frequent types of debt of severely indebted households?
- At the time of first consultation, what level of knowledge have they of the various budgetary tools and strategies available?
- How are consumers informed of the existence of these services?
- What means are used to reach consumers?
- What client groups are particularly targeted by their communications?
With better knowledge of these data it might be possible to establish communications strategies that could encourage a larger number of consumers to consult the organizations in a timely manner, thus taking control of their finances or gaining the ability to redress their situation before it becomes irreversible. Better budgeting by a larger segment of the population would obviously be likely to reduce cases of serious debt and personal bankruptcies.
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