Union des consommateurs - 2009-10

6226 Saint-Hubert street
Montreal, Quebec
H2S 2M2
Telephone: 514-521-6820
Fax: 514-521-0736

1. Information about financial products and vulnerable clienteles


Consumers are being offered an ever-growing number of financial products, and apparently they continue to have little or no information on how best to utilize them.

The Consumer Trends Report says that it is becoming urgent to find effective ways to make it easier for people with limited education or literacy to acquire information. Despite a relative increase in the level of education in Canada, certain groups of Canadians (such as seniors) are more vulnerable, for example, because of limited schooling. Young people are also considered more vulnerable: a good many of them have not completed high school (212,000 dropouts in Canada in 2004–05). The Report also mentions that "beyond basic reading skills, financial literacy is key to long-term security for most consumers." It is important that consumers be able to have access to and be capable of making appropriate, informed and timely use of the information tools that may be available to them so that they can avoid the pitfalls and mazes that access to and use of different financial products and services can pose for them.

This study will serve to verify the accessibility and readability of the objective documents designed to inform vulnerable consumers about the existence and use of a few basic financial services.

The questions are as follows:

  • At the time they make their financial choices, do the more vulnerable citizens have appropriate and adapted tools available to them that permit them to make more informed choices?
  • Are the explanatory documents available to them sufficiently objective and correctly put into layman's terms?
  • Are the methods of distributing explanatory documents adapted to the more vulnerable clienteles and designed to appropriately reach the target clienteles?
  • Is the distributed information comprehensible to them? Does it take account of the specific vulnerabilities of certain clienteles?

Expected results

Using the research results, UC will be in a position, if required, to submit proposals for improving access to useful information for these clienteles.

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2. Access to auto and home insurance: an issue?


Damage insurance (home and automobile) is offered to ensure financial security in the event of fire, theft, accident or prosecution, or to guarantee peace of mind. This takes up a large part of the family budget. Do all Canadians have access to reasonably priced home and automobile insurance? How many of them do not have insurance for their home or vehicle? Is this by free choice, or because of refusal by an insurer?

UC also wants to study the reasons for refusal given by insurers to determine whether they unreasonably restrict access to insurance. For example, is it normal for a person who has been the victim of two home robberies to be turned down by all insurers? UC will do a historical review of the beginnings of insurance to be able to analyze whether insurance as designed and presented today still meets the initial needs and objectives.

Expected results

UC wants to compile a clear and objective profile of uninsured people in Canada, alternatives, and international best practices.

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3. The end-user licence: do you accept all of the conditions?


Modern technologies are omnipresent in the daily activities of consumers. A new form of agreement has become widespread, and consumers are usually ignorant of its scope. Today's consumers have to accept an ever-growing number of end-user licence agreements (hereafter EULAs). These agreements radically modify, and without consumers' knowledge, the rights that they think they have when they purchase a product. Before being able to use certain products (software, CDs, DVDs), consumers have to accept a EULA, that is, conclude, after the initial purchase agreement, a second agreement, often with a third party with whom they will have had no contact. If they do not accept this agreement, they will be unable to use the product purchased. Obviously, the problem is compounded by the fact that consumers are not made aware of these EULAs in a timely fashion, and that they do not read or understand them properly on account of the way they are presented or written.

Given the proliferation of these EULAs and their extension to other consumer spheres, it is essential that the various questions they raise be examined: What methods have been implemented to ensure that consumers are aware of the existence of the licence agreement they will be obliged to accept in order to use their purchase? Are consumers able to grasp the scope and purposes of these licence agreements? As presented, do these agreements allow consumers to become reasonably aware of their rights and obligations, as well as the limits to use that they will be presumed to have accepted? Are those conditions presented in a timely fashion? Are consumers clearly informed of the rights that the end-user licence agreement may force them to waive? Do consumers have a real option to refuse such agreements? How are the user licence and the agreement on the purchase of support coordinated? Is the fact that the user licence is not disclosed at the time support is purchased taken into account by the licences or the legislation? Is there any impact to the fact that, if consumers refuse to accept the licence, the product they purchased might not serve its intended purpose?

This research project will serve to assess the current situation in Canada, to identify the main problems raised by licence agreements, and to propose solutions. Through examination of certain licences, the way they are brought to the consumer's attention, their content, and the relevant legislative provisions, UC will endeavour to determine whether the licence agreements comply with Canadian consumer protection legislation and whether they are serving their purpose without unduly limiting consumers' rights or denying their expectations. This study will also permit UC, where applicable, to identify elements of these agreements which might pose an obstacle to the consumer's reading and understanding them properly.

Expected results

This project should permit UC to make certain recommendations aimed at improving the information provided to consumers and ensuring that they are adequately protected by legislation.

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4. Effective recourse in personal insurance


Personal insurance means life insurance, pensions (RRSP, RRIF and pension plans) and major medical and disability insurance. In 2006 in Canada, 26 million people were covered by at least one of these types of insurance, contracted with banks or insurance companies.

If an insurer refuses to pay, consumers in Quebec and Ontario have an abundance of options. They can file their challenge with their company, the Canadian Life and Health Insurance OmbudService (CLHIO), the Financial Consumer Agency of Canada (FCAC), the Ombudsman for Banking Services and Investments (OBSI), the Autorité des marchés financiers du Québec (AMF), the Financial Services Commission of Ontario (FSCO), and the list goes on. These bodies all offer, at best, non-binding mediation services; if consumers are still not satisfied, they may turn to the courts. However, consumers unable to retain the services of a lawyer will have to apply to small claims court and cap their claim ($7,000 in Quebec, $10,000 in Ontario).

Is this range of remedies, which should make it possible to avoid going before the courts, effective, adequate and understandable for consumers? The literature reports four essential components of an effective relief policy: accessibility, independence, transparency and effectiveness.

However, the many cases reported by UC's ACEF members seem to suggest that there are serious deficiencies to each of these components in the relief policies prevalent in the industry. For example, the multitude of players complicates the task for the dissatisfied consumer (accessibility problem), an ombudsman service funded by the Canadian Life and Health Insurance Association may raise some doubt as to its real independence, the complexity of the contracts is detrimental to the consumer's right to information (transparency problem), and finally, the length of the procedures can often make life financially precarious for the consumer contesting a decision by the insurer (effectiveness problem).

In view of this and of the great popularity of personal insurance products, UC will conduct a detailed review of the mechanisms for protecting the interests of consumers of personal insurance. UC will attempt to identify the flaws that might exist and to see whether these might be addressed by solutions utilized elsewhere in the world.

Expected results

Evaluation of the effectiveness of the remedies proposed, inventory of worthwhile mechanisms used abroad, possible solutions for improving the protection of people who have purchased personal insurance.

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5. Personal loans via Internet platforms:  a financial service of the future?


Extended accessibility, as well as the desire for more "ethical" products and the increasing time and attention given to social networks, are now ensuring a significant rate of penetration for certain new "social" financial products in other countries.

The new systems for lending between individuals, available on Internet platforms, are products of this new wave. Some of these platforms seem to be designed only to offer a financial service, but others display a more pronounced social concern. Lenders may select, based on criteria chosen by them, the individuals to whom they wish to lend, or the projects they wish to finance. The loans made through these sites are regulated to some extent by their sponsors: setting of interest rates, management of risk of non-repayment, etc.

The questions are as follows:

  • What motivates lenders and borrowers to use these alternative modes of lending? What are their advantages and possible disadvantages?
  • What types of needs are these loans designed to meet?
  • What is the penetration rate of these services in Canada?
  • Does Canadian legislation facilitate this sort of parallel service?
  • Are there risks to using this sort of non-institutionalized financial service?
  • Are the users of such a service sufficiently protected by the present legal framework?

This study will allow UC to identify the problems that can be created by these new parallel financial products, to see the precautions that have been taken abroad in the interest of consumer protection, and to gauge the effectiveness of the current Canadian framework with respect to these new products.

Expected results

The results obtained will permit UC to prepare a profile of Internet platforms for personal loans between individuals, describe the issues for Canadian consumers, and submit some possible solutions. The results may also be used in discussions by consumer groups and governments on the topic.

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6. Tie-in sales: issues for the consumer


UC and its members have lately been receiving complaints about tied selling (selling of computers with pre-installed software and an operating system that the consumer never asked for, sale of products that can only be used with certain computer applications, etc.). Consumers are increasingly frustrated by this sort of practice. The lack of information at the time of a tie-in sale distorts market rules and affects consumers' confidence, as well as their freedom of choice.

The questions are as follows:

  • In a tied selling context, is the consumer's consent free and informed?
  • Can these practices be of any benefit to the consumer?
  • Are the solicitations and offers made to the consumer clear and transparent?
  • What legislative safeguards protect consumers from the abuses that these practices may represent?
  • What remedies are offered to the consumer?
  • What effect do such practices have on the market? What are their consequences for consumers?

This research project will allow UC to analyze the legality and impact of tied selling on consumers' rights and on the market. UC will thus be able to clearly determine the rights and recourse of consumers faced with these practices and be in a position to give them appropriate information. If the research reveals defects in the regulation of some of these commercial practices, the results must permit UC to raise them so that the competent authorities can respond to the problems identified.

Expected results

This project will study the extent and consequences of these practices and will propose solutions so that consumers can be better protected. Many consumers are complaining about the effects of tied selling and have no means of combatting such practices.

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7. New modes of consumption: the alternative of barter


Barter, the oldest form of exchange, seems to be making a comeback thanks to the green movement and Internet development, which facilitates exchange and removes the obstacle of distance. The development of goods and services exchange systems (GSES), which are comparable to barter, has become a worldwide phenomenon, as attested by the local exchange systems that can be found around the world, as well as certain national and local exchange networks in Canada. A multitude of websites are now devoted to the exchange of goods and services, and many of them are reporting dizzying expansion. While many vaunt the merits of such systems, which are presented as a model of sustainable consumption, others see them as opportunities for tax evasion and examples of economic inefficiency and question the protection available to consumers outside traditional commercial systems. Before these new practices are more widely implemented, their economic and legal repercussions should be evaluated, as well as their advantages and disadvantages.

The research project will focus on the legal aspects of GSES and on the protection available to consumers, so as to determine what sort of balance exists between their professed advantages and the fears raised concerning them. If these GSES are being used by disadvantaged consumers who regard them as a partial solution to their lack of income, it is important to ensure that in doing so they are not giving up the protection provided for by law.

The questions are as follows:

  • How do GSES work?
  • What are the legal implications?
  • What types of contract are involved?
  • What needs do they meet?
  • What are the impacts of this alternative method?
  • Are consumers well protected?
  • Are the representations made to consumers correct?
  • How are prices or exchange values set?
  • Are the costs of participation justified?
  • Can these systems be used as means of sidestepping the application of certain laws (on taxes or income taxes, for example)?
  • Do GSES come in for unwarranted mistrust or do they take undue advantage of the naïveté of consumers?

Expected results

This project will document the various aspects of this new mode of consumption to ensure that consumers who use it are well protected.

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8. For energy efficiency (EE): an energy rating for houses


Energy ratings are available in Canada for a whole range of products (household electrical appliances, automobiles, etc.). It is regrettable that this is not the case in housing, an essential need which furthermore generates substantial energy spending and presents great potential for improvement of energy efficiency (EE). There are many labelling initiatives for new construction. Given the proportion of existing dwellings that are sold or rented annually, it would seem logical to extend such a measure to these buildings. Faced with the increases in energy costs, should not Canadian consumers looking to purchase or rent a new dwelling also have easy access to standardized EE information?

This research project will evaluate the relevance, feasibility and usefulness of establishing an energy rating program and summarily estimate the potential cost-effectiveness of such a program in light of a cost-benefit forecast. It should also serve to identify various complementary issues, in particular the introduction of public or private incentive programs (e.g. by financial institutions) that would be worth adapting or developing in Canada.

The research project will make it possible to do the following:

  • based on existing initiatives and taking costs-benefits into account, assess the possibility and relevance of establishing a house energy rating program in Canada
  • based on foreign and theoretical models, identify the mechanisms to be considered for such a rating in the residential market
  • identify the main elements that should be taken into account in establishing the rating and estimate the potential performance of different elements.

The project involves making information on the energy requirements of the desired dwelling available to future tenants or buyers. In addition to being an advantage for the buyer or tenant concerned about EE, the added value to be provided by better information on energy performance will be an important incentive for EE retrofits, in particular by owners of rental buildings, who at present have virtually no interest in upgrading their dwellings' performance when it is the tenants who pay the energy costs.

Expected results

This research project should help collect data needed to develop a viable energy rating model applicable to rental and for-sale housing units and help identify the nature of the components to be given priority when it is introduced, including the advisability of making this energy rating mandatory for dwellings (rental or for-sale).