Enhancing Consumer Financial Capabilities: A Canadian Perspective

1
Enhancing Consumer Financial Capabilities A
Canadian Perspective
The 3rd International Forum on FinancialConsumer
Protection and Education

• Kuala Lumpur
• December 14, 2005

2
Overview

• About FCAC
• Financial Literacy vs Financial Capability
• National Symposium on Financial Capability
• FCAC and Financial Capability

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About FCAC

• Who We Are
• Created October 2001 by FCAC Act
• Independent federal government agency regulating
  federal financial institutions on consumer
  provisions
• Report to Parliament through Minister of Finance
• Commissioner appointed for 5-year term
• Funded by assessments on federally regulated
  financial institutions

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About FCAC

• What we do
• Protect Supervise FRFIs compliance with
• consumer provisions in Acts Regulations
  governing them, and
• their own codes of conduct and public
  commitments
• Educate Expand consumer education about
• consumer rights and responsibilities
• financial services and products

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About FCAC

• How we do it
• Yearly Budget of 8.1 million
• Contract out non-core activities
• Commitment to stay small, agile and focussed on
  Consumer First
• Website and toll-free number

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Financial Literacy

• Some definition
• The ability to read, analyze, manage and
  communicate about the personal financial
  conditions that affect material well-being. It
  includes the ability to discern financial
  choices, discuss money and financial issues
  without (or despite) discomfort, plan for the
  future, and respond competently to life events
  that affect everyday financial decisions,
  including events in the general economy.
• - The Institute for Socio-Financial Studies
  (ISFS)

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Financial Literacy

• Components

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Financial Capability

• Observation
• It is a mistake to believe that only those on
  low incomes or in disadvantaged areas need
  financial literacy. People need to be equipped
  with the skills, knowledge and confidence to
  ensure they make informed judgments and take
  effective decisions regarding their own financial
  circumstances.
• - UK Department for Education and Skills

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Financial Capability

• Three interrelated dimensions

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Financial Literacy vs. Capability

• Advantages of Financial Capability
• Goes beyond knowledge and confidence
• Acknowledges stages of developments
• Makes fewer presumptions
• Hind, Kempson and England

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Financial Capability and Public Policy

• It has been found that financial capability can
  contribute to social and economic inclusion by
• Enhancing Social and Economic Inclusion
• Increasing uptake of public programs
• Helping consumers benefit from less costly
  payment arrangements (e.g., direct deposit).

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National Symposium on Financial Capability

• Held in June 2005 in Ottawa, Canada
• National and international participants
• 4 main objectives
• Explore what financial capability means and
  review current knowledge
• Evaluate impacts of financial capability training
  
• Inform policy makers
• Opportunity for networking

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National Symposium on Financial Capability

• Proposed Definition of Financial Capability
• enabling environment that ensures that all
  consumers develop the skills and confidence to be
  aware of financial opportunities, to know where
  to go for help, to make informed choices, and to
  take effective action to improve their financial
  well-being.

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National Symposium on Financial Capability

• Financial capability interventions should
  include
• Information
• Training / education
• Advice

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National Symposium on Financial Capability

• The Impacts of Financial Capability
• Promotes social inclusion
• Increases the use of mainstream financial
  services
• Reduces individual financial barriers
• Allows for better financial decisions over the
  life course

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National Symposium on Financial Capability

• Next Steps
• Additional research
• Environmental scan (domestic)
• Intl financial capability policy and practices
• Establish database of existing programs and
  organizations (domestic and international)
• Move toward a Steering Committee
• Role for public, private and voluntary sectors

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FCAC and Financial Capability

• Informing consumers about their rights and
  responsibilities
• Opening a Personal Bank Account
• Cashing your Government of Canada Cheque for Free
• Low-Cost Accounts
• Cheque Inserts
• Train-the-trainer manuals and outreach
  partnerships
• Call Centre
• CHP Database

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FCAC and Financial Capability

• Helping consumers understand financial products
  and services
• Understanding Your Credit Report and Credit Score
• The Cost of Payday Loans
• The ABCs of Mortgages
• Considering an Investment Product Tied to the
  Stock Market's Performance?
• Qs and As Database

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FCAC and Financial Capability

• Helping consumers get the best financial products
  and services
• Cost of Banking Guide
• Credit Card Interactive tool

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• Thank You!
• Questions? Comments?