Ellen Roseman: Let's strengthen financial literacy
- January 30, 2009 8:40 AM |
- By Ellen Roseman
Money Talks is a daily business column from CBC radio.
Ellen Roseman is a business writer at the Toronto Star.
(Listen to the original audio of this column.)
Here are some interesting proposals in the recent federal budget that affect consumers. They didn’t attract much publicity, so you may not have heard about them.
One, the government thinks Canadians are not getting a fair deal on credit cards. It has a long list of what it wants credit card issuers to do, based on complaints received by the Financial Consumer Agency of Canada.
Federally regulated institutions that issue credit cards need to beef up their disclosure of terms and conditions, the budget says. They should set a minimum grace period on new purchases made with a credit card, provide clear and timely advance notice of changes in rates and fees and improve their debt collection practices.
Two, the government thinks Canadians aren’t getting a fair deal on mortgage insurance. You’re required to take out insurance, which protects the lender from default, if your downpayment is less than 20 per cent of the value of your house. It’s underwritten by Canada Mortgage and Housing Corp., as well as private sector insurers Genworth and AIG.
Mortgage insurance needs to be more transparent, understandable and affordable, the budget says. Also, consumers should not be charged more for mortgage insurance than the true cost of obtaining that insurance. This refers to commissions and referral fees paid by mortgage insurers to financial institutions.
Three, the government wants to raise the level of financial literacy among consumers. This means improving the ability to understand financial issues, applying that knowledge and assuming responsibility for one’s own financial decisions. Financial literacy is an important life skill. It’s not taught in schools and it’s often provided by the companies that get people into trouble with credit cards and mortgage insurance.
This spring, an independent task force will be established to make recommendations to the Finance Minister on a cohesive national strategy on financial literacy. The task force will include representatives of business, education, volunteer groups and academics and will be supported by a federal secretariat.
Hear, hear. I really like this idea of strengthening Canadians’ financial literacy. It’s hard to tell people to look after their best interests when they’re confronted constantly with advertising messages that send them in the other direction.
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