The credit card regulations proposed by Finance Minister Jim Flaherty will do little to effectively protect Canadians struggling under high debt loads, a prominent consumer advocacy group says.

Duff Conacher, chair of the Canadian Community Reinvestment Coalition, said the federal government must do more to ensure banks are not gouging consumers with unfair fees or excessive interest rates.

"The federal government must stop protecting the banks from accountability," Conacher said. He also said lending institutions should be subjected to independent audits to "determine if the banks are reaping excessive profits through gouging interest rates and fees."

On Thursday, Flaherty unveiled nine proposals to amend the laws governing credit cards in Canada. The moves — such as providing customers with written notice that their interest rate is set to increase — were designed to increase transparency and arm consumers with the knowledge to make better financial decisions, Flaherty said yesterday.

But the moves don't go far enough to protect consumers, Conacher said.

Four of the nine measures proposed only deal with disclosure requirements, the CCRC notes. Another proposal only addresses consumer consent for increasing a credit limit, and another only limits debt collection practices in one particular way, the group says.

"It's too little, too late," Conacher said. "None of these proposed regulations do anything to prevent gouging."

The group says the best thing the government could do to protect consumers would be to require banks to undergo an independent audit to ensure that credit card and other consumer and small- and medium-sized business loan interest rates and fees do not amount to gouging.

Numerous government agencies, including the auditor-general, the superintendent of financial institutions, or the Financial Consumer Agency of Canada would be suitable candidates for the task of auditing the credit divisions of the big banks and others, Conacher said.

Rate cap not the answer

And unlike the NDP and others who have lobbied for a hard cap on interest rates, Conacher questions whether a hard cap would be effective.

"The problem with a cap on rates," he says, "is where do you put it? Any number would be pretty arbitrary. And the banks are quite likely to simply turn around and say that since a limit has been put on their business, they're just going to deny credit to some people."

Most of the proposals outlined yesterday deal with increasing transparency among credit companies, and do little to actually reduce the amount of money being charged to consumers, Conacher said. "You add all these proposals up and the banks can still raise their rates — all they have to do is give notice," he said.

"Gouging is the last thing the Canadian economy needs at the moment, as every dollar taken out of it by price gouging is a dollar that consumers no longer have to stimulate the economy."