I. INTRODUCTION2017-03-03T18:33:22+00:00
This Report addresses whether steps should be taken to ensure that individual recipients of government funds can access those monies at low or no cost, and if so, what steps would most effectively achieve that goal. It summarizes the results of the Law Commission of Ontario’s (LCO) independent research and public consultation on this topic, outlines and analyzes key issues, explores the options for reform, draws conclusions and makes recommendations.

As a result of this Project, the LCO believes that long-standing concerns regarding fees for cashing government cheques must be expeditiously addressed. The issues are multi-faceted and therefore solutions, to be effective, must take a holistic approach. Legislative reforms must take into account the complex causes of the problem, and be complemented by supportive policies and initiatives. Accordingly, the LCO’s recommendations include both those requiring changes to the law and government policies and programs, and those addressed to other actors and intended to make the legal recommendations more effective. The LCO’s objectives are to provide a comprehensive analysis of this issue in Ontario and to make practical recommendations that can form the basis of an effective and appropriate reform to this area of law.

This Project had its origins in a 2007 visit by the judiciary to Northern Ontario. Concerns were expressed regarding the distribution of federal funds related to the residential school settlements: visiting judges heard that some individuals had paid exorbitant fees in order to cash their cheques through cheque cashing businesses. These concerns were conveyed to the LCO and were the inception of this Project, which was approved by the Board of Governors in November, 2007. The central purpose of this Project was to examine concerns about the impact of fees for cashing government cheques on low-income Ontarians. These Ontarians are likely to have reduced access to mainstream financial institutions and high fees have a substantial impact on their finances. Initiatives to address fees for cashing government cheques are likely to benefit some of the poorest Ontarians.

Concerns about cheque cashing fees are longstanding. The matter was raised in the Ontario legislature as early as 1984, and in 1992, a member of the Ontario Legislative Assembly unsuccessfully brought forward Bill 154, the Government Cheque Cashing Act, 1992, a private member’s bill that would have prohibited fees for cashing government cheques. Recently, there has been considerable research and public policy debate on the broader issues related to the Alternative Financial Services (AFS) industry, particularly payday lending. Ontario, like several other provinces, has recently passed legislation regulating payday lending (see Appendix B for key highlights of this legislation, which has not yet come into force).[1] As a result of this fresh attention to the AFS sector, issues related to cheque cashing have been receiving renewed focus. Both British Columbia and Manitoba have recently undertaken legislative initiatives to regulate fees for cashing government cheques, while other jurisdictions have taken non-legislative initiatives, such as entering into indemnity agreements with banks and credit unions to ensure immediate and cost-free cashing of government cheques. (See Appendix C for an overview of Canadian initiatives addressing cheque cashing fees.)

Issues related to the AFS industry are many and complex and the discrete focus of this Report must be emphasized. This Project did not attempt to address all of the broad public policy issues surrounding the AFS industry in general. Nor did it address the specific issues related to payday lending that have recently been the focus of significant public concern. Indeed, while payday lending and cheque cashing are often housed in the same businesses and share some similar contexts, the issues and public policy considerations they raise differ in many ways, particularly when it comes to the cashing of government cheques. The common conflation of the two services may mislead as often as it illuminates.

The LCO publicly launched this Project in March 2008 with a Consultation Paper that summarized key issues and options for reform. The Consultation Paper was posted on the LCO website, and was also sent out to over 100 stakeholders, including legal clinics, financial institutions, academics, municipal social service administrators, relevant government ministries, and community and advocacy organizations. In response, the LCO received 15 written responses from both individuals and organizations, and organized further meetings and interviews with 25 organizations. The LCO wishes to extend its thanks to all those who participated in this consultation for their invaluable contributions. A list of contributors is appended to this Report in Appendix A.

The Report is divided into four sections:

1. Key Themes and Issues: This section outlines the central elements of the context and the public policy issues to be considered.

2. Nature of the Problem: This section describes the nature and impact of cheque cashing fees, the central features of the cheque cashing industry and reasons for the usage of cheque cashing services.

3. Avenues for Reform: Many jurisdictions have already taken steps to address this issue. This section outlines initiatives that have been undertaken in other jurisdictions and analyzes their appropriateness in the Ontario context.

4. Conclusions and Recommendations: Finally, this section analyzes the issues and sets out the LCO’s recommendations for reform.

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