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Presidents Choice Financial Case Study

PC Financial: A case study in credit score confusion

Last month, we learned that PC Financial --the financial arm of Loblaw Companies Ltd.--transformed its insurance practice into a brokerage. We also learned that credit scores might play an important role in the company's auto quotes--and practice that might be illegal.

June 17, 2010

On its website, PC Financial offers a quote generator that provides the lowest price available from its carrier partners–The Dominion of Canada Insurance Co., Aviva Insurance Co. of Canada, Elite Insurance Co., et al. It’s based on a series of questions that ultimately provide a price for a year-long policy, once the customer answers all questions.

One query is in relation to credit scores. It asks: Would it be OK for the insurance company to use the customer’s credit score, claims history and other items to build the quote?

The answer to this particular questions seemed to impact the price. When answered “yes,” the policyholder was quoted $824. But answering “no” a second time around, he was quoted $996.

Judging from documentation from the Financial Services Commission of Ontario (FSCO), this might be illegal. FSCO says, “Insurance companies are not to use criteria prohibited for rating or underwriting purposes as a basis for differential treatment in the quoting, application or renewal process.”

But it isn’t cut and dried. PC Financial says the difference in quotes could be due to a number of factors that are grouped with credit scoring–when the customers says “no” to the credit scoring question he is telling the carrier to ignore all of those other factors as well, not just the credit score. Another issue: Are PC Financial’s partners necessarily incorporating credit scores? The company does say the information will only be used “as permitted by law.” In some parts of the country, it’s perfectly OK for carriers to consider credit scores in auto. Elsewhere, it isn’t. Since PC Financial plans to serve numerous locations (the brokerage only served Alberta and Ontario at press time), it’s possible that in the reporter’s case–an Ontario situation–credit scores weren’t applied at all.

PC Financial says it’s off the hook. “FSCO has a bulletin, No. A-01/09, and that applies to insurance companies,” says the company’s communications director Karren King, referencing FSCO’s all-call to the industry last year: if you’re using credit scores in your auto rates, you have 60 days to cease and desist; it’s illegal. “That bulletin reflects FSCO’s view on the regulatory requirements applicable to insurers as it pertains to the use of credit and other information. Like all other independent brokers, we trust that the insurers with whom we do business comply with legal and regulatory obligations.”

In other words, if there’s a problem, it doesn’t belong to the brokerage.

Although FSCO’s position seems clear, its mandate isn’t. “There’s a debate right now that the regulator has the authority to regulate over the binding process–applying the rate to a policy,” says Randy Carroll, CEO of the Insurance Brokers Association of Ontario (IBAO). “But they don’t have the authority to regulate the rate for a quote.”

It’s confusing–is PC Financial presenting quotes that illegally incorporate credit scores or not?

New insurance industry regulations might help clarify the situation. According to a press release from the Ministry of Finance, the department is putting forth 17 consumer protection measures that include “clarifying that certain objectionable quoting practices are prohibited, including using credit scoring to determine whether a driver is insurable or how much to charge a driver for auto insurance.” The government expects to make the proposals into laws this summer.

© Copyright 2010 Rogers Publishing Ltd. This article first appeared in the April 2010 edition of Canadian InsuranceTop Broker magazine.

TORONTO -- How President's Choice Financial customers will be affected by the creation of Simplii Financial, a new brand from CIBC, which will absorb the accounts of some two million current PC Financial account holders.

Question: What's changing?

Answer: CIBC has provided the back-end banking services for PC Financial for nearly 20 years, but the companies said Wednesday they are going their separate ways after a brief transition period. Simplii will take over customer accounts starting Nov.1. PC Financial says everyday banking will continue without interruption.

Q: What types of accounts will move from President's Choice Financial to Simplii?

A: Everyday banking products, including savings, chequing, RRSP, TFSA and mortgage accounts, will be provided by CIBC under the new Simplii Financial brand. However, customers do not need to change information -- such as automated bill payments or direct deposits -- related to their current accounts. There are no changes to the terms and conditions of mortgages, but they will operate under a new name.

Q: What types of account will stay with President's Choice Financial?

A: President's Choice Financial will focus on payment and loyalty programs through its MasterCard credit card products and the PC Plus loyalty program. PC Financial MasterCards are not affected by the changes.

Q: What about the points?

A: It depends on the customer account. After Nov.1, PC Financial users will no longer earn PC points on their debit cards or for the first payroll or pension direct deposit to their bank accounts. But there are no changes for current PC Financial MasterCard holders, who will continue to earn and redeem PC Plus points. Customers who applied or refinance a fixed rate mortgage with PC Financial prior to Aug. 16, 2017, will receive the same amount of PC points on their mortgage advance date.

Q: What will happen to customers' PC Financial debit cards?

A: CIBC will send new debit cards to customers between Nov.1 and Apr. 13, 2018, to replace their current PC Financial cards. Until then, customers can continue to use their current debit card.

Q: Can Loblaws customers still collect PC points when grocery shopping?

A: Yes, the PC Plus program is separate from PC Financial and will continue. PC Financial customers will remain members of the PC loyalty program.

Q: Will PC Plus and Optimum be separate loyalty programs?

A: At this point, the PC Plus and Optimum loyalty programs will operate separately.

Q: When will the transition be completed?

A: CIBC says banking services will be rebranded as Simplii starting Nov.1. PC Bank says the full transition will be completed by April 13, 2018. Banking pavilions and ATMs will be removed from stores in stages beginning in November.

Q: Will current PC Financial customers get new account numbers?

A: No. Account details remain the same.

Q: Will current PC Financial customers get two sets of statements, from Simplii and PC Financial?

A: PC Financial MasterCard holders will continue to receive statements as they do today. But banking customer statements will come from the new CIBC brand as of Nov .1.

Q: Will Simplii have any kiosks, signage or automated teller machines in Loblaw-owned stores after the transition?

A: No.

Q: How will customers access their accounts under Simplii?

A: They will continue to have free access to over 3,400 bank machines across the CIBC network, as well as over the phone, online, and through a mobile app.

Q: Will there be toll-free numbers or web portals to answer questions from consumers?

A: Yes. PC Financial says to call 1-888-723-8881.

Q: In the case of a dispute over details, where can consumers go for a resolution?

A: PC Financial says customers should call 1-888-723-8881.

Sources: PC Financial, a division of Loblaw; CIBC.

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