Archived - Management Response and Action Plan

In their evaluation report, KPMG/ITnet find that, although the mandate and policies of the Retail Debt Program are consistent with federal government roles, responsibilities, and priorities, there is no valid economic rationale for the Retail Debt Program in its current form on the basis that:

• The Government of Canada can meet its financial needs at lower cost on the wholesale market;
• The Retail Debt Program is not a net source of funds for the government, since it is necessary to borrow on the wholesale market to fund the net Retail Debt Program yearly redemptions; and
• There is currently only a very limited need for the Retail Debt Program from the perspective of the Canadian public as the proliferation of alternative insured retail debt instruments leave virtually no market void unaddressed.

The evaluation report states that it is doubtful that the Retail Debt Program could return to cost effectiveness given the low interest rate environment combined with high and increasing administration cost per unit (i.e., due to retail debt stock declining faster than its administration costs).

The report describes the Retail Debt Program business practices and service delivery methods as satisfactory, including service levels, marketing and communications activities, management and operational procedures, and sale and redemption practices.

Lastly, the overall governance framework for the Retail Debt Program is deemed to be aligned with leading practices.

KPMG/Itnet’s primary recommendation is that the Retail Debt Program be wound down in an orderly fashion. Their fall-back recommendation is to streamline distribution so that sales are made exclusively through the cash sales channel (i.e., banks, dealers and direct).

The table below contains the recommendations from the KPMG/ITnet evaluation, along with corresponding management responses and planned actions.