Professor Gail Henderson’s research looks into how consumers are protected and informed about financial products, and how banks are regulated.

What got you interested in the intersection between law and financial regulation?

I was doing research in Ireland on the Irish banking crisis in 2008. I originally approached the situation from a corporate governance angle – when the Irish government guaranteed the liabilities of the local banks and building societies, they said they want to make sure these organizations were not engaged in risky activities on the backs of the taxpayer. So, they appointed public interest directors to keep an eye on the way the banks were being governed. 

In studying that crisis, I realized the way banks are regulated is so essential to the average citizen’s daily life. It’s not a very popular area of research – it is very technical and has been more dominated by economists and finance scholars. 

My work on the potential role of public interest directors on Canada’s big six banks led me to connect with Professor Jerry Buckland, who has become a frequent collaborator, including a recently-completed project on Group RESPs and an ongoing project on financial empowerment.

What is a group RESP?

If you open an RESP at a mainstream bank, you put money in as you’re able to. Maybe you have a scheduled payment, but you could change that at any time. It’s just your money in the account.

When you sign up to a group RESP, you commit to a certain amount – a certain number of units – and making contributions on a monthly or annual schedule. The appeal of the group RESP is that the monthly payments can be very small – less than $10 per month per unit. They are heavily marketed to low and middle-income Canadians.

The risk with a group RESP is that if the investor drops out of the plan, or their kids don’t attend post-secondary education, the earnings on their investment are redistributed to the other investors in the plan. Group RESP promoters also charge an upfront fee which you won’t get back. You would just get back your contributions.

Group RESPs predate the tax benefits associated with RESPS – at one time, this was the only option. When they were originally conceived, it was more of an insurance product. They were marketed at a time when fewer people went to university, so you were insuring against the risk that your kid would pursue post-secondary education. 

Now they are sold as an investment product to increase savings for post-secondary education. The problem is the additional risks of a group plan. If you can’t make the payments, you could lose out on the money paid towards the upfront fees, plus the earnings on your contributions. 

Also, if you drop out of the plan, the government takes back the grants it has added to your contributions and some of those government grants can’t be re-earned. So, they are very risky for low- and middle-income Canadians, particularly those with volatile incomes who might not always be able to make the monthly payments.

The marketing of group RESPs is also very aggressive. Sometimes, salespeople approach new parents in the hospital. Group RESP salespersons will offer to visit new parents at home, where they use high-pressure sales tactics. Group RESP promoters have been sanctioned by the Ontario Securities Commissions because these tactics are illegal under Ontario securities laws. 

These products are also very complicated – I read the prospectuses, and it took me all summer! The rules have changed a bit in recent years, but I would still say they are a predatory financial product.

Why do predatory financial products tend to target lower-income Canadians?

I think it is primarily because they are less likely to have an established relationship with a bank, and therefore be aware of, or have access to, other options. 

What is the financial empowerment project?

The Financial Empowerment project is a five-year SSHRC Insight Grant-funded project in which we ask participants to track their finances and share this information with us over the course of a year. It’s based on the U.S. Financial Diaries project. Professor Buckland is the principal investigator. 

The project aims to draw on the experiences of low-income Canadians and see how that lines up with the initiatives of government and the non-profit sector to improve their financial well-being and the rules that are supposed to protect them.

My role in the project is looking at the legal side of things, such as the regulation of access to a basic bank account, payday loans, tax advances, group RESPs, installment loans, prepaid credit cards, and all those services that fall outside of mainstream banking, which are more likely to be relied on by low-income Canadians.

I look at how those are regulated and how well low-income Canadians are protected from more onerous terms and the regulation of the cost of those products, which tend to be high cost.

Most of us take for granted that we have a credit card in the event of an unexpected expense. But if you don’t have a credit card, or if you can’t get one due to your income or credit history, and you have an unexpected expense, your ability to obtain credit some other way can be very expensive.

Tell us about your financial literacy work with Professor Pamela Beach in the Queen’s Faculty of Education.

Our focus is on financial literacy education materials produced by the financial services industry and whether the key themes and messages in these materials are different from those produced by individuals, government or non-profit organizations. 

We’re also gathering data on whether Ontario elementary teachers are incorporating financial literacy education into their classrooms and if so, how they do so and where they access materials.

Why did you make the switch from private practice to academia?

I enjoy being able to spend the time thinking about policy questions, particularly questions about financial consumer protection and investor protection, and the best answer to those questions. 

How have you enjoyed living in Kingston?

Kingston has been great. It is a bit of a homecoming for me, as I grew up in Brockville.

On your Twitter bio, you mention wanting to teach a course about sports law someday. Tell us about the course.

This would be my dream course. In law school, we tend to separate subjects out into silos – tax, corporate, tort, municipal, personal injury – so this would be a way to, under a common theme, show how these fit together. If you’re in-house counsel for a professional sports team, or owner, for example, you have to think about all these issues – municipal, zoning, liability for players and fans, intellectual property. 

I also have an interest in corporate social responsibility, and there is an intersection between corporate social responsibility and professional sports leagues – you’re seeing concerns about future liability, player mental health … and there is a connection between mental health and financial health. 

Financial literacy is a big issue for professional athletes, and there has been some work in some leagues to educate its players on what to do with their money. All their earnings are up front in their early years – how do they invest the money, make sure it lasts, and not get taken advantage of? 

What are you reading and watching these days?

I read about the consequences of our growing income and wealth inequality, the financialization of the economy, and how low- and middle-income families and individuals cope with those changes in the economy. 

There is also the recent Supreme Court decision around a national securities regulator, so we’ll see if there is any movement. I think it will be helpful to have a regulator with more resources for enforcement to tackle securities fraud. I will be talking about that in my classes this term.

I tend not to watch law or finance shows – you see those shows and go, “This is not how this works in the real world!” If I am watching TV, it’s sports – primarily baseball and basketball. I see the Raptors going further this year, though the Western Conference looks tough to beat.

By Phillip Gaudreau