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Air Canada accused of ‘lying’ to customers to avoid paying up to $2,100 for lost luggage

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Scott Bissell says Air Canada is “trying to get away with paying the least amount of compensation possible,” after the airline lost his luggage on a trip to Florida and initially told him it wouldn’t pay him back for clothes or any other necessities while he waited for his bag.

Under federal law, when an airline loses a passenger’s luggage on an international flight, it can be held liable for damages up to $2,100. But a Go Public investigation has found that’s not the message some inconvenienced passengers are getting from Air Canada.

When Bissell, a member of the Canadian Forces from Vernon, B.C., landed in Orlando for a family vacation on July 11, his bag was nowhere to be found. When he asked an Air Canada baggage claims agent whether the airline would reimburse him for toiletries and clothing he needed to buy, he says he was told there was no compensation available.

“It was just a full on ‘No,'” Bissell says. “I had nothing. I was in a hot city with nothing to wear except the clothes on my back.”

According to airline passenger rights advocate Gabor Lukacs, Bissell’s experience is common. He says travellers are intentionally kept in the dark about the compensation they’re entitled to when their bags are delayed or lost.

“Airlines are deceiving the travelling public,” says Lukacs, founder of Air Passenger Rights, a Halifax-based organization that fights for better protections for air travellers.

“By lying to passengers, the airline has very little to reimburse, because passengers are afraid to spend money.”

I missed the dolphins completely because I was inside on the phone.– Scott Bissell

Bissell had flown from Kelowna, B.C., to Orlando, but his suitcase didn’t make a connecting flight in Montreal.

He says he spent a lot of his vacation on the phone with various Air Canada call centre agents, trying to track down his lost luggage.

Bissell filed a missing baggage report and says he spent hours on the phone with Air Canada, but still did not receive his suitcase until three days after he returned home from his vacation in Florida. (Curtis Allen/CBC) 

“Every day I would take a couple hours out of the morning and go get new clothing and get new stuff that I needed to wear for that particular day,” he says. “From there, I would get on the phone and call the toll-free number and go through the whole process every time.”

On a boat trip with his family to see dolphins, Bissell says he spent much of the time in the cabin, repeating information to a baggage claim agent.  

“I missed the dolphins completely because I was inside on the phone.”

It wasn’t until the third day without luggage that a call centre agent mentioned he could claim “up to $300 US in expenses” — much less than $2,100 Cdn, which is the limit for reasonable expenses established by what’s known as the Montreal Convention

It’s a treaty governing international flights signed by dozens of countries, including Canada in 2003, that sets out the limits of air carrier liability.

Bissell received his luggage three days after he returned home to Vernon.  

After he submitted a written complaint and receipts, Air Canada reimbursed him just over $500 Cdn, and offered him a 20 per cent discount on a future flight, to be used within a year.

“Of course I was disappointed and disregarded [the discount],” Bissell says. “I won’t use it.”

Air Canada says it handles about 115,000 bags per day. (John Li/Getty Images)

Air Canada declined Go Public’s request for an interview. In an emailed statement, corporate communications manager Peter Fitzpatrick said, “We approve reasonable interim expenses. The limits of liability are clearly set out in the itinerary receipt each customer receives and the information is on our website.”

The information is on Air Canada’s website, but requires some searching to find.

Fitzpatrick also wrote that Air Canada handles about 115,000 bags per day and its goal is “always to have bags arrive with the customer, which is what happens the vast majority of the time.”

Though Go Public asked several times, Fitzpatrick declined to address why Bissell was first told he would not be reimbursed for clothes and other necessities and was then told he could only claim up to $300 US.

‘$50 dollars a day’

Another traveller who recently flew on Air Canada says she, too, was misled about how much compensation she could claim after the airline lost her luggage.

Suzanne Hastings-James flew from Halifax to Manzanillo, Mexico, in August, but her bag didn’t make a connection and was never delivered during her 10-day vacation.

She says an Air Canada agent told her she would only be reimbursed $50 a day for five days.

Air Canada lost Suzanne Hastings-James’s luggage and told her it would only reimburse her $50 a day for five days. (Suzanne Hastings-James)

Air Canada gave false and misleading information to this passenger in order to dissuade her from pursuing her rights,” Lukacs says.

“That is unlawful.”

Lukacs says Air Canada agents need to tell the truth when the airline loses a passenger’s luggage.

“The correct answer,” he says, “is that passengers are entitled to incur reasonable interim expenses — up to $2,100 Canadian dollars, depending on the circumstance and the purpose of their trip.”

Hastings-James submitted receipts, and Air Canada reimbursed her $292 within weeks. In a letter, the airline also offered her a $500 voucher toward a future flight.

“I did not accept it,” Hastings-James says. “I want Air Canada to accept responsibility for their negligence and apologize.”

Go Public asked Air Canada why it offered Hastings-James a maximum compensation of $250, but the airline did not answer the question.

Passenger rights advocate Gabor Lukacs says Air Canada is able to mislead customers about compensation because the Canadian Transportation Agency hasn’t issued punitive fines. (Patrick Callaghan/CBC)

Lukacs says Air Canada is misleading passengers because the airline regulator, the Canadian Transportation Agency,  is “turning a blind eye” to the issue.

“The Canadian Transportation Agency could issue fines… for misleading the public,” Lukacs says. “Yet we don’t see those fines being issued.”

When asked if that’s the case, the CTA sent a statement saying it does issue fines — more than $1.6 million worth over the past five years — but it didn’t specify whether any of those fines were related to misleading consumers about compensation for damages due to delayed or lost baggage.

To test what Air Canada agents tell passengers who have lost their luggage, ​Lukacs called a baggage claim centre four years ago and recorded the call.

After claiming he had lost his luggage, an agent told him he could only be reimbursed up to $100 US to replace necessities during the first 48 hours of his trip.

Go Public recently repeated that test, calling Air Canada’s central baggage office call centre three different times to inquire about a lost bag in Orlando. Three different agents said we could claim up to $150 US on the first day and another $50 US on Day 2.

Air Canada declined to comment on the results of Go Public’s test.

‘Goodwill gesture’

Go Public has reviewed copies of letters to passengers from Air Canada, in which the airline says it is providing compensation for lost luggage as “a gesture of goodwill.”

In October 2017, an Air Canada representative wrote to a passenger: “As a gesture of goodwill, if a passenger’s bag is delayed more than 24 hours, Air Canada will contribute towards the cost of first necessities, to a maximum of $100 USD, when substantiated with original purchase receipts.”

Paying that compensation is as much of a duty and obligation as paying taxes. It is required by the law.– Gabor   Lukacs , founder of Air Passenger Rights

Telling passengers it is a “goodwill gesture” is false and misleading, Lukacs says, because it gives the impression Air Canada is doing the passenger a favour.

“Paying that compensation is as much of a duty and obligation as paying taxes,” he says. “It is required by the law.”

He also says the law does not require that a passenger wait 24 hours before making necessary purchases.

  • Click here for information on how to file lost/delayed baggage complaint with the airline regulator

Lukacs submitted the passenger’s letter, and others, to the Canadian Transportation Agency last December.

The regulator says it has not responded, pending the appeal of an earlier decision on a similar complaint.

In that case, the CTA ruled that Air Canada had misled a customer. But it did not issue a penalty because the events that led to the finding happened in 2016, so the one-year statutory limitation had passed. Air Canada is appealing the decision.

‘Not a priority’

John Bardawill, an expert on airline customer service with the Toronto consulting firm TMG International, says part of the problem is many air carriers treat luggage handling as an afterthought.

“If you think about how you get updates on your flight schedule, and the time your flight is supposed to take off, and which gate — they don’t do that with luggage,” he says.

“Once you arrive and your luggage is missing, it’s really up to the consumer to do all the work.”

Industry consultant John Bardawill says airlines need to invest more in customer service and technology to improve baggage handling. (Evan Mitsui/CBC)

He suggests airlines spend more money developing technology so luggage can be tracked and recovered faster.

Bardawill has these tips for passengers:

  • Take a picture of your luggage before you take off. 
  • Make your luggage unique. Add a ribbon or some other trinket to make it stand out.
  • Attach a tag with your name and phone number.
  • Don’t pack valuables that aren’t replaceable.
  • Use public platforms to complain.

And if you do have trouble resolving a luggage issue with an airline, make your complaint public, he says.

“Senior executives of airlines are very sensitive now to social media.”

Airline Compensation for Lost/Delayed Luggage 

  • Up to $2,100 on international flights.
  • Up to $1,500 – $2,100 on domestic flights within Canada (depending on the airline).
  • Up to $3,500 US on domestic flights within the U.S.
  • Must file an airline complaint within 21 days.
  • Must initiate legal action within 2 years of final trip date

Source: Air Passenger Rights

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Real Estate

5 ways to reduce your mortgage amortization

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Since the pandemic hit, a lot of Canadians have been affected financially and if you’re on a mortgage, reducing your amortization period can be of great help.

A mortgage amortization period is the amount of time it would take a homeowner to completely pay off their mortgage. The amortization is typically an estimate based on what the interest rate for your current term is. Calculating your amortization is done easily using a loan amortization calculator which shows you the different payment schedules within your amortization period.

 In Canada, if you made a down payment that is less than the recommended 20 per cent of the total cost of your home, then the longest amortization period you’re allowed to have is 25 years. The mortgage amortization period not only affects the length of time it would take to completely repay the loan, but also the amount of interest paid over the lifecycle of the mortgage.

Typically, longer amortization periods involve making smaller monthly payments and having a much higher total interest cost over the duration of the mortgage. While on the other hand, shorter amortization periods entails making larger monthly payments and having lower total interest costs.

It’s the dream of every homeowner to become mortgage-free. A general rule of thumb would be to try and keep your monthly mortgage costs as low as possible—preferably below 30 per cent of your monthly income. Over time, you may become more financially stable by either getting a tax return, a bonus or an additional source of income and want to channel that towards your principal.

There are several ways to keep your monthly mortgage payments low and reduce your amortization. Here are a few ways to achieve that goal:

1. Make a larger down payment

Once you’ve decided to buy a home, always consider putting asides some significant amount of money that would act as a down payment to reduce your monthly mortgage. While the recommended amount to put aside as a down payment is 20 per cent,  if you aren’t in a hurry to purchase the property or are more financial buoyant, you can even pay more.

Essentially, the larger your down payment, the lower your mortgage would be as it means you’re borrowing less money from your lender. However, if you pay at least 20 per cent upfront, there would be no need for you to cover the additional cost of private mortgage insurance which would save you some money.

2. Make bi-weekly payments

Most homeowners make monthly payments which amount to 12 payments every year. But if your bank or lender offers the option of accelerated bi-weekly payment, you will be making an equivalent of one more payment annually. Doing this will further reduce your amortization period by allowing you to pay off your mortgage much faster.

3. Have a fixed renewal payment

It is normal for lenders to offer discounts on interest rate during your amortization period. However, as you continuously renew your mortgage at a lower rate, always keep a fixed repayment sum.

Rather than just making lower payments, you can keep your payments static, since the more money applied to your principal, the faster you can clear your mortgage.

4. Increase your payment amount

Many mortgages give homeowners the option to increase their payment amount at least once a year. Now, this is very ideal for those who have the financial capacity to do so because the extra money would be added to your principal.

Irrespective of how small the increase might be, in the long run, it would make a huge difference. For example, if your monthly mortgage payment is about $2,752 per month. It would be in your best interest to round it up to $2,800 every month. That way, you are much closer to reducing your mortgage amortization period.

5. Leverage on prepayment privileges

The ability for homeowners to make any form of prepayment solely depends on what mortgage features are provided by their lender.

With an open mortgage, you can easily make additional payments at any given time. However, if you have a closed mortgage—which makes up the larger percentage of existing mortgages—you will need to check if you have the option of prepayments which would allow you to make extra lump sum payments.

Additionally, there may also be the option to make extra lump sum payments at the end of your existing mortgage term before its time for renewal.

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Real Estate

Mortgage insurance vs. life insurance: What you need to know

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Your home is likely the biggest asset you’ll ever own. So how can you protect it in case something were to happen to you? To start, homeowners have a few options to choose from. You can either:

  • ensure you have mortgage protection with a life insurance policy from an insurance company or
  • get mortgage insurance from a bank or mortgage lender.

Mortgage insurance vs. life insurance: How do they each work?  

The first thing to know is that life insurance can be a great way to make sure you and your family have mortgage protection.

The money from a life insurance policy usually goes right into the hands of your beneficiaries – not the bank or mortgage lender. Your beneficiaries are whoever you choose to receive the benefit or money from your policy after you die.

Life insurance policies, like term life insurance, come with a death benefit. A death benefit is the amount of money given to your beneficiaries after you die. The exact amount they’ll receive depends on the policy you buy.

With term life insurance, you’re covered for a set period, such as 10, 15, 20 or 30 years. The premium – that’s the monthly or annual fee you pay for insurance – is usually low for the first term.

If you die while you’re coved by your life insurance policy, your beneficiaries will receive a tax-free death benefit. They can then use this money to help pay off the mortgage or for any other reason. So not only is your mortgage protected, but your family will also have funds to cover other expenses that they relied on you to pay.

Mortgage insurance works by paying off the outstanding principal balance of your mortgage, up to a certain amount, if you die.

With mortgage insurance, the money goes directly to the bank or lender to pay off the mortgage – and that’s it. There’s no extra money to cover other expenses, and you don’t get to leave any cash behind to your beneficiaries.

What’s the difference between mortgage insurance and life insurance?

The main difference is that mortgage insurance covers only your outstanding mortgage balance. And, that money goes directly to the bank or mortgage lender, not your beneficiary. This means that there’s no cash, payout or benefit given to your beneficiary. 

With life insurance, however, you get mortgage protection and more. Here’s how it works: every life insurance policy provides a tax-free amount of money (the death benefit) to the beneficiary. The payment can cover more than just the mortgage. The beneficiary may then use the money for any purpose. For example, apart from paying off the mortgage, they can also use the funds from the death benefit to cover:

  • any of your remaining debts,
  • the cost of child care,
  • funeral costs,
  • the cost of child care, and
  • any other living expenses. 

But before you decide between life insurance and mortgage insurance, here are some other important differences to keep in mind:

Who gets the money?

With life insurance, the money goes to whomever you name as your beneficiary.

With mortgage insurance, the money goes entirely to the bank.

Can you move your policy?

With life insurance, your policy stays with you even if you transfer your mortgage to another company. There’s no need to re-apply or prove your health is good enough to be insured.

With mortgage insurance, however, your policy doesn’t automatically move with you if you change mortgage providers. If you move your mortgage to another bank, you’ll have to prove that your health is still good.

Which offers more flexibility, life insurance or mortgage insurance?

With life insurance, your beneficiaries have the flexibility to cover the mortgage balance and more after you die. As the policy owner, you can choose how much insurance coverage you want and how long you need it. And, the coverage doesn’t decline unless you want it to.

With mortgage insurance through a bank, you don’t have the flexibility to change your coverage. In this case, you’re only protecting the outstanding balance on your mortgage.

Do you need a medical exam to qualify? 

With a term life insurance policy from Sun Life, you may have to answer some medical questions or take a medical exam before you’re approved for coverage. Once you’re approved, Sun Life won’t ask for any additional medical information later on.

With mortgage insurance, a bank or mortgage lender may ask some medical questions when you apply. However, if you make a claim after you’re approved, your bank may ask for additional medical information.* At that point, they may discover some conditions that disqualify you from receiving payment on a claim.

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5 common mistakes Canadians make with their mortgages

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This article was created by MoneyWise. Postmedia and MoneyWise may earn an affiliate commission through links on this page.

Since COVID-19 dragged interest rates to historic lows last year, Canadians have been diving into the real estate market with unprecedented verve.

During a time of extraordinary financial disruption, more than 551,000 properties sold last year — a new annual record, according to the Canadian Real Estate Association. Those sales provided a desperately needed dose of oxygen for the country’s gasping economy.

Given the slew of new mortgages taken out in 2020, there were bound to be slip-ups. So, MoneyWise asked four of the country’s sharpest mortgage minds to share what they feel are the mistakes Canadians most frequently make when securing a home loan.

Mistake 1: Not having your documents ready

One of your mortgage broker’s primary functions is to provide lenders with paperwork confirming your income, assets, source of down payment and overall reliability as a borrower. Without complete and accurate documentation, no reputable lender will be able to process your loan.

But “borrowers often don’t have these documents on hand,” says John Vo of Spicer Vo Mortgages in Halifax, Nova Scotia. “And even when they do provide these documents, they may not be the correct documentation required.”

Some of the most frequent mistakes Vo sees when borrowers send in their paperwork include:

  • Not including a name or other relevant details on key pieces of information.
  • Providing old bank or pay statements instead of those dated within the last 30 days.
  • Sending only a partial document package. If a lender asks for six pages to support your loan, don’t send two. If you’re asked for four months’ worth of bank statements, don’t provide only one.
  • Thinking low-quality or blurry files sent by email or text will be good enough. Lenders need to be able to read what you send them.

If you send your broker an incomplete documents package, the result is inevitable: Your mortgage application will be delayed as long as it takes for you to find the required materials, and your house shopping could be sidetracked for months.

Mistake 2: Blinded by the rate

Ask any mortgage broker and they’ll tell you that the question they’re asked most frequently is: “What’s your lowest rate?”

The interest rate you’ll pay on your mortgage is a massive consideration, so comparing the rates lenders are offering is a good habit once you’ve slipped on your house-hunter hat.

Rates have been on the rise lately given government actions to stimulate the Canadian economy. You may want to lock a low rate now, so you can hold onto it for up to 120 days.

But Chris Kolinski, broker at Saskatoon, Saskatchewan-based iSask Mortgages, says too many borrowers get obsessed with finding the lowest rate and ignore the other aspects of a mortgage that can greatly impact its overall cost.

“I always ask my clients ‘Do you want to get the best rate, or do you want to save the most money?’ because those two things are not always synonymous,” Kolinski says. “That opens a conversation about needs and wants.”

Many of the rock-bottom interest rates on offer from Canadian lenders can be hard to qualify for, come with limited features, or cost borrowers “a ton” of money if they break their terms, Kolinski points out.

Mistake 3: Not reading the fine print

Dalia Barsoum of Streetwise Mortgages in Woodbridge, Ontario, shares a universal message: “Read the fine print. Understand what you’re signing up for.”

Most borrowers don’t expect they’ll ever break their mortgages, but data collected by TD Bank shows that 7 in 10 homeowners move on from their properties earlier than they expect.

It’s critical to understand your loan’s prepayment privileges and the rules around an early departure. “If you exit the mortgage, how much are you going to pay? It’s really, really important,” Barsoum says.

She has seen too borrowers come to her hoping to refinance a mortgage they received from a private or specialty lender, only to find that what they were attempting was impossible.

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