Finance Committee on June 19th, 2006

[Sheila Fraser]

In February 2007.

[Paul Crête, Bloc, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Based on your experience, if it gets your recommendations in February, will the government have time to incorporate them into its next budget?

[Sheila Fraser]

The government should have the audit findings before the holidays.

[Paul Crête, Bloc, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

If the government wants to take them into account in preparing its response, it could announce in the next budget that it will be taking steps, if there are recommendations.

[Sheila Fraser]

Assuming the next budget is tabled in the spring of 2007.

[Paul Crête, Bloc, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Yes. We are totally in the dark here. Thank you.

[The Chair, Conservative, Brian Pallister]

Madam Fraser, would you like to make some concluding comments?

[Sheila Fraser]

I'd just like to thank you, Mr. Chair, and the committee for inviting us to appear today.

As we mentioned, we haven't done a lot of work on the specific authorities that were granted to the agency, but certainly what we've seen on the board of management and the audit committee, and on some of the other accountability provisions, has been positive. In the course of your hearings, if there are issues that come up that you would like us to consider in our forthcoming audits on human resource management, we would certainly be glad to consider them.

[The Chair, Conservative, Brian Pallister]

Thank you.

On behalf of the committee, I know we all appreciate your cooperation and your testimony today, and the ongoing work that you do. Thank you for your openness and your frank responses today. We appreciated having you here.

[Sheila Fraser]

Thank you.

[The Chair, Conservative, Brian Pallister]

We will now move to committee business. We have three items, and we will start with Madam Wasylycia-Leis and her motion.

Would you like to make some comments on it?

[Judy Wasylycia-Leis, NDP, Winnipeg North, MB]

Thank you, Mr. Chairperson.

This motion is in response, first of all, to the rapid growth of payday lenders in all of our communities, and the commensurate lack of regulations to help control this area in terms of consumer protections. A number of attempts have been ongoing at the federal-provincial level to try to find a way to solve this and to provide some sort of regulatory framework. They haven't produced much fruit to date, so a number of provinces have started to review this area on their own, and one of them is Manitoba. It has proposed legislation to control issues around rollover loans, with a definition of payday loans, cooling-off periods, and so on, and to do it through an established agency—in this case, the Manitoba Public Utilities Board.

But in order for a province like Manitoba to proceed, it needs a change to the Criminal Code that sets aside section 347 of the code. Provinces like Manitoba, with legislation ready to roll and a plan for regulating the industry, and who have actually requested an exemption from the Criminal Code on payday loans, do require commensurate action at the federal level.

So all I'm asking is that we send a motion to the House asking the Minister of Justice to amend the Criminal Code at an early date to make this possible for provinces like Manitoba and indeed for others that are starting to follow, like British Columbia.

[The Chair, Conservative, Brian Pallister]

Just for clarification, Madam Wasylycia-Leis, you have a motion calling on us to recommend to the Minister of Justice, but you said in your comments that you wished us to make a recommendation to the House. Which of those two—

[Judy Wasylycia-Leis, NDP, Winnipeg North, MB]

Sorry, I'm assuming that a motion from this committee is reported to the House.

The motion itself is to ask the Minister of Justice to amend the Criminal Code to provide for the exemption of payday loans from section 347 of the Criminal Code in circumstances where provincial regulation of the payday lending industry has been established, and a request for such an exemption made.

[The Chair, Conservative, Brian Pallister]

Is there discussion?

Mr. McKay.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Why is it necessary to repeal a section of the Criminal Code in order for a province to regulate in the field? Is this a constitutional issue?

[Judy Wasylycia-Leis, NDP, Winnipeg North, MB]

The Criminal Code sets a criminal rate of interest for payday lenders. Any of the regulatory frameworks being proposed by provinces like Manitoba will in fact require a way to compute the rate of interest, along with all the other administrative fees, which could end up being more than the criminal rate of interest in the code. In fact that's one of the problems that we face right now: the criminal rate of interest in the code can mean nothing when these payday lenders can in fact find ways to add all kinds of administrative and other charges to the actual loan, making the interest rate somewhere in the neighbourhood of over 1,000%. So in order to have a reasonable scheme, we need that exemption from the Criminal Code to address that concern.

[The Chair, Conservative, Brian Pallister]

Ms. Ablonczy.

[Diane Ablonczy, Conservative, Calgary Nose Hill, AB]

Mr. Chairman, with respect to this motion, my question would be this. How can the provinces regulate payday loans if there is in fact no enabling legislation to make it a criminal offence, allowing penalties to be applied, etc.?

[Judy Wasylycia-Leis, NDP, Winnipeg North, MB]

The provinces have responsibility for this area right now, from the point of view of consumer protection.

In this case, Manitoba would like to more proactively pursue it. In order to do that, however, as it sets up a framework, it has to make adjustments to the actual fees being charged. The sum total of that may exceed the criminal rate of interest. Therefore, in order to proceed to regulate and apply the framework, which has already been established and is spelled out in a bill awaiting passage at the legislative level in Manitoba, it needs change at the federal level in terms of the criminal rate of interest.

[The Chair, Conservative, Brian Pallister]

Mr. McKay, and then Mr. Crête.

[John McKay, Liberal, Scarborough—Guildwood, ON]

The Criminal Code applies to a universal set of behaviour, and it's not payday loans. It's effectively usurious loans of any kind, regardless of whether they're payday loans or any other kind of loan.

I don't quite understand why you would carve out a specific section of the Criminal Code. You would be in effect eliminating a section of the Criminal Code that would apply only to payday loans but not to other forms of usurious loans. Is that correct?

[Judy Wasylycia-Leis, NDP, Winnipeg North, MB]

That's correct.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Okay. I think the figure is generally about 57%. A usurious loan could be 57% and criminally sanctioned, but we could say that a payday loan is 100% and not criminally sanctioned. I don't quite understand where the equity would be in that kind of a scheme.

The second question has to do with the fact that you're effectively asking for one province to be exempted from the application of the Criminal Code. The Criminal Code is a universal statute. How can you do that?

[The Chair, Conservative, Brian Pallister]

Madam, for the committee's purpose and for your purpose, I'll propose a friendly amendment to give clarification on this.

In the motion, you say: “That the Standing Committee on Finance, pursuant to Standing Order 108(2)....” I would insert “report to the House recommending”.

Is that fine for the amendment? Is it acceptable to you?