Finance Committee on Feb. 27th, 2024

[The Chair, Liberal, Peter Fonseca]

I call this meeting to order.

Welcome to meeting 129 of the House of Commons Standing Committee on Finance. Pursuant to Standing Order 108(2) and the motion adopted by the committee on Tuesday, January 30, 2024, the committee is commencing its study on non-prime lending and the criminal interest rate.

Today's meeting is taking place in a hybrid format, pursuant to the Standing Orders. Members are attending in person in the room and remotely using the Zoom application.

I would like to make a few comments for the benefit of witnesses and members.

Please wait until I recognize you by name before speaking. For those participating by video conference, click on the microphone icon to activate your mic. Please mute yourself when you are not speaking. For interpretation, for those on Zoom, you have the choice at the bottom of your screen of floor, English or French. For those in the room, you can use the earpiece and select the desired channel.

Although this room is equipped with a powerful audio system, feedback events can occur. These can be extremely harmful to interpreters and cause serious injuries. The most common cause of sound feedback is an earpiece worn too close to a microphone. We therefore ask all participants to exercise a high degree of caution when handling the earpieces, especially when your microphone or your neighbour's microphone is turned on. In order to prevent incidents and safeguard the hearing health of the interpreters, I invite participants to ensure that they speak into the microphone into which their headset is plugged and to avoid manipulating the earbuds by placing them on the table, away from the microphone, when they are not in use.

Just as a reminder, all comments should be addressed through the chair. For members in the room, if you wish to speak, please raise your hand. For members on Zoom, please use the “raise hand” function. The clerk and I will manage the speaking order as best we can. We appreciate your patience and understanding in this regard.

In accordance with the committee's routine motion concerning connection tests for witnesses, I am informing the committee that all witnesses have completed the required connection tests in advance of the meeting.

I would now like to welcome our witnesses. From ACORN Canada, we have Donna Borden, the national representative—welcome—and Bhumika Jhamb, the research and communications coordinator. From Prosper Canada, we have Elizabeth Mulholland, the chief executive officer.

Go ahead, Mr. Baker.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

Mr. Chair, on this, in the motion that we passed for this study on predatory lending, the committee specifically asked that the Canadian Lenders Association come to committee. Could you clarify why they're not appearing?

[The Chair, Liberal, Peter Fonseca]

I can tell you that Sacha—or Alexandre—is here, but the other Alexandre, Alexandre Roger, is not with us here today. He is the standing clerk of the committee.

I know that he makes every effort possible with all witnesses to be able to get them here. He did reach out to the Canadian Lenders Association a number of times and was not successful in being able to get the witness you had asked for to be here.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

I would just say that I'm incredibly disappointed with that for a few reasons. One is that those witnesses were in the motion. They were given notice. One of the members of that organization, I understand, had confirmed attendance as of Friday. At the last minute, they've now pulled their presence at this committee.

One of the reasons we're having this study, one of the primary reasons, is because of the unfounded allegations that these folks have put out into communities. We have low-income folks who are being taken advantage of, the folks these people represent, and for them to speak in the media and everywhere else but be unwilling to appear, especially when they were given notice and had previously confirmed their attendance, is incredibly disappointing to me.

I just wanted to make sure that you understood and that it was put on the record how disappointed I am. If we're serious about studying this issue, then these folks need to be here.

[The Chair, Liberal, Peter Fonseca]

Thank you for that, MP Baker.

I'll reiterate that I do know that our clerk makes all best efforts to be able to have our witnesses here. I know personally, having heard from Alexandre, that he did reach out to the individuals from the Canadian Lenders Association to be here. As I said, he made every effort for them to be able to appear, but they are not here with us today. We do have some other witnesses.

Go ahead, MP Chambers.

[Adam Chambers, Conservative, Simcoe North, ON]

Thanks very much, Mr. Chair.

I always enjoy the opportunity to speak to the experts. As my colleague mentioned, certain people were invited. I think we also have to recognize, notwithstanding that this winter is a little bit different from others, that it's vacation time. When we are very rigid on a date as in, you need to appear or we want you to appear on X date, and someone isn't in the country, I would submit that it would be reasonable for you as chair and the clerk to use some discretion to say that, if this is a witness we'd like to hear from, maybe we would move the date.

We programmed out the motion to be very specific that today was the day when we were having this hearing. That was set before we had any discussion with any witnesses. I can't speak to the particular details of the current situation, but if we want to have very specific requests on individuals, we may need to be a bit more flexible. I would give more flexibility to you as chair and to the clerk, to say, “This individual we really want is not available on the 27th, but they are available on this date, so can we change the motion or just have unanimous consent to move this meeting to the next meeting?”

I worry now that I don't know what the plan is for future studies on this.

Anyway let's get to the witnesses here today. I think because we were fairly rigid on the date, that prevented us from potentially hearing from witnesses we wanted to hear from. You have, at least from me, the ability to make recommendations on changing dates in the future, depending on the availability of witnesses.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Chambers, for that.

I'll just speak to that. It is up to the committee, the members, in terms of what can be done. What I went by is the motion. I looked to the team and, of course, our clerk who does an outstanding job I think for our committee, and I know he did provide flexibility, not on the date but in other ways, for the witnesses to appear. Unfortunately, they're not here with us, and that's where we are.

MP Baker.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

First of all, Mr. Chair, I don't know if the folks at the Canadian Lenders Association cited that it was vacation time when they explained why they couldn't appear. To me, this is not vacation time. This is not March break. This is not the middle of August. The folks from the Canadian Lenders Association on a full-time basis are out there advocating, spreading misinformation in the media and defending actions that are hurting the most vulnerable in our society.

They were given notice. They confirmed their appearance on Friday, so they weren't planning to be on vacation as of Friday. Suddenly they've apparently booked a vacation on Monday and Tuesday. That, to me, doesn't hold water.

I'm just expressing my disappointment because I think this is clearly a priority for them, and if it is a priority, the forum to discuss this is here when the finance committee is doing a study on the topic. That's all.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Baker.

I'm going to go to MP Thompson, but I do want to get to the witnesses we have with us today. We want to hear from them and hear their remarks, and we want to get to the members' questions.

MP Thompson.

[Joanne Thompson, Liberal, St. John's East, NL]

Thank you, Mr. Chair.

I'll be very brief. I want to note that we have the option of hybrid. CLA is not an independent witness; it is an organization. With all due respect, hybrid, even if someone is on vacation, allows for witnesses to join from wherever it is they find themselves. I think their absence today is noted and unfortunate.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Thompson. You're right. We do have the hybrid opportunity—

[Marty Morantz, Conservative, Charleswood—St. James—Assiniboia—Headingley, MB]

Mr. Chair, just on this point....

[The Chair, Liberal, Peter Fonseca]

Yes.

[Marty Morantz, Conservative, Charleswood—St. James—Assiniboia—Headingley, MB]

I did see on the notice of meeting that the Canadian Lenders Association was on the notice, but I didn't see a name of a person. I'm wondering whether they did in fact confirm they were going to be here or not. There's some confusion around that. There was never a name. Normally there's the name of the organization and the name of the individual, but the notice didn't have the name of an individual at all. It didn't have Mr. Schwartz or anyone else on it, so I just would like the clerk to confirm that they did actually have confirmation that the Canadian Lenders Association and someone from that organization would be here.

[The Chair, Liberal, Peter Fonseca]

The clerk, Alexandre Roger, is not with us here today. We have another Alexandre with us today, but he does not have that information.

What I can tell you from the information I do have is that the clerk did reach out to the principals within the organization, and they were not able to join us. That's what I can tell you.

[Marty Morantz, Conservative, Charleswood—St. James—Assiniboia—Headingley, MB]

Did the clerk or you, Mr. Chair, reach out to the Ontario police association as well?

[The Chair, Liberal, Peter Fonseca]

I don't reach out to the witnesses. It is the clerk who reaches out to the witnesses, so I do not have that information for you.

I don't believe he has, because they were not one of the witnesses that were cited within the motion.

[Marty Morantz, Conservative, Charleswood—St. James—Assiniboia—Headingley, MB]

Okay. Great.

[The Chair, Liberal, Peter Fonseca]

Now we'll go to our witnesses, who have been waiting patiently. We thank you for that, and we thank you for coming before our committee for this study.

We'll start with ACORN Canada.

Ms. Jhamb, you can start for us. I know you're sharing your time with Ms. Borden.

[Dr. Bhumika Jhamb, Research and Communications Coordinator, ACORN Canada]

That's right. Thank you so much for having us today.

ACORN is very encouraged by the federal government's decision to lower the interest rate for installment loans from 48% to 35%. ACORN's fair banking campaign has been asking for this change for years now, and we're happy it is finally happening.

The evidence, through a series of surveys and testimonies of low- and moderate-income people, refutes the claims of lenders that it helps people in any way or improves their credit scores—

[Julie Dzerowicz, Liberal, Davenport, ON]

Mr. Chair, I'm very sorry. Could you please ask our witness to slow down for our translators and even for me?

Thank you.

[The Chair, Liberal, Peter Fonseca]

We want to make sure that we hear everything you have to say, and we have interpreters here in the room to interpret English and French. If you could just slow down a bit in terms of your pace, that would be helpful.

Thank you.

[Dr. Bhumika Jhamb]

Thank you. I'm sorry about that.

ACORN is very encouraged by the federal government's decision to lower the interest rate for instalment loans from 48% to 35% APR. The evidence, through a series of surveys and testimonies of low- and moderate-income people, refutes the claims of lenders that it helps people in any way or improves their credit scores.

The latest survey by ACORN of low- and moderate-income people highlights the impact of high-cost loans to 623 community contacts. This research was funded by the federal office of consumer affairs, and the report was reviewed by distinguished professor in economics and public policy Brenda Spotton Visano.

The study shows that 80% of respondents reported stress, anxiety and depression; 72% said it resulted in even more debt; and 67% reported adverse effects on their credit score. One-third said their loans got refinanced multiple times; and the majority were highly unsatisfied with the high-cost loan.

As far as claims made by lenders that this move will impact their profit margins and the industry will cease to exist are concerned, there is enough evidence that points to the contrary. Many states in the U.S. have lowered the interest rate for a two-year, $2,000 instalment loan to 32.5% APR and to 25% APR for a five-year, $10,000 instalment loan, yet lenders continue to thrive.

Quebec is the only province in Canada that already has an interest rate cap of 35%. Goeasy, in fact, in its annual report said it will be expanding in Quebec. It also said in its annual report that the new federal interest rate will benefit Goeasy and those with scale in the long term, and it is well prepared to adapt if this federal interest rate is lowered.

Research in Alberta by El Hazzouri et al. on payday lending shows that a lower allowable interest rate did not result in decreased access to credit, nor did it result in more, riskier borrowing. Payday loans in most provinces had a fee of $21 per $100, which now stands at $15 per $100, but payday lending continues to thrive. Decreased access to high-cost credit results in much better alternatives, not riskier alternatives as the industry suggests.

The U.S.A.'s National Consumer Law Center's extensive survey of research found that once a state limits rates, in state after state, consumers are better off and find better ways to cope with financial challenges. Credit union DUCA's 2020 report on the “State of Fair Banking in Canada” notes the significant negative economic and well-being impacts of high-interest predatory lending. The report helped inspire the launch of DUCA's escalator loan, which provides access to fair credit for borrowers.

These are the kinds of models we want to support, not high-interest fringe lending.

The amount of money someone would save by taking out a $5,000 instalment loan over five years, with the rate lowered from 48% to 35%, is $2,000 and more. This is a substantial amount of money saved for those who need it most.

I'll now hand it over to Donna Borden to share her experience.

Thank you.

[Donna Borden, National Representative, ACORN Canada]

Thank you so much.

Hello and thank you for having us today.

I took out an instalment loan several years ago with CitiFinancial, which is now called Fairstone. I borrowed $10,000, paid back around $24,000 after five-plus years, and then realized that I still owed $7,000.

The lender kept renewing and refinancing my loan without my knowledge. Refinancing is a common tactic employed by these lenders so that the borrowers can never come out of the debt trap.

If there's one thing we have heard from people who have taken out these high-cost loans, it is “never again.” These lenders charge the maximum interest rate. It doesn't matter. Even after—

[The Chair, Liberal, Peter Fonseca]

We're going to have to stop, Ms. Borden.