Evidence of meeting #59 for Procedure and House Affairs in the 39th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was amendment.
A recording is available from Parliament.
11:30 a.m.
Liberal
Marcel Proulx Liberal Hull—Aylmer, QC
Thank you, Mr. Chair.
I have just a quick question, Mr. Dewar. The way I understand this, if we accept NDP-2, a bank that wanted to lend money at a bank rate of less than 1% above prime rate could not. Is that the idea of this amendment?
11:30 a.m.
NDP
Paul Dewar NDP Ottawa Centre, ON
For the purposes of this legislation, this is what the formula would be, yes.
11:35 a.m.
Liberal
11:35 a.m.
NDP
Paul Dewar NDP Ottawa Centre, ON
No, no, let's be clear. This is a floor we're building here, not a ceiling.
11:35 a.m.
Liberal
Marcel Proulx Liberal Hull—Aylmer, QC
Then I don't agree, Mr. Chair, and will be voting against it.
Thank you.
June 18th, 2007 / 11:35 a.m.
Liberal
Karen Redman Liberal Kitchener Centre, ON
Thank you, Mr. Chair.
I was just going to make exactly that point. Despite the fact that Mr. Dewar thinks the paperwork will be onerous, I would submit that it absolutely will be when this bill passes.
This is a floor, it's not a ceiling, so you may well have people who have rates that are at this floor. You've established it at prime plus 1%. There may well be people who are getting prime plus 3%. That reporting mechanism is going to kick into place anyway, because everybody will not have the same rate of return.
I see very little advantage in establishing the floor.
11:35 a.m.
NDP
Paul Dewar NDP Ottawa Centre, ON
I'd just like comments from our panel on this. We're hearing different things. Maybe some clarity would be helpful.
11:35 a.m.
Conservative
11:35 a.m.
Counsel, Legislation and House Planning, Privy Council Office
I'd just like to point out that in the bill proposed subsection 405.5(1) starts with the following:
405.5 (1) Except as permitted under this section, no person or entity shall (a) make a loan
So the rate of interest charged is one of the conditions that must be met in order for the loan to be permitted under this section. We are in fact talking about an offence if the financial institution makes out a loan below the rate of interest specified in the act.
Right now it's a fair interest rate. Under the NDP proposal, it would be a minimum set rate of prime plus 1%.
11:35 a.m.
Director of Operations, Legislation and House Planning, Privy Council Office
Perhaps for further clarity, there was some mention made that if a rate was set below that, the difference would be treated as a contribution. That is not the case. It's simply that the loan would be illegal, and it would be subject to the offence provisions.
11:35 a.m.
Liberal
Marcel Proulx Liberal Hull—Aylmer, QC
I just want to make sure I understand Mr. Chénier and Mr. McDougall.
What you're saying is that a bank could not charge less than a fair market rate of interest. It doesn't say anywhere that it cannot be 1%, or 0.5%, or 0.75% above prime rate. As long as it's above prime rate, as long as the bank is not lending money without any profit, there's nothing you can do to touch them in terms of this being an illegal loan, right?
11:35 a.m.
Counsel, Legislation and House Planning, Privy Council Office
Right now, according to the bill, it has to be at fair market value.
11:35 a.m.
Liberal
Marcel Proulx Liberal Hull—Aylmer, QC
Sure, fair market value, but there are loans made every day at prime plus 0.5% or—
11:35 a.m.
Counsel, Legislation and House Planning, Privy Council Office
That's right. It's an assessment that the bank makes according to the degree of risk it's willing to accept.
11:35 a.m.
Liberal
Marcel Proulx Liberal Hull—Aylmer, QC
Okay, but that therefore means it doesn't have to be 1% above prime. It could be 0.5% above prime. Therefore, NDP-2 would be forcing a minimum charge above rate.
Again, I'm against it, Mr. Chair.
11:35 a.m.
Conservative
The Chair Conservative Gary Goodyear
Thank you.
Any further comments on this amendment?
I think we're ready for the question on NDP-2.
(Amendment negatived)