Procedure and House Affairs Committee on Nov. 1st, 2012

[Scott Armstrong, Conservative, Cumberland—Colchester—Musquodoboit Valley, NS]

Thank you.

[The Chair, Conservative, Joe Preston]

Madame Latendresse.

It's your time to say something nice about Mr. Reid.

[Voices]

Oh, oh!

[Scott Reid, Conservative, Lanark—Frontenac—Lennox and Addington, ON]

The word I was looking for was “dedicated”, by the way. We'll correct the record to reflect that.

[The Chair, Conservative, Joe Preston]

Go ahead.

[Alexandrine Latendresse, NDP, Louis-Saint-Laurent, QC]

Thank you very much, we appreciate that.

Thank you for having come here to testify.

You explained earlier that loans always involve risk management. Consequently, you are aware of the risk that a candidate may not be able to reimburse a bank loan after a campaign. In the context of Bill C-21, however, that becomes a presumed contribution to the campaign.

What consequences could this have? As we know, banks cannot fund either candidates or campaigns.

[Marion Wrobel]

My understanding is that when there is an obligation to repay, which is the case when financial institutions make a loan, should that default, it is not a deemed contribution.

Is that correct?

[Anthony Polci]

Yes. In our initial read of the legislation...many years ago, in a previous version, that was something we looked at a little more carefully. It seems that the way it is structured—a loan agreement is an obligation to pay, that sort of thing—it's been designed not to have a lending institution find itself suddenly having made a contribution. It's to protect against that.

[Alexandrine Latendresse, NDP, Louis-Saint-Laurent, QC]

The purpose is not to criminalize certain things, but indeed to take money out of politics.

That is basically what I wanted to find out.

I am going to yield the rest of my speaking time to Mr. Scott.

[Craig Scott, NDP, Toronto—Danforth, ON]

This has been an extremely useful period already. It also indicates why it could be really important to hear from some individual financial institutions, including some co-ops and the caisse populaires, just to dig down a bit deeper into how individual banks would think about this in their lending decisions. I'll just put that on the record for our own purposes.

Something else to put on the record is that in my own experience in the NDP, our limit for nomination races is a little bit lower than that. I just want to make sure not everybody thinks that people are running for $12,000 to $20,000. It was $5,000 for my by-election.

You said something very interesting, Mr. Wrobel. You said “at least getting the money back”. That's a slightly different concept from making a significant profit. If the banks were to know that on balance they're not going to lose money, that begins to sound a bit like a public duty point of view. I'm wondering if that's what you intended.

[Marion Wrobel]

We were talking about lending to the non-profit sector. It's up to an individual institution to determine what interest rate it charges to individual customers and non-profits.

Financial institutions, banks, make loans to those they expect can repay them. The question was referring to “on balance”. Loans are not made to sectors. They're not made to the political process. They're made to individuals, whether households, businesses, or campaigns, with the expectation that each time a loan is made, it will be repaid, not that it works out on balance. The expectation is that each loan is repaid and profitable.

[Craig Scott, NDP, Toronto—Danforth, ON]

If the committee has any written questions after we've studied your testimony, would you be willing to assist us in that respect?

[Marion Wrobel]

Of course.

[The Chair, Conservative, Joe Preston]

I have no one else left on my list.

Mr. Garneau, by all means.

[Marc Garneau, Liberal, Westmount—Ville-Marie, QC]

I just wanted your impression with respect to somebody who may be an independent when they run. We met with the Chief Electoral Officer. When that question came up.... If you're running as an independent, the bill basically said it's going to be tough.

What is your feeling with respect to an independent who doesn't have the backing, of course, of an association or even a party? Would you agree that that person, all other things being equal, is at a bit of a disadvantage?

[Anthony Polci]

There was the question I answered earlier about nomination contestants and leadership campaigns, where there are fewer tools available in terms of rebates and things. I think the same would apply in that instance. They don't have a rebate through a party backing or a riding association backing, which would be a factor in assessing a loan. It doesn't mean an independent candidate wouldn't necessarily be eligible for a load, because there have been independents in the House of Commons who have been elected as an independent. Again, it comes down to their ability to pull together a successful and viable campaign.

[Marc Garneau, Liberal, Westmount—Ville-Marie, QC]

Thank you.

[The Chair, Conservative, Joe Preston]

I'll go to Mr. Gill while I wait for Mr. Williamson to go back to his seat.

[Parm Gill, Conservative, Brampton—Springdale, ON]

Thank you, Mr. Chair.

I'm just trying to understand the whole thing, as I guess all the other members are on this. My question is if somebody is able to get 20 people to sign a $1,200 guarantee each and walks into the bank and says, “Here, I have 20 people who are signing up for a $25,000 loan”.... If it's not necessarily worthwhile for the bank or the institution, they may still say, “No, sorry, we are not interested because of all this paperwork that we have to do.” Is that the understanding I have?

[Marion Wrobel]

Or a response might be “This is administratively cumbersome. It is expensive. The cost of that will be reflected in the cost of the loan.” Ultimately the borrower will pay for that. There are couple of ways an institution can react to that.

[Parm Gill, Conservative, Brampton—Springdale, ON]

But there is a possibility that they may still turn it down. Even after, let's say hypothetically, the candidate decides to pay that extra cost, the institution can still easily say, “Sorry, it's not really worth our while.”

[Marion Wrobel]

We can't predict what an individual institution will do in a particular circumstance. As I said before, institutions do not want to lose money on loans. At the same time, they do not want to pass up the opportunity to make money on loans. If there are ways in which they can recover their costs, presumably they would do that. But I can't guarantee what bank A will do or what bank B will do.

[Parm Gill, Conservative, Brampton—Springdale, ON]

Right. Even though $1,200 isn't necessarily a huge amount, how long would you say the bank may take to evaluate the 20 guarantors in terms of their worthiness of guaranteeing that loan? I walk into the bank today and say, “Okay, here are the 20 people willing to guarantee my loan. It's $1,200 each. I need this loan as soon as possible.” Can you give us some sort of a timeframe on—

[Marion Wrobel]

You are asking a very specific question about how the process would work in a bank, and we're not qualified to answer the details of that question.

[Anthony Polci]

But I would say that your question is legitimate given the concerns we have raised. It does speak to the administrative complexity. This is the whole point. Why does a guarantor exist? It's to backstop the loan so that ultimately if there is a default from the principal person, you would go to that source for funding. This is where you ask if it's practical. I can't pull a number out of the air where the practicality stops. That is the question that a bank will have to consider. Can an institution go to 20, 30, or 40 guarantors to collect on the loan that is in default? That puts into question, from our perspective, the practicality of it.