House of Commons Hansard #44 of the 40th Parliament, 2nd Session. (The original version is on Parliament's site.) The word of the day was cards.

Topics

Opposition Motion--Finance
Business of Supply
Government Orders

4:55 p.m.

NDP

Jean Crowder Nanaimo—Cowichan, BC

Madam Speaker, the track records of both the current government and the previous Liberal government are grim. New Democrats in the House have been raising issues around consumer protection for a number of years. I just need to reference the payday loans, which is another scandalous aspect of lack of regulation.

We need some solid consumer protection regulation put in place so that consumers can have some confidence that when they engage in a transaction, they are actually getting fair and reasonable interaction between themselves and the credit card companies.

Opposition Motion--Finance
Business of Supply
Government Orders

4:55 p.m.

Bloc

Robert Carrier Alfred-Pellan, QC

Madam Speaker, first off, I would like to point out that I will be sharing my time with the member for Jeanne-Le Ber.

I am pleased to speak today to the motion by the New Democratic Party to introduce comprehensive legislation relating to the problem of credit cards.

Bearing in mind consumer vulnerability in the current crisis, the Bloc supports the motion. However, when the government introduces this legislation, it will have to make sure it respects the areas of jurisdiction of Quebec and the provinces. In Quebec, consumer protection legislation has been in force since 1971. It sets out strict requirements regarding contracts for credit cards of all sorts. It will be important therefore to respect Quebec's expertise and jurisdiction. Once again, the Quebec nation has taken the lead over the Canadian federation in protecting its merchants and its consumers. In addition, the organization known as Option consommateurs sees that the rules are followed.

In order to understand the development of credit cards, we have to understand the principle of habit, almost obligation, created by the major credit card companies.

And what of Quebeckers' and Canadians' financial situation? It is true that debt is a major problem in the country. According to a survey done by the Certified General Accountants Association of Canada in the spring of 2007, 84% of Canadians reported being in debt, 14% of all Canadians reported a significant increase in their debt and, most notably, 40% of Quebeckers and Canadians in debt believe that their debt hurts their chances of being financially secure in the event of unforeseen circumstances. In the spring of 2007, the current recession was just starting. The current government did not even realize that there was a recession. Let us not forget the remarks by the Prime Minister during the 2008 election campaign.

The level of Canadians' and Quebeckers' personal savings has decreased hugely since the 1980s, dropping from a high of 20.2% in 1982 to a low of 1.2% in 2005.

It is true that the spread between the Bank of Canada's key lending rate and credit card interest rates is growing. To help Canadians and Quebeckers, the Bank of Canada lowered its key lending rate several times to today's level of 0.25%, the lowest in Canadian history. Recession oblige, you might say.

In the case of the major credit card companies, a credit card should be a matter of choice for individual consumers, but is that really the case? Just try to book a hotel room without a credit card. This is just one example.

Because of cuts by the federal government to transfers to the provinces, Quebec has had to cut funding to home economics organizations, many providing information on credit.

However, business oblige, and the major credit card companies, MasterCard and Visa, not to mention any names, are working miracles to make access to supposedly easy credit all the easier, but in tandem with a rate of interest to consumers often over 20%. Consumers increasingly use credit cards as a method of payment. We should therefore expect credit card charges to drop.

Despite increased volumes of sales, reduced fraud, lower interest rates and improved technology, credit card rates continue to rise. It seems that the main problem involves information and awareness about the benefits and the risks of credit.

A survey by Nanos Research has revealed that 55% of Canadians have a poor understanding of the costs of credit cards—63% think that the charges increase without a corresponding increase in terms of value and 67% think that the credit card companies do not explain their charges clearly.

Another survey ordered by the Canadian Federation of Independent Business shows that 82% of Quebec card holders support having the credit card industry more strictly regulated.

And what about merchants? The credit card companies charge those who accept a credit card from customers doing business with them. Approximately 10¢ is currently charged merchants on average for each debit transaction, regardless of the amount of the purchase. Credit card transactions average $45 per transaction. The credit card companies are preparing to increase transaction fees charged retailers. The consumer does not see these fees. They currently represent about 2% regardless of the amount of the transaction. Applying a hypothetical charge of 1% would represent, then, 45¢, an increase of over 400%. Who, but the consumer, do you think, is going to pay this dizzying increase?

On top of that, Canadian retailers have higher hidden costs than do retailers in other industrialized countries. True, the major banks and financial institutions reap a significant profit from this. In 2007, alone, the fees amounted to $4.5 billion in Canada.

Most credit cards are issued by a limited number of companies. Visa and Mastercard control close to 85% of the credit card market, and this gives them total freedom to impose charges and conditions on retailers. One might therefore wonder whether the hikes in hidden fees might not be a sign of abuse of a dominant position. In order to ensure that there is no abuse by issuing companies, the Bloc Québécois contacted the Competition Bureau this past January in order to have the commissioner examine the issue. The Bureau's powers are limited, however.

This is why the Bloc Québécois introduced a bill to reinforce the Competition Act during the last parliament, Bill C-454. That bill would have given the Competition Bureau the power to carry out its own real investigations into the industry. At the present time it cannot, on its own, do more than general studies that have no clout. With its own investigations, it will be able to summon witnesses and protect them. If the companies conspire together on price-fixing, they will leave no proof of having done so.If witnesses cannot be summoned and protected, it is very likely that no anti-competitive practice will ever be proven. When businesses want to enter into agreements with their competition, they will have to prove that such agreements are in the public interest. At present, these agreements with competitors are allowed, unless it can be successfully proven that they are contrary to the public interest.

This is not all the Bloc Québécois has done. Following on representations by the Quebec coalition of merchants opposed to the increase in transaction fees on credit and debit cards, my colleague from Saint-Maurice—Champlain and I got the following motion passed by the Standing Committee on Finance.

That the Finance Committee conduct a study of the various debit and credit card transaction fees imposed on merchants as well as the standard and transactional practices that justify them and report its observations and recommendations to the House.

This study will be undertaken shortly, in the next few weeks. It will make it possible to hear from a number of witnesses as well as various stakeholders. This will enable the committee to formulate its recommendations to the government. These could then serve as the basis for the legislative measure called for in the motion presented today by the NDP.

As I said, the Bloc Québécois is therefore in favour of the motion, because consumers need legislation to ensure they are protected. The Bloc will, however, ensure that this legislative measure introduced by the government fully respects the jurisdiction of Quebec and the provinces.

Opposition Motion--Finance
Business of Supply
Government Orders

5:05 p.m.

Bloc

Thierry St-Cyr Jeanne-Le Ber, QC

Mr. Speaker, I am pleased to speak today on this NDP opposition day regarding the motion presented by the member for Sudbury.

The Bloc Québécois supports, in principle, the motion that is before us today, that the government should take action to protect consumers who are particularly vulnerable in tough economic times.

However, when the government introduces legislation of this nature, as we sincerely hope it will, we will make sure that it is respectful of the jurisdiction of Quebec and the provinces in this area.

I would note that in Quebec we have had the Consumer Protection Act since 1971, and that this act governs contracts between credit card issuers and consumers. It will therefore be important for both Quebec’s jurisdiction and Quebec’s expertise in this regard, which is considerable, to be taken into account.

I would like to point out, and I will come back to this later if time permits, that in 2007 the Supreme Court denied a financial institution leave to appeal in a case involving one of the largest exemplary damage awards in the history of Quebec. That decision affirmed a decision of the Quebec Court of Appeal, and confirmed Quebec’s jurisdiction and its ability to protect consumers in their dealings with credit card issuers.

I will not read the motion before us in full, but we do agree that debt is a major problem in Canada and we find it surprising, to say the least, that the gap between the Bank of Canada’s key lending rate and credit card interest rates is continually growing, when we might have thought, given the rising numbers of all sorts of cards being widely used by consumers, that competition should be narrowing the gap. Surprisingly, the reverse is happening.

It is also true that the big banks and financial institutions are making large profits from that gap, and even though a few of the items in the NDP motion do not all come within the jurisdiction of the federal government, we believe it is worthwhile for the federal government to take action in relation to matters within its own jurisdiction in this regard.

On that point, item (a) in the motion before us talks about a measure that would “protect consumers from ‘any time, any reason’ interest rate increases and account changes”. That could provide a useful starting point that would, in this case, come under the jurisdiction of the federal government.

We have long said that the federal government could look into linking the credit interest rate to the Bank of Canada's key lending rate with reference to the criminal rate in section 347 of the criminal code, which would better synchronize the cost of credit and the usual rate of interest. In other words, rather than having the criminal rate in section 347 set in absolute terms, we think the government should look into making it relative, if you will, to the key lending rate of the Bank of Canada.

Since I referred to it earlier, I would like to elaborate on the matter of provincial jurisdiction. Everything that concerns local business and civil law comes under the jurisdiction of the provinces and Quebec. So the companies issuing credit cards are subject to the rules of consumer protection contracts in each jurisdiction.

The legislation on consumer protection sets out many strict requirements specifically governing credit cards of all kinds. Section 118, for example, defines variable credit and raises the issue of credit cards. Section 126 provides that a company issuing a credit card must send a statement of account to consumers setting out a number of points I will not mention here, but which are described quite explicitly in the legislation.

Section 128 provides that a company issuing credit cards may not increase the limit of the variable credit, called usually a line of credit or credit limit, except at the express request of the consumer. That is very important, and I will come back to that. For example, it is provided that notice of any change to the terms of a variable credit contract must be sent at least 30 days before it takes effect. So we can see that there are regulations in Quebec to protect consumers and that the Government of Quebec can, if it wishes, continue to legislate in this area. We believe, however, that the federal government could also do its part in its own areas of jurisdiction, as I mentioned earlier.

A number of examples of class actions are currently before the courts in Quebec against the practices of financial institutions contravening the Consumer Protection Act. I will come back to this later. I would, however, like to give a few examples of practices considered dubious. The typical example is that of over credit limit fees.

American journalist Bob Sullivan wrote a book on the hidden fees paid by American consumers. Practices in Canada are similar in many respects. Hidden fees include the famous over credit limit fees. The problem lies in the fact that the companies issuing credit cards now allow consumers to exceed the limit of the credit card rather than simply refusing the transaction. They subsequently charge the over credit limit fee. In the United States, the fees run between $10 and $35, which is similar to such fees in Canada. Within my own circle, someone mentioned this problem to me. I was stunned to learn that an institution could charge fees when, in a way, it was the negligent party since it had allowed the credit limit established under contract to be exceeded.

In 2004 and 2006, Option consommateurs launched a class action suit against certain financial institutions which issued credit cards. Their suit was against financial institutions which had made unilateral decisions to raise customers' credit limits and to allow people to exceed their limits by imposing over-limit charges, fortunately an offence under the Consumer Protection Act. I would emphasize that what was “fortunate” was that this practice is banned by the consumer legislation, and not the non-compliance with the law by certain companies. I am sure that was understood by everyone.

So, in November 2006 and October 2007, this class action was allowed by the Superior Court against the following financial institutions: Amex Canada and the Bank of Nova Scotia for over-limit charges to customers; Canadian Imperial Bank of Commerce, Citibank Canada, HSBC Canada, MBNA Canada, and the Bank of Montreal, for both raising credit limits without the cardholder's consent and for imposing over-limit fees. The National Bank of Canada was also included for increasing credit limits.

According to Option consommateurs, the purpose of this class action was to obtain the reimbursement of illegally charged fees and exemplary damages.

In closing, it might be worth pointing out that the consumer protection bureau states in its Internet site that:

The merchant or financial institution cannot raise the credit limit, if there is one, except at the express request of the cardholder. The mere fact that the consumer exceeds his or her original credit limit by making a purchase or purchases does not constitute an express request within the meaning of the act.

The class action is still underway and we wish good luck to all those involved .

I will not have time to discuss excess late payment charges. I will simply point out that it would be appropriate, in these difficult economic times, for the government to pass legislation on this. That is why we are supporting the NDP motion.

Opposition Motion--Finance
Business of Supply
Government Orders

5:15 p.m.

Conservative

Mike Wallace Burlington, ON

Mr. Speaker, I thank the members on the Bloc side who have commented on today's motion. I am a little confused, to be honest, about why the Bloc is supporting this motion today. Even the last member, in his speech, talked about Quebec jurisdiction. Normally in this House when there is an issue that Bloc members think is only Quebec's jurisdiction, they vote against it. Then the next item, whether they think it is good for Quebec or not, they vote for it. They are either for Quebec or they are not; it just depends. They kind of float around, and we are not really sure on this side what they stand for.

The previous speaker from the Bloc talked about transfer payments. We have not cut transfer payments to Quebec. In fact, they have increased by 40% during our government. That is a tremendous amount of support for that province, as it deserves.

Transfer payments for health care went up 6%, transfer payments for social services went up 3%, and we have no intention of cutting those in the future. I know things are tough.

My question is this: Do they not find that is a conflict of their own belief system, that they are here to represent Quebec's interests and are voting for a motion that deals with a federal issue, or is it really a federal issue and they have finally come to realize that they are part of a united Canada?

Opposition Motion--Finance
Business of Supply
Government Orders

5:15 p.m.

Bloc

Thierry St-Cyr Jeanne-Le Ber, QC

Mr. Speaker, my colleague had many questions. As for his questions about the speech by the previous Bloc member, I am surprised that he did not take the time to ask them after his speech. He would surely have had some very appropriate and appreciated answers.

With regard to jurisdictions, it is true that the Bloc Québécois defends tooth and nail the responsibilities and jurisdictions of the Quebec government. The motion before us does not say that the federal government must meddle in the jurisdictions of Quebec, but that we must examine the issue and that legislative measures should be introduced. When these legislative measures are presented, we will ensure that they do not interfere in the exclusive jurisdictions of Quebec and the provinces. That is what I said throughout my speech.

However, my colleague is quite right when he shows the limitations of Canadian federalism and the difficulties faced by Quebeckers in making their own decisions and their own choices because they do not control all the levers of power. He clearly demonstrated that sovereignty remains the best option for Quebec.

Opposition Motion--Finance
Business of Supply
Government Orders

5:20 p.m.

NDP

Jim Maloway Elmwood—Transcona, MB

Mr. Speaker, my comment is directed as much to the previous Conservative questioner as it is to the member who just spoke.

A number of years ago I remember being in the United States and putting a number of charges on my credit card, only to find out, when I got my bill, there were some extra charges that were not spelled out and seemed to be excessively high. When I contacted the credit company, I found out that there was an extra charge for currency conversion. I do not know whether anyone is aware of that.

That is an issue, and I am still not certain it has been resolved as far as information is concerned. Whenever I go to the United States, it is still never spelled out on my credit card statement that there is an extra hidden fee of what I believe is 1%, 2% or 3% for conversion. Everyone should be aware that this is a practice that credit card companies have been doing for a long time. Nobody knows about it. I contacted the company, and it did admit that there is a fee for conversion--

Opposition Motion--Finance
Business of Supply
Government Orders

5:20 p.m.

Conservative

The Deputy Speaker Andrew Scheer

I must stop the hon. member there to allow time for a response.

The hon. member for Jeanne-Le Ber.

Opposition Motion--Finance
Business of Supply
Government Orders

5:20 p.m.

Bloc

Thierry St-Cyr Jeanne-Le Ber, QC

Mr. Speaker, credit card companies are real pros when it comes to hidden fees. Technically, these fees are explained in tiny, pale grey characters on a white background on the back of the contract, but nobody actually understands them. Here is another classic example: if someone misses a—

Opposition Motion--Finance
Business of Supply
Government Orders

5:20 p.m.

Conservative

The Deputy Speaker Andrew Scheer

Order, please. It being 5:23 p.m. pursuant to an order made earlier today all questions necessary to dispose of the opposition motion are deemed put and a recorded division deemed requested and deferred until Monday, April 27 at the expiry of the time provided for government orders.

Message from the Senate
Government Orders

5:20 p.m.

Conservative

The Deputy Speaker Andrew Scheer

I have the honour to inform the House that a message has been received from the Senate informing this House that the Senate has passed certain bills.

Message from the Senate
Government Orders

5:20 p.m.

Conservative

David Sweet Ancaster—Dundas—Flamborough—Westdale, ON

Mr. Speaker, I think if you were to seek it, you would find unanimous consent to see the clock at 5:38 p.m.

Message from the Senate
Government Orders

5:20 p.m.

Conservative

The Deputy Speaker Andrew Scheer

Is there unanimous consent to see the clock at 5:38 p.m.?

Message from the Senate
Government Orders

5:20 p.m.

Some hon. members

Agreed.

Message from the Senate
Government Orders

5:20 p.m.

Conservative

The Deputy Speaker Andrew Scheer

It being 5:38 p.m. the House will now proceed to the consideration of private members' business as listed on today's order paper.

The House resumed from March 11 consideration of the motion.