Soaring interest rates in 1981 and 1982 were very damaging for small owners of rental buildings and owners of apartment buildings.
Some had to borrow, also at high rates, against other assets they had, the money they needed to fill the gap imposed by this sudden hike in the interest rates. I remember a real estate transaction involving two rental properties with 12 apartments in which the vendor, already choked by his mortgage lender, a bank, one of the big six, had to pay out $56,000 in dollars of the time in interest penalty for breaking his mortgage. In the United States, the federal law on housing provides that no penalty may be charged for breaking a mortgage, and yet the American economy seems to be in good shape.
In the face of the outcry against such abuses, the Minister of Finance had asked bankers to take themselves in hand and show a human face to their mortgage borrowers. How pure of the minister. Taxpayers were nevertheless understanding and, as always, reacted calmly to the problem. Because of a lack of political will on the part of the Liberals of the time, they as usual bore the entire cost of the mess.
Since then, interest rates have been civilized, although recently, because of the collapse of the Mexican currency, we are told, they have tended to rise. When interest rates dropped recently to 5.25 and 5.5 per cent per annum, this was the time for the party in power to act. The situation that existed in 1982-83 had evaporated. There was therefore no way the banks could be taken by surprise now. Last summer, the banks paid 2, 2.5 and 3 per cent on term deposits and charged 5, 5.25 5.5 per cent on loans.
You know, Mr. Speaker, 2,500,000 people are having to deal with a mortgage in Canada at the moment. They are held hostage by financial institutions and the market, not just by the financial institutions, but by fluctuations in the market. This is becoming distressing, and it affects our economy, not always predictably, but certainly noticeably.
Outraged, Mr. Speaker? Yes indeed, and here is why. Private members' bills are first drawn at random. The bill before us, Bill C-273, has passed that stage. A private member's bill is next referred to a sub-committee on private members' business, comprising a majority of Liberals and Reform Party members and a single member from my party.
This committee decides whether the bill will receive a simple one hour debate, as in the present case, or whether it is to be voted on. If it is decided that it will only get an hour's debate, the whole matter is dropped at the end of that hour, it is is history, over and done with. If, however, this committee decides that it will be put to a vote, then the parties can express their opinions, debate it and, after three hours of discussion, the member's bill is put to the vote.
There is no doubt that if a majority of members in the committee is afraid that a member's bill may be passed into law, they assess the impact on their constituents, their supporters and, indeed, on their financial backers. In that case, it is either
debated for three hours or referred for an hour's debate like this one.
There is no need to spell it out. If it were passed, the bill before us would cause the banks to lose huge sums which they now collect in penalties.
Last November, these poor banks declared overall profits of $4.3 billion at the end of their fiscal period, no doubt after having made provisions for bad debts and withheld taxes owing; $4.3 billion, imagine that.
Why did the Sub-Committee on Private Members' Business, in which our friends opposite and beside us call the shots, oppose putting the bill before us to a vote? Could it possibly be because the six big chartered banks each contributed an average of $250,000 to the Liberal Party of Canada during the last election campaign? One might think so.
This obscure committee did not include the interests of the Canadian taxpayer in its decision, but only those of its financial backers. There you have the results of politicking, an art the Liberals have mastered.
Reform Party members are learning quickly too now that they are aiming to form the next government. God forbid! For Canadian taxpayers, the lesson to be learned in all of this is that, if a vote is sure to be won, you are the last ones to be considered.
I would like to warn the members who are in the majority in this committee about their attitude in this case. I plan to send to all regional and national newspapers in their ridings a copy of Hansard including this debate, so each and every one of them will have to explain why they refused to put the bill before us to a vote.
Coming back to the bill, I can see right away from the reaction of my colleagues opposite that they will claim such a measure might harm certain investments. I rather doubt that and I shall tell you why.
At present, a loan granted for more than five years can be repaid in advance provided that a sum equal to three months' interest is added to the capital and interest due. For a few years now, however, the Bank of Montreal has given out loans for seven years or even more.
Nor is there any validity to the argument that such a procedure would mean that individuals who invest their savings for the long term in banks would lose money. If people want to get a relatively high return for their investment dollar, a return that is competitive with bank rates, they can always buy Canada, Quebec, Ontario or other savings bonds, or municipal bonds. Municipalities are not known for the bad habit of reimbursing their debts before the end of the term. Therefore, these people will nevertheless be paid the interest that they are entitled to receive.
Section 93 of the consumer protection act that took effect in Quebec in 1976-77, I believe, prohibits any creditor from demanding from a consumer any payment in addition to that which is due on the day of payment-the act makes no mention of mortgages, because the Interest Act falls under the jurisdiction of the federal government.
Therefore, as long as you are not a business person, because the Consumer Protection Act only applies to individuals, no penalty will apply if you pay off your television or car early. This did not prevent finance companies, business people in Quebec from doing business. What may have slowed them down more was the negative impact that a provision of the Interest Act had on Canada's economy in general.
When people who could get other financing elsewhere are compelled to go to the end of their mortgage terms or pay astronomical amounts, that could hurt the province's and the country's economy, in my opinion.
In 1976, the Hon. Anthony Abbott of the Liberal Party, the predecessors of the people on the other side of the House, introduced Bill C-16. This bill was a "providing for" bill. It provided for the protection of borrowers and depositors, for the regulation of interest rates on judgment debts and was to repeal the Interest Act. Since 1867, the Interest Act had not been substantially amended and had only been changed to include the Northwest Territories and the Yukon. The bill, which probably was killed through pressure from lobbyists, big banks or some other source, proposed to cancel or repeal the Interest Act.
Clause 15 of that bill provided that any borrower who pays off early all or part of the principal of a mortgage under the preceding subclause is not obliged to pay, on the early payment, the greater of the penalties stipulated in the loan agreement-i.e. in the contract-the penalty payable being the lesser of the interest payable for a period of three months or the interest which would have been payable if the loan had run to its term.
In other words, the lesser amount of the two; a maximum of three months' interest or less than that amount, if in fact a shorter period was left on the term. And that penalty was to be calculated on the amount of the early payment at the interest rates applicable to the loan.
When I introduced my bill, I was not aware that this bill had been introduced in 1976. I discovered it when I was doing my research. This bill does not come from the Social Credit Party of Canada, the party of infinite love or the transcendental meditation party; it comes from the Liberal Party, from the people sitting opposite us. Why did they renounce their principles?
What has happened to that party since then? Did they get contaminated by the Reform Party? I know that they are against.
If a group in Canada has been penalized by the measures in the Interest Act, it is the western farmers. As we know, western farmers are expecting large payments. Do they get paid when they sell their crops or do they rely on their various insurance policies or on income stabilization plans? I do not know. But the fact is that they sometimes have to wait a while before they receive their money. In the meantime, they have to secure their loans by taking out a mortgage. Since they need money to tide them over for a certain time, they borrow from the banks.
They are perhaps among those hardest-hit in Canada because of the large amounts they borrow on a regular basis, almost annually, while waiting to receive the amounts owed them.
I am disappointed because I sincerely believed that, political games aside, this bill was aimed at protecting for once-it is not much, just once-ordinary people who have trouble paying their mortgage. I thought that all members of this House, whatever their party, would automatically look after the interests of ordinary people, of those who allowed them to sit opposite us. But they were fooled once again by powerful lobbies and monopolies putting pressure on them and saying, "Listen, I do not want to lose my $4.3 billion".
According to press reports, it will probably be worse next year because of the economic recovery. Their net profits may exceed $4.3 billion. Of course, together they can give $1 million, $1.5 million or $2 million to the party that can promise them not to touch the Interest Act, so they do not lose astronomical amounts in penalties like those they lost, I gather, unfairly.
I also wanted to table this bill for my constituents in the riding of Chambly for whom I worked for 15 years as a notary, handling transactions and mortgages. I saw some of them leave my office with tears in their eyes. I saw people who could no longer make their payments put the key on my desk and tell me, "Please give it to the bank manager; I am going to rent an apartment in Montreal because I can no longer make my payments". I saw that in 1982 and 1983. It was heartrending.
When I decided to go into politics, one of the promises I made to the people of Chambly was to try to persuade the government to amend this act, which struck me as inhuman, as Mr. Lalonde, the finance minister at the time said, but then he asked the banks to implement their own controls. It is a bit like asking a fox, who has already made it into the henhouse, to eat only a few. It is like turning the blood bank over to Dracula. It amounts to almost the same thing.
I say to the people of Chambly, at least I have tried. Those of you who are watching can see that I have tried to change things. I am disappointed that it did not pass. And it was because of ignorance, the wish to do nothing of certain of my colleagues, most of them, unfortunately, from the party in power. I say to them that we will not give up, and that we will try again, perhaps at a time when they are less worried about their corporate constituents, the banks, and come back to the charge with a similar bill.
