Bill C-26 (Historical)

An Act to amend the Criminal Code (criminal interest rate)

This enactment amends the Criminal Code by exempting persons from the application of section 347 of that Act in respect of agreements for small, short-term loans. The exemption applies to persons who are licensed or otherwise authorized to enter into such agreements by designated provinces that have legislative measures that protect recipients of payday loans and that specify a limit on the total cost of those loans.

Criminal Code

[André Bellavance, Bloc, Richmond—Arthabaska, QC]

Mr. Speaker, I must thank my colleague from Laval who has just spoken with such eloquence that it will be difficult for me to follow her example during the next 10 minutes. She has very well described the debate and exposed the problem with Bill C-26, while defending the interests of Quebec, of Quebeckers, and of those unfortunate Canadians who are obliged to rely on these kinds of payday loans across the country, but not so much in Quebec. I will have an opportunity to explain that during my remarks.

I am pleased to be able to speak to Bill C-26 for the purpose of condemning it. This bill amends the Criminal Code with respect to a criminal interest rate and seeks to regulate the payday loan industry.

While on the surface it may appear praiseworthy, the bill contains what is known as a hidden defect. I imagine that among the 308 members of this House, there are some who know people who have bought a house and discovered after several weeks or months that the vendor had hidden, knowingly or otherwise, some defect in the house. In the end, those people realize that they should not have paid so much for their home. That is what is known as a hidden defect.

It is the same thing with this bill. Upon initial examination, it appears to be good. However, we notice that there is a serious problem that, in my opinion, has unfortunately been seen over and over, ever since the Bloc Québécois has been here in this House, and which probably also existed before our arrival. Mr. Speaker, during your time in office, I imagine that you have heard these arguments all day long throughout the parliamentary session. Once again, it is an invasion by the government into the jurisdictions of Quebec and the provinces. There is the problem. There is the hidden defect in Bill C-26.

Obviously, for political reasons, they will say that we are in favour of this kind of industry and that we do not want to help unfortunate people to escape from this trap, and so forth. Let it be clearly understood that we recognize the need to attack this new form of exploitation of the most vulnerable workers. We do not dispute that goal; far from it. However, why should the federal government control what Quebec already does well and, in fact, does better than what the provisions of this bill would bring about?

That is the problem. As my colleague from Laval said earlier, the Prime Minister, because of his veto, can decide to impose whatever he wants in this regard on Quebec and the provinces. Obviously, this is a serious problem.

As I said, there is nothing inherently wrong with wanting to regulate the payday loans industry more closely; it is a good thing. However, the way in which it is being done is still problematic in our view. It must be pointed out that the provisions in the Criminal Code and the Interest Act do not at present specifically regulate this new form of loan, which actually came into being in the 1990s. This is quite a recent practice. It is therefore reasonable for this Parliament to want to put some thought into the question. This is a fact of life—these payday loans we are all talking about—that is affecting growing numbers of western countries, including Canada.

Today—and this was undoubtedly less common in the past—a person can have a regular job, a wage, but still be living in poverty. This is a fact of life today, even in 2007. People have to use the services of these companies, whose practices may be questionable, including the high cost of loans, unfair collection practices and high interest rates. This what a person has to deal with when they do business with this kind of company. When someone starts to use the services of this kind of business, they are often taking the first step in the vicious cycle of poverty. It is not just an individual who suffers as a result; an entire family may suffer from this situation.

In my opinion and the opinion of the Bloc Québécois, the government should put some thought into this phenomenon rather than infringing on the jurisdictions of Quebec and the provinces. A few days ago, my colleague from Trois-Rivières said that she had looked into this matter. She also gave an excellent speech on Bill C-26 right here in this House. She cited statistics released by Statistics Canada, from which we learned that there are in Canada, at present, 1.3 million more poor households than there were 25 years ago. The government has failed to stem this epidemic of poverty, if you will forgive the expression; the opposite has occurred. The fact that there are growing numbers of poor people is one of the consequences of the proliferation of this kind of business. In Canada, 1,300 of these companies have been identified. There are very few in Quebec.

That is why we have to make a distinction, with what is happening in Quebec at present and the reason why we do not want the federal government to stick its nose into what is happening in Quebec. Quebec has succeeded in stemming the problem of the proliferation of these businesses.

There is also the Canadian Payday Loan Association, with 22 member companies that currently manage 850 service outlets throughout most of Canada. At present, there are none in Quebec.

In the past there has been this sort of company in Quebec, as elsewhere. There used to be even more of them in Quebec. That is why at some point the police, with the help of the Office de la protection du consommateur du Québec, decided to look into it. It was a chance to clean up these companies, especially those involved in loansharking, and they disappeared. That does not mean that pawnbrokers do not exist. Unfortunately, again because of poverty, people are forced to take their precious belongings—a television set, a sound system or even their children’s sports equipment—so that they can get a bit of money to buy groceries some weeks. It is easy to imagine what happens because of the high interest rates if the money is not paid back. People unfortunately lose their valuable item.

This still exists and it is too bad. We should look into it and also make sure that these people are not involved in usury.

Quebec has already put in place some tools to oversee and regulate this sort of industry by means of its Consumer Protection Act. Under this law, the interest rate must be indicated in loan contracts, and all charges are included in the annual rate. Charges for opening a file, for forms and so on cannot be added on. Jurisprudence has also established that annual rates of interest above 35% are excessive. I would remind the House that the current Criminal Code sets this rate at 60%. In Quebec, it is set at 35%.

The first thing Bill C-26 does is enshrine the definition of payday loan in the Criminal Code. The exemption mechanism—and that is where the problem lies—is twofold in design. First a province must be designated by the federal government in order to be exempt from the application of section 347 of the Criminal Code and section 2 of the Interest Act so that they do not apply to its payday loan industry. To be designated, the province must apply and meet certain conditions, those infamous conditions. Such designation may also be withdrawn unilaterally when the conditions are no longer met to the liking of the federal government. Another example of Ottawa knows best. This is the precisely where the problem with this bill lies. The member for Sault Ste. Marie said earlier he did not see any problems with this bill, but this is where there is encroachment on the provinces’ areas of jurisdiction.

I would like to remind the members that the Bloc Québécois is defending the Government of Quebec's position. Quebec's government believes that by making an exemption subject to compliance with the conditions, the federal government is clearly encroaching on a provincial area of jurisdiction. As I said earlier, Quebec is already regulating this industry without having to report to the federal government. I would like to remind the members that Quebec's maximum interest rate is 35%, not 60% as set out in the Criminal Code.

We are against Bill C-26. That said, we are not against it because we support payday lending, a business that, unfortunately, is proliferating almost everywhere in Canada but less so in Quebec. That is not the case at all. We are against it, but we believe that Quebec has the right to regulate the commercial practices of businesses within its jurisdiction, and that the federal government should not veto this in order to apply the legislation.

The federal government certainly has the power to set the maximum legal interest rate. However, it does not have the jurisdiction to regulate industries' business practices.

In closing, thanks to its Consumer Protection Act, Quebec already regulates this industry and prohibits unreasonable practices. That is why we find that Bill C-26 offers nothing new or good for Quebec, which is already equipped to deal with this situation. We do not need the federal government's veto or its encroachment on another area of jurisdiction. Enough is enough.

[Nicole Demers, Bloc, Laval, QC]

Mr. Speaker, I am pleased to rise today in this House to debate Bill C-26.

I will be sharing my time with the member for Richmond—Arthabaska, my worthy and eminent colleague, who always comes to the defence of the farmers. He does so in this House and outside it as well, in the ridings and throughout the regions.

I rise in this House to debate Bill C-26 because we in the Bloc Québécois support neither the bill nor the principle of it. I know of no industry that would ask government to legislate a restriction on its profits. My colleague alleged that the industry needed regulation. Regulation of the consumer industry is a provincial and territorial and local business matter. It does not come under federal government jurisdiction.

The aim of the bill, as I read and understand it and as I examine it like my Bloc colleagues, is to amend the Criminal Code, which already contains provisions to restrict the charging of usurious interest rates. Businesses operating in this type of industry want rates higher than those currently in effect under the Criminal Code.

I am not here to protect people represented by other MPs or the people of Canada. MPs will decide what legislation is needed to support their fellow citizens and protect them as required. We must not forget that 547,000 Canadians work for minimum wage and it is primarily they who need payday loans and make use of this industry.

The industry is well entrenched throughout Canada, except in Quebec. Why? Because in Quebec the government has passed legislation in this regard. Rates of interest have been set below the usurious rates charged elsewhere in Canada, well below the figure of 60%. We must keep this in mind.

Quebec passed this legislation because it is entitled to do so under its authority to legislate to protect its citizens, so that all consumers are well protected against an industry that is abusing its power and making money at the expense of the poor.

That is how I see it. It is an industry that makes money at the expense of the poor and, at present, it is primarily the industry that is pressuring the government to reconsider this legislation. That is wrong. Members have to realize that we must not give in to lobbying by the industry and that we must respect those who elected us to this House. We must provide the best framework for our citizens. Once again, this the is a provincial responsibility.

Furthermore, if we accept this bill as it is now written, we will be opening the door to a great danger. The bill states that the federal government would have the right of oversight and veto regarding provincial and territorial legislation. Imagine that the Prime Minister in this House decides to examine Quebec's legislation. We decided that an interest rate of 60% was too high and the Prime Minister could say that he does not agree. Would all Quebeckers have to pay what the rest of Canadians have decided to pay? That is not right. We have established rules to protect our citizens. That is precisely why it is important that we not adopt this bill. It meddles directly in areas of provincial and territorial jurisdiction.

Since the government was elected, the Prime Minister has been making very public speeches claiming he wants to limit encroachment on provincial and territorial jurisdiction. Yet this bill does just the opposite, giving the federal government even more powers than before. Does that make sense? I am asking you, Mr. Speaker. I realize you cannot answer me, but I know that you have been thinking about this and coming to the conclusion that what the government is doing does not make sense.

I hope my colleagues will also give this some thought and come to the same conclusion that when we legislate, when we decide to bring in a new law, that law has to represent as many people as possible, the interests of as many citizens as possible, the interests of citizens who do not have a voice.

That is why we are here. We are not here to represent industry, though we often do so when it is in our best interest. We defend industry when our citizens have jobs they want to keep and when they have the right to work.

Our first duty is to the citizens who elected us as members of Parliament. We must remember that as we discuss this bill in the House. We have discussed it over the past few days. I hope my colleagues will remember that.

I hope they will remember that the people who use this kind of service are society's poorest—the ones earning minimum wage. If we give people the opportunity to borrow money from these places, they will sink deeper and deeper into a cycle of debt from which they will have a very hard time escaping. We must remember that.

Payday lending is short term lending involving unsecured loans for small sums of money—a few hundred dollars for a couple of weeks.

Lenders require that the borrower provide a cheque so that they can get their money as soon as the borrower is paid. Earlier, the claim was made that people earning minimum wage do not have access to banks. But if they are able to write a cheque to pay a loan, then they must have a bank account. We therefore need to work with the banks to make sure these people have access to loans at much lower, much more reasonable rates. Interest rates on personal loans, consumer loans, currently range from 6% to 7%, nowhere near the usurious rates payday lenders charge.

Even the Consumers' Association of Canada is very concerned. Yet the background information on this bill says that it is at the request of the Consumers' Association of Canada and the people who use this type of company that the government is introducing legislation to amend the Criminal Code on criminal interest rates. This legislation has served Canada well to date, but Quebec has more restrictive legislation.

All consumers will lose because of this legislation. The Consumers' Association of Canada understood this. And if the Consumers' Association of Canada understood this, why are we having so much trouble understanding it? If an association that represents so many people properly, effectively and professionally understood it, why are the members who are here to represent their constituents' interests having so much trouble understanding it? The association even believes that the industry is calling for this amendment for its own benefit.

Consumer protection is within the jurisdiction of the Government of Quebec and the provinces. That is why I would ask all my colleagues in this House to think carefully before giving in to pressure from payday loan companies. I would ask them to think about all their constituents who could become trapped in this cycle of debt. We must be very careful. This bill is not what it purports to be. This bill will not help the public. It will help the payday loan companies.

The House resumed from February 5 consideration of the motion that Bill C-26, An Act to amend the Criminal Code (criminal interest rate), be read the third time and passed.

[Paul Szabo, Liberal, Mississauga South, ON]

Mr. Speaker, the government has again seen fit to reintroduce another bill, which was introduced by the previous government, on payday loans. I believe we will find there is some extensive support for this because of the implication it has to ordinary Canadians.

A payday loan is a short term loan for a relatively small amount of money to be repaid at the time of the borrower's next payday. In order to qualify for a payday loan, the borrower must have a steady source of income, usually from employment but also from pensions or other sources, and a bank account. The lender will typically lend up to a specific percentage of the net pay for a period of up to 14 days, ending on the next pay day.

The borrower provides the lender a cheque, postdated to the borrower's next expected income payment date, for the total amount of principal, plus interest and other fees. Members have indicated that when we take the fees, interest and insurance, the cumulative cost is in effect an interest rate of as much as 60%, which by any criteria is usury and inappropriate.

One might ask who would want to pay these exorbitant rates of interest. This is the crux of the reason why I wanted to speak on the bill. It is again a demonstration that there are people out there who, in the absence of the protection of the laws of Canada, will be taken advantage of by people who see these little pockets of opportunities to take money away them simply because they are torn between needing cash today to buy food or to pay the balance of their rent, and the only opportunity they have is to go to payday lending institutions.

This is a problem because people who are in those situations find themselves without any credit rating. This means they have no line of credit and no opportunity to borrow from a bank. They probably have a bad credit rating for that matter. In addition, they would not have a credit card. Although credit card interest rates are very high, they are not 60%.

One might ask why they would borrow a net paycheque from someone at those rates when they could simply draw on a credit card. That is not even an option. We are talking about vulnerable Canadians who are faced with the only opportunity to get the cash they need to take care of the basic necessities of life such as food, clothing and shelter. The only opportunity for them is to go to the payday loan industry. The bill has to deal with that. It is the reason why the bill was brought forward in the last Parliament. I am pleased that we have had an opportunity to bring it forward in this Parliament and I hope to see it passed very quickly.

Provincial and territorial governments, as well as consumer advocacy groups, have raised concerns. The government should take solace in the fact that this is a matter which has been seen at all levels of government and society. They have raised concerns over incidents of questionable practices within the industry. It calls for the question about why the industry has not been totally regulated. That is another issue totally. The concerns involve the high cost of borrowing, insufficient disclosure of the contractual terms, unfair collection practices and the spiraling debt loads resulting from rolling over loans.

When people are prepared to charge usurious rates of up to 60%, when they want their money, they will go after people in a very draconian fashion. This all of a sudden becomes a risk to the safety and security of the people involved. Sometimes things happen, people start to go downhill and they cannot stop. They have exhausted every opportunity. They may have stumbled across this so-called payday loan opportunity, but they still cannot get out of it. What is the recourse to them? There is none. They go to jail, I suppose, if that is possible. However, in terms of the collection practices, even on ordinary consumer debt, we have seen badgering, threatening and all kinds of terrible things. One can imagine what happens out there.

There is no question that something has to be done. We get this situation where usurious people will tend to say that if they cannot pay now, they will roll it over and double the rate. All of a sudden, people are getting pennies on the dollar from moneys that they acquired through their employment.

The approach of the bill is to deal through the Criminal Code. Section 347 of the Criminal Code of Canada makes it an offence to enter into an agreement or arrangement to receive interest at a criminal rate. It is defined as exceeding 60% per year. When I looked through the speaking notes provided by the research staff of the Library of Parliament, I noted the definition of interest. I thought it was worthwhile mentioning because we are talking about the rate of interest.

Bill C-26 defines interest in the same way it is defined in subsection 347(2) of the Criminal Code. The existing definition of interest is, however, problematic in a sense that payday lenders have tried to avoid the provisions of section 347 by disguising interest as various fees and charges. Not only is there a prescribed interest rate on the loan, there are also fees for processing and other charges for things like insurance. Payday loan associations want to be sure that if they never collect, they will be able to recoup some of the money through the insurance, which is paid by the person who takes the loan in the first place.

In one business model, payday lenders incurred the operating costs associated with providing payday loans and charged customers a fixed fee and insurance type premium on each loan transaction. The premium was designed to cover the cost of providing the loan as well as the risk of loan default as assumed by the insurance company that may be owed by the payday lender.

If the insurance charges argument were to be accepted before a Canadian court, it is unclear whether the exemption proposed under Bill C-26 would apply. This could result in problematic jurisdictional challenges of provincially imposed limits on the cost of borrowing. Regrettably, it appears there still may be some difficulty from a jurisdictional standpoint to address some of the issues here.

As I indicated, the interest rate is covered under section 347 of the Criminal Code. It was not intended to be a consumer protection tool for economic price regulation. Despite its intended purpose, section 347 has been interpreted as applying to most lending arrangements in Canada, including payday lending.

The penalties under section 347 are significant: a maximum penalty of five years imprisonment on indictment, or a maximum penalty of six months imprisonment; and/or a fine not exceeding $25,000 on summary conviction.

With respect to the proposed amendments in Bill C-26, the payday lending industry can continue to operate but with controls. This is not to put them out of business, but there will be some controls should Bill C-26 be passed and given royal assent.

The proposed amendments will exempt payday lenders, which operate in provinces and territories and have measures in place to protect borrowers, from the application of section 347 of the Criminal Code of Canada. Second, they will require the jurisdictions that regulate the industry to place a limit on the cost to consumers of payday borrowing.

Some of the detractors of the legislation will say that the federal government has basically said that it does not want to deal with this and that it will instead pass the problem on to the provinces. That is not exactly the intent of the proposed bill. Making the amendment to the Criminal Code will allow everything else to continue to operate but carves this out. For those provincial jurisdictions that already have laws in place, those laws can stay in place without being affected by the bill. All it will take under the bill is for the government to designate those provinces in which the particular provisions of Bill C-26 will be applicable. Those that do not have the designation will continue to utilize their own laws. It does work.

The amendments would not apply to federally regulated financial institutions such as banks. They are intended to facilitate the provincial regulation of an industry that is not currently regulated.

Banks and other federal financial institutions are already subject to legislation, including the Bank Act, the Trust and Loan Companies Act, the Cooperative Credit Associations Act and the Insurance Companies Act.

As can be seen, there is an attempt here to deal with it and I must admit, in looking at some of the debate which took place in the first session of the 38th Parliament, I did see some argument that there still were some concerns.

We are debating this bill at second reading and we could bring forward some of those concerns in an attempt to promote questions and to raise issues at committee. On the termination of the debate at second reading we will vote on the basic principles of the bill. The committee that deals with the bill is where we will have the opportunity to hear from representatives of the payday loan industry and all the stakeholders. I am sure there will be some case studies. People have found themselves in a situation where usurious rates have been charged.

Very briefly I want to go over a couple of the clauses. Clause 1 updates the wording of section 347 of the Criminal Code with respect to the fine not exceeding $25,000 and changes “notwithstanding” to “despite”.

Clause 2 amends the Criminal Code by adding subsection 347.1(1) which retains the definition of interest found in subsection 347(2) and adds the definition of a payday loan. It is important to have that in there. The definition is:

“payday loan” means an advancement of money in exchange for a post-dated cheque, a pre-authorized debit or a future payment of a similar nature but not for any guarantee, suretyship, overdraft protection or security on property and not through a margin loan, pawnbroking, a line of credit or a credit card.

Clause 2 of the bill introduces new subsection 347.1(2) which exempts a person who makes a payday loan from criminal prosecution in the following circumstances; first, that the loan is for $1,500 or less and the term of the agreement is for 62 days or less; second, that the person is licensed by the province to enter into the agreement ; and third, that the province has been designated by the governor in council under new subsection 347.1(3). Subsection 347.1(2) does not apply to regulated financial institutions such as banks.

Subsection 347.1(3) states that the provisions outlined will apply to provinces that are designated by the governor in council at the request of the province. This is an opt in by the province.

The only area I would like to comment on has to do with the payday loan industry. The growth of this industry has focused attention on the industry and its practice of charging relatively high rates of interest. The industry really has brought it on itself. The critics have called for prosecution of the payday lenders under the Criminal Code provisions, even if such action reduces the profitability of the industry or results in its abolition.

Proponents of the industry point to the growth of payday loan companies as evidence that the industry is fulfilling an otherwise unmet need for short term credit and/or convenience. I am not sure that the case studies of individuals will show that there is a high demand in the marketplace for this service by people who just need a little short term credit. Anybody who is prepared to pay effectively a 60% interest rate on a cash advance clearly has no credit and no options. This is a serious problem which I believe is already creating great harm in communities across the country.

Proponents have argued that instead of an outright ban on payday loans the federal government should allow the provinces to regulate the industry in the interests of restricting some of the more abusive industry practices, such as insufficient disclosure of contractual terms, aggressive and unfair collection practices, and the rolling over of loans. The payday loan industry itself has proposed self-regulation as a means of addressing some of the concerns associated with the lending practices.

There is obviously room for discussion. Even the industry itself is a proponent of self-regulation, but for this issue, the more the public learns about the usurious practices and the lack of protection for people who are vulnerable and put under duress to pay usurious rates, the more I think Parliament and the Government of Canada must take action.

Some commentators have suggested that the federal government is merely transferring the problem to the provinces, which may or may not adequately regulate this industry, but already there are provinces that do so. Transferring the responsibility to the provinces may also lead to a patchwork of different laws and regulations and a lack of uniformity and enforcement, some suggest. It is true that the provinces are the masters of their own legislation and also in terms of the mode in which they operate.

They also take into account the fact that there are credit organizations that do provide the same or similar products but do not charge usurious rates. This allows the flexibility that may be necessary so that it does not deal with businesses that are operated in a fair manner.

Some commentators have advocated reforms to section 347 of the Criminal Code beyond those provided by Bill C-26. The Supreme Court of Canada stated that section 347 “is a deeply problematic law”. In addition, there is concern that the provisions set out in Bill C-26 could cause legal uncertainty in relation to negotiating larger scale financial transactions such as bridge loans and convertible debentures.

Clearly this is not as straightforward as might first be thought. Members will be aware of that. I think it is going to be important for our members on committee to seek appropriate witnesses to make sure that we have the facts and that we do in fact, as we pray at the start of every day in the House, make good laws and wise decisions.

Finally, a number of other stakeholders have made recommendations that they believe would reduce the need for payday loan companies, including: first, government led education programs designed to promote financial literacy; second, the promotion of competition from traditional banks and other financial institutions in order to better control costs in the alternative consumer credit market; third, reforms to make the process of bank closure in low income and rural neighbourhoods more onerous; and finally, government aid for the establishment of community banking operations in low income neighbourhoods.

It is clear that there is a problem out there in terms of the usurious rates being charged on payday loans. It is also very clear that there are many stakeholders, including community groups and organizations and all levels of government, that have expressed a concern and support for changes to be made. I believe that we will find solid support for Bill C-26 to bring forward some constructive ways in which we can address the problem. In referring this matter to the justice committee, I suspect that we may even have some excellent witnesses there to provide some of the answers to the concerns raised with regard to potential jurisdictional or legal problems as prosecutions may come forward.

In summary, I support Bill C-26. I am pleased that the current government saw fit to bring forward a good Liberal bill from the last Parliament.

[Paul Szabo, Liberal, Mississauga South, ON]

Mr. Speaker, I am pleased to participate in the debate on Bill C-26. It is an act to amend the Criminal Code (criminal interest rate). We refer to it as the payday loans.

I want to give a little background, which I found very interesting. The payday lending industry is a growth industry in Canada. It was virtually non-existent until 1994. The payday lending industry is believed to have grown to more than 1,300 outlets. Canada's new government, the so-called—

[Guy André, Bloc, Berthier—Maskinongé, QC]

Mr. Speaker, it is a pleasure to speak on Bill C-26, An Act to amend the Criminal Code (criminal interest rate), following the remarks of my colleague, the hon. member for Shefford.

According to the government, the purpose of Bill C-26, which we are debating today at third reading, is to respond to the concerns of some provinces and territories as well as several consumer advocacy associations which believe that it is urgent and necessary to regulate more strictly payday lending, which is a growing industry in some provinces.

While it may seem simple and even generous, this bill is, as the hon. member for Shefford aptly explained, yet another attempt at interfering in jurisdictions that belong to Quebec and the provinces. The Conservative members across the way are shaking their heads saying no. They should read the bill.

Even if the government's intent was to supervise better at the federal level to prevent interference in provincial jurisdictions, it is once again interfering in an area that we, in Quebec, are managing superbly.

Members will understand that the Bloc Québécois will oppose this bill which opens the door to a federal veto on tools currently used in Quebec to regulate such activities through the Consumer Protection Act, among others. I do hope that government members from Quebec are familiar with that piece of legislation. Have they forgotten about it since coming to this place, the House of Commons? I am not sure, but I think so.

As I said, the government described this bill as a response to many concerns raised about the payday lending industry. Granted, this is am industry that has been accused of all sorts of questionable practices, including high lending rates on future pay, insufficient disclosure on contractual terms, if any, and all too often unfair debt collection practices.

Before getting into the details of our reasons for opposing this bill, I would like to say a few words about these increasingly popular payday loans.

This is a disturbing phenomenon because it reflects a troublesome reality, the increasing presence of poverty. The people who borrow from these payday lenders often find themselves short of money. At present, the Criminal Code sets limits on payday lenders. Interest rates may be as high as 60%. I am sure that no member of this House would borrow a portion of his or her salary at such a high interest rate. The target is people without resources. That is why such activities are governed in Quebec by the consumer protection act, and the interest rate can be no higher than 35%, while here 60% is mentioned. I think 35% interest is already high.

In Quebec, payday loans are becoming less and less common. Mechanisms have been put in place; support groups for the poor have been created. There are even some CLSCs that loan money to clients with temporary needs, such as food for a week. All sorts of social measures, such as food banks, have been set up to help these people, all so they will not have to take out loans they cannot pay back. When someone borrows a portion of their salary at that kind of interest, for two or three weeks, they repeat the same scenario and keep getting deeper into debt. It affects quality of life for the borrowers and their families.

According to the Canadian Payday Loan Association, payday loans are unsecured small-sum short-term loans typically for a few hundred dollars. As we know, they are usually for two weeks. Payday loans are specifically designed to help customers with one-time, unanticipated expenses. The average payday loan is around $280 for a period of 10 days.

We can see that these loans are for small amounts to meet what are supposed to be one-time needs but are often related to rent, accommodation and housing. Payday loans are really designed for the low income earners in our society.

As I have said, I am sure that government officials, our ministers, members of Parliament and other members of society do not take out payday loans. We are talking about the poorest people in our society here today. I heard what my NDP colleague said, that we were doing this to help the least fortunate. It is incredible!

This Conservative government tends to minimize and sometimes even ignore the problems associated with poverty. We saw this recently, when the government cut funding for literacy programs and Status of Women Canada programs. My colleague and I recently toured New Brunswick and Newfoundland. People were offended at the cuts to programs that contribute to our social fabric. Once again, the government is introducing a bill to squeeze these people further.

Payday loans, also called wage advances, are a very expensive way for consumers to meet a temporary need for credit. This type of loan is expensive, because lenders charge numerous, often excessive administrative fees, not to mention high interest rates.

In return for making the loan, payday lenders will require a post-dated cheque or a preauthorized debit for the loan amount and will charge applicable fees as well as interest. With the addition of the various fees, the amount to be repaid is greater than the amount of the initial loan.

This puts the squeeze on borrowers. Here in the House of Commons, we are trying to help people in provinces where payday loans are not regulated at present. I understand that, but I do not believe that a measure such as this is the best way to help people in need. It is important to remember that these are the people this bill targets.

As you know, we are opposed to this new bill. It contains two main measures. First, it adds a definition of a payday loan to the Criminal Code. Second, it amends section 347.1 of the Criminal Code to allow exemptions from that section.

There are two parts to the new exemption mechanism. The first part specifies that section 347 of the Criminal Code and section 2 of the Interest Act no longer apply to the payday loan industry of a province when the amount of money advanced is $1,500 or less and the term of the loan is 62 days or less, and the lending company is licensed under the laws of a province to provide such loans.

The second part—and this is where we have a problem—involves a political decision by the federal government.

The federal government exempts from the application of section 347 of the Criminal Code and section 2 of the Interest Act provinces designated by the federal government for passing legislation that the federal government considers to be consistent with its objectives for regulating this industry.

In conclusion, why should Quebec submit to the rules established by the federal government in order not to be subject to criminal interest rates, when Quebec already has consumer protection legislation that properly regulates this activity, which is in fact all but non-existent in Quebec? The members from Quebec now in this House know this. We believe that 60% is an almost criminal rate of interest. In our view, it is usurious.

I have explained in my speech that we have found other ways of helping those in need.

The Bloc Québécois therefore opposes, in principle, the bill—

[Robert Vincent, Bloc, Shefford, QC]

Mr. Speaker, I will share my time with the member for Berthier—Maskinongé. First, I am very pleased to speak to Bill C-26. I totally disagree with my colleagues' assertions, as do all Bloc Québécois members. Bill C-26 is a underhanded means to help people who have difficulty getting a loan to get money from payday lenders. These payday lenders have put pressure on the government to legalize their existence with a clause in the law, clause 347, which allows them to demand up to 60% in interest, and this can be verified. Indeed, it is the interest rate that appears in section 347 of the Criminal Code.

However, the major problem in this issue is the fact that the federal government is once again intruding into Quebec's areas of jurisdiction. In Quebec, there is already an act that deals with these loans, and the entire loan is at a maximum interest rate of 35%. Thus, any other loan with an interest rate of more than 35% is loansharking. The best way to gouge people is to lend them money at an interest rate of 60%.

Which group will take over the payday loan market? I believe it will not be the merchant who owns the corner store or the butcher down the street. The member was talking earlier about organized crime. This is the best way to launder money. It is obvious that these people will take the legal road to do something that is illegal. If the House of Commons is not aware of this, it will open the door to these people, who will be able to demand interest rates of up to 60%.

In addition, I sit on the Standing Committee on Industry, Science and Technology, where Bill C-26 was debated. How long was the debate? An hour. Why? Because the people in the other political parties agreed that it is a great bill. We are therefore going to pass it without wondering what people in Quebec or other provinces think, whether or not they think it is good or whether it encroaches on provincial jurisdictions. I should even mention that, in committee, we asked whether any of the provinces were opposed to this bill. To our great surprise, none were.

During that same meeting, we received a communiqué from Quebec saying that Quebec disagreed with Bill C-26.

Why should Quebeckers, who already have legislation covering these sorts of loans that caps interest rates at 35%, have to ask the federal government for an exemption from the bill?

Why should we let the government interfere in our jurisdictions?

If the rest of Canada thinks this is fine and dandy and wants to endorse this system, it can do so. But Quebec's position is that this is not how it is going to be and that we will fight tooth and nail to make sure this system is not put in place.

On both sides of the House, Conservative and Liberal defenders of the bill are saying that they represent Quebeckers. What they are really saying is that they are not listening and that they have bills and will adopt them at everyone's expense.

They are saying in the House and in the newspapers that they represent Quebec's interests and are going to stand up for Quebec. I cannot say what I am thinking, because I would be reprimanded, but I can say that that is not true.

There are members opposite who say: “This is good, we are able to make progress for Quebec”. I think they are wrong. They do not know what they are talking about and they will say just about anything.

What is more, this bill addresses people who earn a salary, including seniors. Why? Because they receive an income every month and are able to certify to payday lenders that they have a salary. They can borrow against their income. How far will we go with these measures to give them a chance to spend their money? If a problem arises, these people have to turn to payday lenders to borrow money. As I was saying earlier when I asked the Liberal member, is there a problem? Are our seniors not being paid enough money? They built our country, Quebec especially. Are we going to abandon them like this? If they need $100 to fix their broken washing machine, will they have to turn to payday lenders? There were no payday lenders before. Why would we need them now? To give others a chance to become wealthy and launder money? I do not believe this is a good solution.

Furthermore, the designation process—and this is the problem—requires that the province write the federal Minister of Justice to inform him that it has a law and is seeking a designation. If, on the recommendation of the federal Minister of Industry, the Minister of Justice feels that the province meets the requirements, the Governor in Council will receive recommendation to grant the exemption. This process should be relatively simple.

Why should get on our knees to ask the federal government for permission to be exempt? We have nothing to ask of it. We have our own laws. We are capable of respecting them and enforcing them. We do not need anyone to be a big brother and tell us what to do.

I strongly believe that this bill is not appropriate in that legislation is generally left to the discretion of the provinces. It is as simple as that.

When we talk about legislative measures, especially measures on consumer protection that generally cover payday loans, I do not think that consumers would agree with the way the government wants to encourage them to consume even more and have the opportunity to get money easily. It is easy to get money from payday lenders.

Much worse could be said. Michael Jenkin, director general of the office of consumer affairs and co-chair of Industry Canada's federal-provincial-territorial consumer measures committee, said, “I have a few words, just for a moment, on payday lending. It's a form of short-term lending through which the consumer typically borrows several hundred dollars for 10 days to two weeks. The borrowing costs are very high, as you probably know. They are usually in the range of, for example, $40 to $75 for a $300 loan for two weeks...”

He told us the costs were very high. Imagine paying $40 to $75 interest on a $300 loan for two weeks. It is not usurious, but it sure is close. It is not far off. I can see the Quebec members nodding off on the other side of the House. They should listen more rather than think about their next snooze. That way, they might understand this a little better.

That is not all. In 2004, the federal, provincial and territorial ministers responsible for consumer affairs expressed concern about the abusive practices and high costs consumers encounter in this parallel market, such as with payday lending. One study showed that payday loans were far too expensive and that the interest rates were too high. That was in 2004. It is now 2007. Now, a bill has been introduced to confirm that everything is just fine.

I would like to conclude by saying that we will vote against this bill. We in Quebec will take care of this responsibility ourselves.

[Roy Cullen, Liberal, Etobicoke North, ON]

Mr. Speaker, I thank the member for Shefford for his question.

Bill C-26 addresses a subject that we have discussed today: the very high interest rates charged.

Frankly, I am not sure if these payday loan organizations will accept pension cheques. Perhaps they do.

I think there are two different issues. If pensioners have problems getting from payday to payday and a pension is their only source of income, increasing their pension will not expose them to further difficulties. It will keep them away from the payday loan organizations. I do not see the two as running contrary to each other.

I think if we were to do something with seniors that could help them with their pensions, it could keep them away from payday loan organizations. In fact, I suspect many seniors are not aware of the proliferation of payday loan organizations. Some may be, but some may have difficulty finding their way to the payday loan organizations and dealing with some of the complexities. I am not sure that they are big customers, but I am only saying that. I do not have any research or information to support that.

I do not think that what I am suggesting here with respect to old age security and what Bill C-26 does conflict with one another in any way shape or form.

[Roy Cullen, Liberal, Etobicoke North, ON]

Mr. Speaker, I am very pleased to speak to Bill C-26, An Act to amend the Criminal Code (criminal interest rate).

The purpose of this bill is to amend the Criminal Code to exempt payday lenders doing business in provinces and territories that have legislative measures in place that protect borrowers from section 347 of the Criminal Code of Canada, and to require that the competent authorities set limits on what the consumer is charged for a payday loan.

It was our Liberal government that put the wheels in motion for this bill by starting consultations with the provinces and territories and other stakeholders to deal with this very important issue.

If we look at it, we have these payday loan operations that fill a certain market niche, but unfortunately they really gouge consumers and some of the interest rates, as many have cited in the chamber today, can reach 1,200% per annum, whereas the Criminal Code in section 347 makes it a criminal offence to charge more than 60% interest per annum.

Some might ask, if the Criminal Code already says that, why would the police not arrest people or the crown prosecutors prosecute people who are charging clearly more than this?

That is a good question and one that I have wondered about myself. I think we really need to look at the origin of section 347 of the Criminal Code which was designed primarily to deal with what we now call loan sharks. Loan sharking is an activity carried out mostly by the underworld or by organized crime, where people who are in a desperate need of a loan would go to a criminal like this and be prepared to pay a very large amount to get a loan because perhaps they had to pay back another debt, a drug debt, a gambling debt or whatever it might be. Therefore, it became known and is known today as loan sharking and that was really the origin of this provision in the Criminal Code.

The reality is that there are many Canadians who really need the benefit of these payday loan operations because between paydays they find themselves stretched for whatever reason and they need to obtain a loan from one of these particular operations.

A payday loan is a short-term loan for a relatively small sum of money provided by a non-traditional lender. Statistics from the Canadian payday loan industry suggest that the average payday loan is valued at $280 and is extended for a period of 10 days. In order to qualify for a loan, the borrower generally must have identification, a personal chequing account, and a pay stub or alternative proof of a regular income. Payday lenders typically extend credit based on a percentage of the borrower's net pay until his or her next payday, generally within two weeks or less. The borrower provides the payday lender with a post-dated cheque, or authorizes a direct withdrawal, for the value of the loan plus any interest or fees charged.

There we have it: small loans of very short duration that help people meet their needs from payday to payday. By decriminalizing it, so to speak, which is the effect of Bill C-26, the provinces and territories will agree to regulate these same-day loan enterprises, which is part and parcel of this particular bill. The provinces and territories will regulate the interest rates charged on these payday loans. I think most Canadians would agree that 1200% per annum is exorbitant and unjustified. It puts people deeper into debt instead of helping them find their way out of a position like that.

It also begs the question of why it is that people cannot live between paydays. There are many reasons. We hear a lot about poverty in Canada, of course, and we have done many things to try to alleviate poverty, one of which was to have a strong economy. Certainly our Liberal government cut taxes for low income and medium income Canadians.

The Liberals also introduced a number of programs like the national child benefit, which is an example that I would like to highlight. We brought in the federal child tax credit, but unfortunately, the province of Ontario, where my constituency is located, has clawed back the federal child tax credit 100%. From the point of view of the recipient, that makes it neutral. The benefit that we tried to convey was clawed back by the government in Ontario. That was done by the Harris Conservative government. The Liberal government ran on a platform to take back the clawback, but it has not done that. That affects many groups in the province and certainly does not help families and the working poor. We should begin to address it.

I have been talking about working families in the low to medium end of the income spectrum and I am sure we can find individuals like that who need loans to get them from one payday to the next; it might be monthly or, depending on how they are paid, bi-weekly. They may need to make a large capital acquisition. Maybe their stove has crashed. Maybe they have other urgent expenses. They need help from payday to payday with a loan so they go to one of these payday loan companies. We have seen these companies grow in large numbers and in size and scope across Canada.

Another group I would like to touch on is seniors. In my riding of Etobicoke North, I encounter many seniors. Many of them are living on fixed incomes with old age security and the Canada pension plan. Some might benefit from a company pension as well. I think these people are facing rather unique cost pressures. Old age security is indexed every year, but it is indexed to the general cost of living.

I have done some research on this. I am going to be coming to Parliament with an initiative in the not too distant future. What has been found is that the cost of living index that is presented to seniors is not the same as the cost of living index or the cost pressures facing Canadians in general. We can see a number of reasons for that. We could look at property taxes, rents, insurance rates, energy costs and food costs. These are cost pressures that seniors face. If one is on a fixed income, this can create quite a problem.

Our Liberal government brought in the guaranteed income supplement and made some one-time changes to it. This is another area that we should look at. I believe that we may need to develop a particular cost of living index for seniors, one that reflects the basket of goods and services they must deal with.

Given that, we should also look at perhaps a one-time change in the old age security and then index it to this new index. I appreciate that this would cost the federal treasury some money. I do not mean to minimize that, but I think it is an area we need to look at. Our seniors built this country and we need to respect that. We need to help them deal with the cost pressures they face and the standard of living they are entitled to.

I will be supporting Bill C-26.

[Charles Hubbard, Liberal, Miramichi, NB]

Mr. Speaker, with your permission and the consent of the House, I would like to share my time with the hon. member for Etobicoke North.

As I listen to the debate between the two parties, and we think of the bill, Bill C-26 is a very small bill. Most of the sections in it deal with the concept that the bill will only be effective in terms of trying to regulate the industry if the provinces request assistance. It is not something that is going to be driven by the federal government, but rather it is in response to concerns that the provinces have had that they are not able to regulate the same day or payday loan activity.

We have to assume that there are people out there who want to borrow money for a short period of time. This morning I was checking with one of those groups and I found that it seemed so simple. If one wants to borrow $500, the indication was that one would pay only 16¢ per day for each $100 borrowed, but there is also a $10 fee in order to register with the company.

It sounds like a very small amount of money to pay back, borrowing $500 for 10 days, but when we consider it in terms of the Criminal Code, that interest rate without the fee would be nearly 60%. I am concerned that if I were working for one of those companies today, listening to the debate in the House, it must be rather a slimy feeling they have about our attitudes about the type of activity that they have in those communities.

They are all pointed out as being terrible organizations and we see them as being people who are trying to rip off the poor. In fact, many of them do rip off the poor. I asked the parliamentary secretary this morning, in terms of the other fees that are associated with payday loans because those loans are often given to people who are very short of money, who do not have friends and who have no opportunity to borrow from a bank or from another financial institution.

I dealt with a case in my own riding on Friday of a person who applied for EI. He had been out of work. It took him a few days to get his record of employment from his employer and then he put his request in to draw his EI. After waiting nearly 30 days, his claim had still not been processed. I am glad to say we found out today that his claim has been processed, but an individual who has been without a paycheque for nearly five weeks is in need of money. He said that he had no money because he had medical needs in terms of prescriptions and on Friday afternoon he was very desperate. I would think that he might be a person who would go to a same day lender to get a short term loan until his first EI cheque arrived.

Other people in the country might be working for an employer and would have to wait two or three weeks to get their paycheques. If they could borrow the $500 and get it at a reasonable rate, then it would be a service that our banks and other financial institutions often do not offer.

We know that the sad cases that we hear of usually deal with other penalties that are associated with the initial loans. We know that the costs that they put in, in terms of administrative fees, in terms of whether or not one is able to pay the loan after the 10 or 14 days are up, cause heavy penalties that are built into the amount of money that has to be paid when the loan is up.

We find, as some speakers have indicated, that in many cases companies that are involved in these franchises are able to rollover those loans, to keep the person in a rut until that loan has become so great that it is almost impossible to pay back.

We are talking today about some form of consumer protection. We are trying to avoid the idea of predatory lenders. We have the old system of pawn shops. We have various other financial agencies that cost 30% to get money from them. We have credit cards which sometimes run as high as 28% and we try to regulate those in terms of our various regulations, policies and laws.

This particular bill, Bill C-26, goes to section 347 of the Criminal Code and with it we are placing those organizations not in terms of the financial arrangements that our country has within our finance but more importantly, within the Criminal Code. We are dealing with it in terms of people who would be assessed very heavy penalties, in fact penalties that would put them in the criminal group.

Why do we have it? We as Liberals want to say that we have this on the fast track. We have indicated to the Minister of Justice that there are six bills that he has before the House that we want to be sure that they proceed quickly.

I felt badly today that in terms of some time that we took after question period we dealt with a very difficult case of justice. Wilbert Coffin was a person from Quebec, a riding in fact just north of my own, and to think that we had to debate that issue and bring it in at the same time as we are bringing in another type of criminal activity which is actually causing people to pay too much interest and to cause them financial hardship.

I want to assure the House that as Liberals we strongly support the bill. We want to see that the provinces have the opportunity to bring in legislation that will enable them to effectively regulate not only the same day loans or the payday loans but hopefully to regulate a lot of those activities within our provinces and within our country that cause so much hardship to the people who are less able to afford it.

Being poor is a terrible thing in this country. I know as a party and as the House we all want to work to see that we can end poverty, but we also know that many people are poor on a weekly basis in terms of having some particular problem which causes them to get a same day loan.

As a party we support this venture. We want to see the bill become law as quickly as possible. I can assure you, Mr. Speaker, that our members on this side of the House will support the effort of the Minister of Justice and the minority Conservative government as they proceed with this piece of legislation.

[Judy Wasylycia-Leis, NDP, Winnipeg North, MB]

Mr. Speaker, this is a day to celebrate. We have reached the end of a long hard process to get some justice in the area of fringe financial services. Today, we are debating the final stage of a bill that will bring us closer to moment when payday lenders are regulated across the country.

Getting here was no easy feat, but it happened after a great deal of work on the part of members of the House. It happened after enormous pressure from community groups across the country. It happened because we found a way to cooperate when push came to shove. I think that tells Canadians everything they need to know on how to make Parliament work, especially in a minority situation.

Here we are today with Bill C-26, at its final stage, that will give provinces a mechanism, a means by which they can regulate payday lenders without leaving it up to a system that has largely failed Canadians over the last decade or more.

With the bill, we have an ability to set aside the Criminal Code pertaining to what is an acceptable rate of interest, that being 60%, so provinces can put in place a regulatory framework to put an end to usurious rates and to lending practices that take advantage of the most vulnerable in our society.

This has come after considerable debate in the House and at the industry committee. General approval and support for the idea has come from all sides, except for the Bloc. Most of us are still trying to figure out the position of the Bloc on this important issue. We know the province of Quebec has a system that works, a system that deals with this matter on the basis of consumer protection. Members of the Bloc feel that the province of Quebec has dealt with the problem of those who prey on individuals through payday lending operations.

Therefore, the question for the House has to be this. Why can we not simply agree among ourselves to get this passed so that all provinces can have some way to protect consumers in the most expeditious way possible? To this day, we are still trying to understand why the Bloc chose to use some methods at committee and in the House to hold up the bill when, at the outset, there was almost unanimous support to have the bill, which is a one paragraph, proceed through all stages as quickly as possible so provinces, waiting with legislation, could do so.

In terms of the Quebec situation, we cannot figure out the reasons for the obstruction from the Bloc members, especially in the context of the Quebec media. Just in the last week or so, when my leader and our caucus spoke out vehemently against the use by banks of what we would consider exorbitant fees at ATM machines, the Quebec media responded and said that it was a silly issue. Le Droit suggested that there were things far worse than ATMs. I will read from Le Droit of January 30 of this year. It says:

Come to think of it, there are things worse than the fees charged for using ATMs...

The article goes on to say:

If he had really wanted to do something for the poor in Canada, the member for Toronto—Danforth would have targeted the some 1,300 financial service outlets such as Money Mart—the payday lenders—that lend small amounts of money to some two million Canadians annually, at such high rates that they are currently being sued in a class action in Ontario.

We have taken both issues very seriously. Obviously we feel there is a real need, and Canadians agree, to put some limits on the fees that banks can charge for accessing one's own money. We have spoken out about the exorbitant fees that Canadians are charged and we have asked the government to consider putting a lid on those charges or, in fact, to eliminate the charges we face to access our own money.

At the same, we have been fighting for years on the question of money marts, rent to owns, payday lenders and all fringe financial institutions. This has been a driving force of members in my caucus over the last four or five years.

I can go back to when we first started raising this years ago. We put forward motion after motion, asking the government to start to take action against payday lenders and those who preyed on people when they were most vulnerable. We worked long and hard to try to get the former government to recognize the need to take action.

I wrote to then minister of finance, now the House leader for the Liberal Party, to ask him to do what Manitoba and other provinces wanted, which was to have provisions to set aside the Criminal Code so provinces could finally take action to put a lid on these usurious fees and to try to deal with the vulnerabilities that people faced as a result of this explosion of alternative financial centres or alternative fringe financial centres in the absence of bank presence. We did not get very far with the previous government.

When the new government came in, we began the process all over again. It took a considerable period of time, but we finally are at the point where we have cooperated, one another in the House. We have developed legislation that would allow the job to be done. Is that not what matters? In the end it is not the politics and the games about how one can hold up the House for other purposes and who initiated what and how it came to be. It is about trying to get something done for Canadians.

This is an example of where the House is making a very significant initiative on the part of Canadians, many of whom are forced to deal with payday lenders and other fringe financial services.

I do not need to go over the statistics, we have had many of these during these debates. We know that just in a decade we have gone from zero payday lenders to over 1,300. We know the stories of people who have lost their life savings. They were in this vicious cycle of going to payday lenders, being taken advantage of and being trapped for the rest of their lives. Story after story portrays this tangled web of payday loans.

I will read one example that came from a number of years ago, back in 2004. It was reported by the Toronto Star. The article begins by saying, “Quick cash, creeping risk 'Pride was what I left behind'”. It says:

Kim Elliott's Friday payday loan ritual that began as soon as her 12-year-old son was off to school.

First stop was the bank to withdraw $700 from the freshly deposited $900 paycheque from her job as a front desk manager at a Windsor hotel.

A short drive away, $650 went to pay off a loan at Stop 'N' Cash, a payday lending store that offers high-interest, short-term loans. As soon as the teller had the cash in her hands, Elliott took out another loan, this time to pay off the interest on a loan at Cash Money, another payday loan store. The transaction was the same there—pay down, loan again, drive to the next lender.

Three hours and three to our loans later, the paycheque was gone. Elliott would then take out about $350 in her final loan of the day, this one to have money to get through the next two weeks.

Does that not say why this day is so important and why Bill C-26 has to be passed as quickly as possible?

It is especially relevant in areas where the banks have abandoned entire communities. Whether one is looking at the question of ATMs or the issue of money marts and payday lenders, the root of the problem is the same: big banks have abandoned communities.

For the purpose of the House's understanding of the issue, I will once again describe what happened in Winnipeg North, my constituency. In the old Winnipeg north end, over a period of half a dozen years, all bank branches closed their doors and left that entire community without access to bank branches.

Yes, there are outlying branches, but we are talking about a community that has a high proportion of senior citizens, a very high level of low income earners, many people with disabilities, people who do not have access to cars or family members to drive them or access to computers and sometimes even telephones to do their banking. What do they do? In the case of trying to get cash, they have to go to a private white label ATM machine and they get charged up to $6 to access maybe $20 or $30, whatever they can afford to take out of their accounts.

People in organizations, like the Bankers Association, and perhaps even some members in this place have suggested that the NDP is ridiculous for raising the question of ATMs and fees. When there is a situation like that, we are not talking about convenience. We are not talking about affluent people who should know better in terms of how much money they take out at one time. We are talking about people who do not have any other choice.

The same holds true when it comes to fringe financial services. The same holds true when it comes to payday lenders. When the banks left, they created prime conditions for money marts, rent to owns and payday lenders. Every aspect of the fringe financial service popped up. It took up the space and filled the vacuum.

People went to those places because they did not have any other choice. There was no place to do their banking. There was no place to access some short term cash without going to a place that charged exorbitant interest rates and all kinds of fees and additional arrangements on top of the 60% interest rate that is criminal.

Something had to be done. We needed a way to get this into the hands of consumer protection departments at the provincial level so regulatory schemes could be put in place to arrive at what would be a reasonable interest rate for these kinds of lending situations. That is exactly what this legislation aims to do and what provinces like Manitoba, which has been the pioneer in this field, aim to do. It is about putting in place a mechanism so one can assess what makes sense in terms of an interest rate.

No one is saying that we cannot look at this in terms of risk and not charge interest. We are talking about short term loans where there is some risk, so there has to be an interest rate structure that is reasonable and allows for people not to lose the shirts off their backs.

However, in that context, why should we allow people to charge a 1000% or $2000% interest rate? Is there not a limit? Is there not something government can do? Is this not the best way to do it, given the fact that we could not over the last number of years get the provinces to agree on one standard? We could not get the federal government to pull those ministers from the provincial and territorial governments together to arrive at one standard. It dragged on for too long, to the point where the provincial NDP government in Manitoba finally brought in legislation of its own that then began this ripple effect where other provinces followed suit.

As we speak today, the Manitoba NDP government and the New Brunswick government have legislation ready to go the minute Bill C-26 is receives royal assent. They are waiting desperately for immediate action by the House. I hope we can get there very quickly, finish this debate, have the vote, get it to the Senate and get it back here, with royal assent.

In the face of banks leaving communities like Winnipeg North, the community had to take charge of the situation. People in Manitoba and in my own community of Winnipeg North finally said that they had been hurt by the banks too many times. They could not seem to hold the banks to account. They could not make the banks come to them with their statements before they shut the doors. They could not seem to convince the banks that there was some merit in having access to personalized banking services in every community across the country.

After 10 bank closures and after trying everything possible, people in the community basically said that they were going to take matters into their own hands and work with the folks who really care about the community to make a difference. That is what happened. It was not necessarily with great help from government, although there was some financial support of course. It was not with the help of any of the banks, although the last bank to close its doors in Winnipeg did give some money for a pilot project to study an alternative financial community services arrangement. That bank did give its building to the community for $1. That has made a difference and we thank the CIBC for that, but the CIBC left a whole community. It abandoned a whole area. Small businesses, local community activists, organizations, many seniors and hard-working families were suddenly left without anything. I think the CIBC actually owed it to the community to do that.

I hope other banks who abandon us will look at that as an example of their responsibilities. I hope they will consider doing so before we have to go to the next step which is to try to bring in what is so workable in the United States, a community reinvestment act which forces banks to carry out their responsibilities to the community and to give something back for the loyalty of consumers over those years. Rather than go that route, I hope banks will start to realize that they have a responsibility to Canadians, to the consumers and clients who built up those banks over the years and made such huge profits for them that the banks owe something to those communities.

Today we have a chance to make up for the downfall, for the failings of a banking system that has ignored consumer concerns. Today we have an opportunity to protect consumers from exorbitant interest rates. Today we have a chance to say to communities that we believe that a community needs to have a say in its own destiny.

The whole origin of the project in Bill C-26 came not from government, although the Manitoba NDP government was vital and central to the whole evolution of this wonderful legislation, but it came from the community. It came from organizations that felt the impact of the banks abandoning them. It came from community activists and research groups who well documented every step of the way what was happening to our community. It is only right that we pay tribute to those studies which documented this problem.

I refer to the work of Jerry Buckland, who is with the Winnipeg Inner-City Research Alliance, and to Nancy Barbour, who came out of the community and worked on this research, who has since passed away, and to whom we owe a great debt of gratitude. They did the study, “The Rise of Fringe Financial Services in Winnipeg's North End”. They put together detailed studies on fringe banking in Winnipeg's North End. Going back to September 2005 there is the paper, “There Are No Banks Here” regarding financial and insurance exclusion in Winnipeg's north end.

The situation in Winnipeg's north end is not peculiar. Many older neighbourhoods, inner city communities and rural communities have gone through the same phenomenon where banks have abandoned the communities and gone to where they say it is more profitable. The banks have left people at the whim of payday lenders and to pay exorbitant fees at ATM machines.

Today we are taking a step to correct this. Today we are actually making a difference in terms of the lives of Canadians. I urge all members of Parliament from all sides and all walks of life to support this bill. Let us get it through the House as quickly as possible so that it can receive royal assent. Let us put into place legislation that makes a real difference for ordinary families.

The House resumed consideration of the motion that Bill C-26, An Act to amend the Criminal Code (criminal interest rate), be read the third time and passed.

[Paul Crête, Bloc, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Mr. Speaker, today I rise to speak to Bill C-26. After examining this bill in the parliamentary committee, I thought that it would be very favourably received since the Government of Quebec has had legislation for the last two decades that manages the payday loans issue through the Office de la protection du consommateur.

Quebeckers who are listening to the debate today must be wondering why this question has still not been resolved. They must be asking themselves, "Is there not legislation under which this issue could be dealt with?" The answer is no. In the rest of Canada, that is not the case.

I saw this in committee. The representatives of the three federalist parties joined together and systematically, and very firmly, opposed a slight amendment being made to provide that in the event that a province—such as Quebec—already had a law that addressed this issue adequately, no in-depth study would be done. The jurisdiction of the province would be respected. The provincial authorities have decided that this is the right approach. At that point, notice would simply be taken that the law and the mechanics were already in place. That is the law that would prevail.

The payday loans question is important because it often affects people with very low incomes or people who suddenly need financial loans. In the rest of Canada, a flourishing industry has developed that engages in all sorts of conduct. Some work according to all the rules, others less so. I perfectly understand that there would be a desire to deal with this issue. The Bloc has never objected to this kind of legislation being applied in the provinces where there is not already legislation in this area and where the provinces decide to apply it.

Our opposition to the bill arises out of the fact that there is already a law in Quebec. My colleague said earlier that he had a problem with the Bloc's approach and that he needed proof. This is not the Bloc's approach; it is Quebec's approach.

The present federalist liberal government in Quebec City is of the same view as the Bloc on this point. We have checked with the office of the minister. The office of the minister wanted Quebec to be able to say, by giving notice to the federal government, “We already have legislation that deals with the question of payday loans, and accordingly it is that legislation that will apply in Quebec.”

In actual fact, though, this is not the answer we received. The provincial government will have to submit its legislation to the federal government. There will be studies of the appropriateness of the bill and how we are dealing with this problem. Then it will be referred to the Governor in Council. It is quite a production.

Although this is a provincial jurisdiction, that is to say, an area that is Quebec’s responsibility, and although Quebec has had 20 years of experience and there are no problems with the application of the law, we still have to go and seek the blessing of our big brother in Ottawa.

It is totally incomprehensible that a Conservative government like this one, which claimed that it would show more respect for areas of provincial jurisdiction, would act in this way. There is even talk of a bill to provide a framework for the federal government’s spending power.

They say that Quebec is a nation. The Prime Minister himself introduced a motion in the House to this effect. But at the first opportunity, when they finally have a chance to show they are going to do things differently, the bulldozer is there ready to go. The steamroller is right there. They are going to standardize everything all across Canada.

The provinces will all be required to justify their legislation. Even 20 years of experience in this area does not matter. According to the federal government, that is not how these issues can be resolved.

It is important to know that under the practices developed in Quebec over the years, the maximum currently acceptable rate is 35%. That is very different from what is seen in the rest of Canada. Thanks to the Office de la protection du consommateur, the various roles are well defined and understood. We do not have any problems with this industry. To the extent that it exists, particular practices have been accepted and excesses are prohibited. Quebeckers are legally entitled to a maximum rate of about 35%.

People who want to make a pile of money in a hurry on the backs of those who are not very well off financially by providing these kinds of services have less incentive to try to do so.

The Criminal Code refers to a rate of 60%. Now, the government wants each province to pass legislation in this area if it sees fit, whereas Quebec has already done so.

The bill states that the federal government will designate provinces. It is therefore giving itself the right to veto the measures taken by a province that requests an exemption. A province cannot just send a letter to say that it already has legislation in place. A province that has legislation like what Quebec has had for 20 years must come, hat in hand, and ask for an exemption from a government that has been unable to solve this problem for 25 years. It is like saying, “We have a law. Will you let us enforce it?” This is typical of the federal government, especially senior bureaucrats, who want to have “One Canada, One Nation“ here in Ottawa.

The reality is quite a different matter. Obviously, jurisdictional legislation will not change the world, but this is an example of a situation where, in a year when the federal government recognized Quebec as a nation, it is also telling Quebec: “You are a nation, but when it comes to payday loans, we do not recognize what you are doing and we want the right to give our OK”. This is the federal government's double standard.

In its policy statements and in its day-to-day behaviour, the government is taking the old approach that Quebeckers have often criticized. We hope that payday loans can continue to be dealt with the way they have been by the Government of Quebec and that the federal government will end up giving its blessing very quickly. The fact remains that this is written in law. This is something that is inconsistent with sharing jurisdictions and does not respect the expertise developed over the years.

There is no doubt that in the rest of Canada it is important to have a way to deal with this situation. We know this by the letters received from people who tell us about what is going on in the rest of Canada. There truly are behaviours that need to be brought into line. There needs to be a framework. Quebec has had this framework for 20 years now. If the provinces want to see how it works, they can contact the Government of Quebec to see the method that was developed. If they want to use it, all the better. If they decide to do something else, that is their choice. There is no problem. We will respect their jurisdictions.

The position the Bloc Québécois is defending today is not one of “sovereignists”, it is the position of the Government of Quebec, the current federalist government and the previous governments of Quebec. It is governments and people who have witnessed the role of the Office de la protection du consommateur. These are people who represented very different opinions on a national level, people such as Ms. Bacon, who is in the other place, and Ms. Payette, who was a Quebec minister for the Parti Québécois. She brought about some significant changes in our society and continues to do so today through her writings. These were people with very different opinions, but they had a frame of reference at the Office de la protection du consommateur, which is an example and a very interesting model. Today, Quebec is getting a rather discouraging message from the federal government.

I was even more surprised by the attitude in committee. Tomorrow in the Committee on Industry, a report will be tabled on the manufacturing sector and, without revealing the content of the report, it will be quite unequivocal about the action that should be taken in this sector.

Now, when a question of jurisdiction arises and a tiny change is needed in our legislation to ensure that Quebec's areas of jurisdiction are being respected, the three federalist parties rise to say: “No, we cannot spend time on a small amendment. There is no satisfying Quebec on this. Quebec must conform to the same requirements as the others”. This is an example of what we have seen in the past, and there are many such examples. We did not think we would see it again here today in a bill such as the one now before us.

With respect to the payday loan industry, we are told that it arose in Canada mainly in the early 1990s. I believe the Office de la protection du consommateur was already regulating the loan sector to some extent. This is likely why Quebec did not experience any serious abuses in this industry.

Jurisdiction is shared to a certain degree, since Quebec and the provinces have responsibility for local trade and commerce and civil law. There is also shared jurisdiction over contracts and consumer protection.

The federal government estimates that this industry now comprises more than 1,300 points of sale. Their distribution is very uneven and Quebec has very few such businesses. In practice, anyone in Quebec who is listening to this debate likely believes that this issue has already been resolved and must be wondering why a new bill has been introduced on this topic. I would like to explain to them that the industry grew at very different rates in Quebec and in Canada.

Little is heard about this issue in Quebec, because it has been resolved for several years now, in fact, for decades. The new situation in the rest of Canada must be corrected. We agree with the substance of this bill. However, when it comes to respecting jurisdictions, the bill does not in any way meet Quebec's requirements.

When I was working in committee on this issue, thanks to the marvels of modern communication technology, I received notices from the Government of Quebec, calling for a debate to pass the proposed amendment.

Meanwhile, members of the various parties said that it was not an important issue. The deputy minister of the department, the senior public servant, had just told us that this would not have any implications for Quebec and that it was wrong to believe that federal approval would be required. Just then, I received a cabinet memo from the Quebec Minister of Justice on my Blackberry stating the exact opposite.

Such a striking example shows us that there are still too many things to be changed in this system for there to be true respect. If there is no respect for our jurisdiction in matters such as this one, which is very important, imagine what will happen with even more significant issues.

Individuals are forced to borrow money against their wages and have to deal with people who charge ridiculous rates. There must be oversight in this area.

On this matter I agree with my Liberal colleague from Prince Edward Island who spoke earlier. We must also examine the overall implications and what must be done. It is not true that the issue will be resolved by a mere rap on the knuckles of those who do wrong. An enforcement component must be put in place. However, there is also the question of the environment in which people work, as well as what is required of banking institutions.

My NDP colleague was saying that the banks have not done their job. I think there is some truth to that. In Quebec, we have the Desjardins movement. In recent years, profitability has been a major consideration, but it has nonetheless developed a means of helping individuals who are having a little more difficulty. This has prevented an unhealthy industry from emerging.

In my riding, credit unions have a special committee that looks at such issues when it is urgent. This has led to a more humane approach to these situations. This is what will have to be put in place by the provinces that need to develop legislation. With the bill before us, they will require federal government approval when they table their legislation. Perhaps this does not bother the other provinces and they agree with this way of doing things.

The government should have respected the fact that each province moves at its own pace. If the government truly respected jurisdiction in this matter, this bill would have contained an amendment making it possible for us to adopt it immediately. I sent amendments to each member of the committee. Making them would have indicated a change in attitude on the government's part toward recognizing Quebec's expertise in this matter, which is not currently the case. At the same time, the legislation would have been adopted faster so that the situation could be addressed appropriately in all Canadian provinces.

In light of these factors, I believe you will understand why the Bloc Québécois cannot vote for this bill in its current form: it does not respect Quebec's jurisdiction. There is still time for the federal government to amend the bill. We can easily reach a compromise. I would ask the government to check its source within the Quebec government because that government's position on this issue is the same as the Bloc Québécois'. The bill would be much more acceptable if it were amended to take into account Quebec's expertise and to respect its jurisdiction. It that were to happen, we would have the opportunity to adopt a functional bill as soon as possible, one that respects provincial jurisdiction and Quebec's jurisdiction in this matter and that recognizes the expertise we have developed.

Today, a quick look at every province reveals that there is one province where payday lending is not a problem: Quebec. The other provinces have a serious problem. That is clear from the members' eagerness to pass this bill even if it means encroaching on Quebec's jurisdiction in committee.

Today's debate in this House will make the public aware of this situation. Quebec is being treated like a child with respect to this practice. Quebec has the expertise, the jurisdiction and the power to implement its legislation, but the federal government is imposing its own way of dealing with the payday loan issue.

I hope that the members of this House will pay attention to what we are saying. I will be available to answer any questions and address any comments from colleagues who are not members of the committee but who would like to have a say in this matter.

[Wayne Easter, Liberal, Malpeque, PE]

Mr. Speaker, I am pleased to speak to Bill C-26, an act to amend the Criminal Code (criminal interest rate).

The bill was reported back to the House from committee on December 13. It very seldom happens that a bill is reported back without amendments. That shows what can happen when there is strong cooperation between the parties. Actually this is one of six bills the official opposition has called upon the government to work with all parties to pass as soon as possible.

We believe with just a little more cooperation, especially from the government, that in addition to Bill C-26, the following bills could be reported back to the House: Bill C-9, which would restrict the use of conditional sentences; Bill C-18, which would strengthen the DNA data bank; Bill C-19, which would amend the Criminal Code on street racing; Bill C-23, which would amend the Criminal Code and criminal procedure in languages of the accused and sentencing, in other words, update Canada's Criminal Code; and Bill C-22, which would amend the Criminal Code with respect to age of protection, with the importance of protecting children. We believe with a little more cooperation from the government, we could in fact be getting those six bills approved in the House.

In summary, Bill C-26 amends the Criminal Code of Canada to exempt payday lenders who operate in provinces and territories having measures in place to protect borrowers from the application of section 347 of the Criminal Code of Canada, and require jurisdictions that regulate the industry to place limits on the cost to consumers of payday borrowing.

To a great extent a lot of work was done on this bill by previous ministers of industry and justice. A lot of work has gone on with the provinces and territories to get the kind of collaboration needed to put forward this bill in the House of Commons. I congratulate all the folks, including members of the government, who were involved in those discussions to get us where we are at today.

There is certainly a need to ensure consumers that usury interest rates are not allowed in this country. There is no question that there is a lot of authority in the Criminal Code of Canada under section 347 to lay criminal charges for usurious interest rates. Section 347 makes it a criminal offence to charge more than 60% per annum.

As we all know, some payday loan companies have charged far in excess of that rate. In fact, we have heard of outrageous interest charges, when compounded and fees are added, in excess of 1,200% per annum, yet no charges under section 347 to payday loan companies have been made.

Yes, the concern is there, but the payday loan business is a little more complicated jurisdictionally, and I would say on an individual need basis, more than meets the eye. Jurisdictionally payday loan operations are considered to be commercial businesses. They are not banks, although I think many people believe they are. As commercial businesses, to a great extent they fall under provincial jurisdiction.

My colleague, the MP for Scarborough—Rouge River, explained it. I want to quote from his remarks in the House because he gave best explanation on this point:

We are going to keep a Criminal Code provision, but we are going to allow an exemption for a lawful business that lends money using this payday loan mechanism. The exemption will be based on the premise that a province or a territory is regulating the commercial operation.

He went on to say:

Placing this amendment with section 347, will allow the provinces to assume their proper jurisdiction in the regulation of the commercial affairs of their citizens. However, at the same time, we maintain the criminal prohibition with the 60% per annum cap where there is no provincial regulation. We are assuming that a province will provide a form of regulation that will essentially keep the same level of protection the consumers have had up to now.

It is important to mention that because it explains the jurisdictional problem and the difference between the commercialization as a business.

Therefore, the bill does cover off the jurisdictional question under clause 2 by the person being licensed by the province to enter into the agreement, and second, the province has been designated by the governor in council or cabinet under the proposed new section 347.1.3.

On an individual need basis, it is obvious from the demand for transactions, estimated to be $1.3 billion or more, and in fact the parliamentary secretary said it is as high as $2 billion now, and also the increase of payday loan companies that are estimated to be over 1,300. It is obvious from these shocking figures that individual Canadians have an urgent need for short term cash for whatever reason.

Yes, I recognize the amounts are in the low hundreds of dollars, but the cost, as others have said before me, are very high.

Mr. Jenkin with the Department of Industry, who was a witness before committee, indicated:

It's a form of short-term lending through which the consumer typically borrows several hundred dollars for 10 days to two weeks. The borrowing costs are very high, as you probably know. They are usually in the range of, for example, $40 to $75 for a $300 loan for two weeks or less.

I must emphasize that while I support the bill as a way to improve the situation for people who are in need of immediate cash, I still am worried about the impact of the financial strain on individuals. There is no question in my mind that the individuals who are basically forced to use these services are the ones who can least afford to pay these high fees. Maybe they need the dollars to provide food, buy groceries for the family. Maybe they need the dollars for a medical bill or maybe they even need the dollars to pay the minimum payment on a high interest bearing credit card.

Whatever the reason, there is clearly a problem out there that needs to be addressed beyond this bill. I certainly would advise the government and others that we really need to be doing as a country, both at the provincial and federal level, some research into the social or economic reason why people think they are forced to go to these services for those kinds of money. They are the people who can least afford it and I believe that needs to be looks into and addressed.

The bottom line is that we are in favour of this bill. We do believe it is a step in the right direction However, there are other underlying causes that we need to recognize are out there in a social and economic sense and issues that really affect people in their daily lives that forces them to use these services. That is the worrisome point.

The bill is good but I believe the House and the government need to look at the underlying causes of the need to use these services more so.

[Paul Crête, Bloc, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Mr. Speaker, my riding is another one with a very long name that describes the whole of the area where the people I represent in this House make their homes.

I listened with interest to the remarks of my colleague. I know that the work has been done by the Standing Committee on Industry and not the Standing Committee on Justice. Perhaps he is not aware of how these things were done, but I would still like to ask him a question.

In Quebec, as opposed to what has happened in the rest of Canada, the matter of payday loans was dealt with in the 1990s—if not, indeed, the 1980s—with the creation of the Office de la protection du consommateur. In Quebec, the maximum rate of interest that can be charged is 35%. When this bill was tabled, we expected, therefore, that the federal government would say that any provinces that already has similar legislation, with adequate protection, has only to declare that and it will be automatically designated. That would have made it possible to adopt the bill very quickly in one day of parliamentary debate. However, in committee we encountered fierce opposition—not just mild opposition—from representatives of the other three parties because they absolutely insist that the federal government must have the right to give its blessing to the provincial legislation.

I would like to ask my colleague, instead of demanding that there be a designation made by the governor in council, and in the final analysis, the Prime Minister, would it not have been more reasonable to decide whether Quebec's act is acceptable on the basis of the provisions in Bill C-26?

Would it not have been possible to accept an amendment that was suggested not only by the separatists in Bloc Québécois but also by the Government of Quebec, which represents all Quebeckers and which has administered the current act for 25 years?

Could the Conservatives not have shown that much flexibility when they are so fond of proclaiming that they respect provincial jurisdiction? In this case, they show no sign of that respect.