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

[Vic Toews, Conservative, Minister of Justice and Attorney General of Canada]

moved that Bill C-26, An Act to amend the Criminal Code (criminal interest rate), be read the second time and referred to a committee.

Mr. Speaker, it is with pleasure that I speak today in strong support of Bill C-26, An Act to amend the Criminal Code, dealing with the criminal interest rate.

In its essence, the bill is about providing greater protection to Canadians. It is about enabling the regulation of an industry which, for better or for worse, has come to occupy a very real place in Canadian cities and towns.

Payday lending and the payday lending industry has, in the span of approximately 12 years, mushroomed in Canada to become an industry which is estimated to provide short term loan services to about two million people in Canada each year. It has a volume loan of approximately $1.7 billion annually. I was pleased to table this bill on October 6, 2006, as I believe it would enable more effective protection of Canadians everywhere.

Before discussing the substance of Bill C-26, I wish to point out that these amendments are the result of a collaborative dialogue between the territorial, provincial and federal governments. In this respect, I wish to acknowledge with thanks my colleague, the Minister of Industry, for it was the discussions among federal and provincial ministers responsible for consumer affairs who helped to ensure that these proposed amendments would meet the needs of those provincial jurisdictions which choose to regulate the industry.

It is important to situate this bill within its proper context. Doing so will enable us all to better appreciate its significance and the very important and practical consequences it would have in ensuring that everyday Canadians who use the services of the payday lending industry have enhanced protection against questionable business practices.

As I said moments ago, the payday lending industry is a relatively new one in Canada. Despite this, payday lending has, nevertheless, become a familiar fixture throughout Canada occupying prominent places on our streets in our communities. Indeed, just a few blocks away from this place, if one were to take a stroll in either direction, east down Rideau Street or south down Bank Street, the prevalence of payday lending outlets are readily noticeable. This is no different for communities throughout Canada.

The payday lending industry is believed to have first appeared in Canada around 1994. Beginning in the western provinces, the industry has since spread across the country from west to east. Whether we are talking about Prince Albert, Saskatchewan; Pembroke, Ontario; or Charlottetown, P.E.I.; the payday lending industry is there. In fact, the industry is currently operating in every province and territory in Canada except in the province of Quebec. In the case of Quebec, the inability of the payday lending industry to operate is a result of that province's decision not to issue licences to businesses that would charge more than 35% annual interest. This has effectively prevented the operation of the payday lending industry in that province.

Despite the absence in Quebec, it is estimated that there are approximately 1,350 outlets in the rest of Canada. It is clear, therefore, that the industry is well established. It is equally clear that it is time for effective government regulation of this rapidly growing industry.

We believe it is important to ensure that those Canadians who do use the services of a payday lender are provided the necessary protection from exploitative business practices, particularly so among the most vulnerable members of our community. The amendments proposed by Bill C-26 would allow for this.

It is important to be clear about what we are talking about when we speak of payday lending and the payday lending industry. The concept of a payday loan has really become shorthand for what is essentially a short term loan for a small amount. Generally, loans of this nature are in the range of $300 and extend for a period of about 10 days. The reasons that individuals choose to use the service of a payday lending industry are varied. Some use it for convenience while others use it out of necessity.

To date, loans of this nature have been provided by alternative retail lenders in Canada. Associated with this service, these alternative lenders will generally charge a range of administrative and processing fees as well as the interest associated with the borrowing of the moneys.

Qualification for these loans is generally straightforward. The borrower must first demonstrate proof of a steady income. Most obviously this is established through proof of employment, although employment is not necessarily required. Other sources of income can suffice in certain circumstances, including, for example, pension income. The borrower must have a bank account and must also provide a post-dated cheque or pre-authorized debit to the lender for the amount of the loan plus the associated fees and interest. Repayment of the loan is often due on the date of the borrower's next payday.

So in some respects, applying for and paying back a payday loan generally resembles other types of consumer lending. While the service provided is of a similar nature to other lending instruments, the specific form it takes is quite different.

For quite some time now, the payday lending industry has been the source of significant concern. Most notably, concerns have focused on the very high cost of borrowing, which in some cases can range in the thousands of per cent on an annual basis. Other concerns include the insufficient disclosure of contractual terms, aggressive and unfair debt collection practices, and the fact that these loans can quickly spiral out of control as a result of rolling over loans.

In light of these very real concerns, it is time for action.

This government has made a commitment to improve the lives of Canadian families. Bill C-26 reflects this commitment. Bill C-26 would amend the Criminal Code to enable provincial and territorial regulation of the payday lending industry. Currently, section 347 of the Criminal Code provides for an offence of entering into an agreement or arrangement to receive interest at an annual rate of more than 60%. Effectively, this creates the offence of charging interest at a criminal rate.

Section 347 was added to our Criminal Code in 1980. The principal policy rationale driving the inclusion of this provision was to address the practice of loansharking and that activity's role in relation to organized criminal behaviour. This was and remains a laudable goal. Organized crime poses a real threat to the safety and security of our communities. It did in 1980 and it continues to do so today.

Our government continues to take steps to better respond to the threats posed to our citizens and communities by organized crime. These include key legislative reforms in the area of gun crime as well as committing $200 million to strengthening the ability of the RCMP to combat organized crime. We will continue to strengthen our responses in this area, ensuring safer streets and communities for Canadians.

While section 347 may have been meant to address organized crime, the reality is that the provision has been interpreted as applying to most lending arrangements in Canada, including payday lending. Despite this fact, it is important to point out that section 347 is not a consumer protection tool.

The amendments proposed by Bill C-26 would clear the way for the provinces and the territories to create the tools they need to regulate the payday lending industry. In essence, the amendments would provide an exemption from section 347 of the Criminal Code for payday lenders under very specific and circumscribed instances. This exemption would be set out under proposed new section 347.1 of the Criminal Code.

How would this exemption scheme operate in practice? I am glad you asked that question, Mr. Speaker. First, the proposed amendments would define payday loan for the purpose of the exemption. A payday loan would be defined to mean:

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.

While this definition may seem like a mouthful, it is an extremely important aspect of the proposed amendments. Laws and legal systems are meant to provide a certain degree of precision, clearly defining the limits of the behaviour which they purport to regulate.

By defining a payday loan in this fashion, the proposed amendments provide the precision necessary to ensure that the exemption will not capture other types of lending arrangements where the policy considerations at play are very different. These amendments are targeted in scope.

We have heard the concerns expressed by our provincial and territorial colleagues in relation to the regulation of the payday lending industry and we have demonstrated our commitment through Bill C-26 to working with them to ensure that Canadians are provided increased consumer protection measures.

The amendments would further prescribe the types of payday loan arrangements that would be subject to an exemption by providing two additional requirements. First, the amount of money advanced under the agreement cannot be more than $1,500. Second, the loan agreement cannot be for more than 62 days. These are measured and well-considered limitations. They appropriately reflect what we know to be the typical payday lending situation, that is, a short term loan for a relatively small amount.

The proposed amendments specify additional requirements before providing for the exemption from section 347 of the Criminal Code. First, the payday lender must be licensed or otherwise specifically authorized under the laws of the province or territory in which the lender is operating. This presupposes the existence of a provincial or territorial consumer protection scheme. Importantly, the provincial scheme will have to include, for the exemption to apply, a limit on the total cost of borrowing under the payday lending agreement.

Should a province or territory wish to develop such consumer protection measures to address the payday lending industry within their jurisdiction, they will further need to seek a designation from the governor in council in order to provide an exemption from the application of section 347.

In practical terms this would mean that a province or territory which seeks an exemption under section 347 would write the federal minister of justice requesting that a designation for the exemption be issued. The request would need to detail how the province complies with the requirements proposed by these amendments, namely, that the province has legislative measures providing for a consumer protection scheme in place, which includes limits on the total cost of payday borrowing.

Assuming this is the case and acting on the recommendation of the federal Minister of Industry, the Minister of Justice would then ask the governor in council to grant or not grant the exemption. At any time, the province, through its lieutenant governor in council, can request that the designation be revoked. Similarly, the governor in council can revoke the designation if the legislation which establishes the consumer protection scheme established by the province is no longer in force.

This is a sensible and effective solution to a pressing concern in Canada. Bill C-26 facilitates the development of a consumer protection scheme in what has been a largely unregulated area. In so doing, the amendments recognize the constitutional authority over business practices possessed by the provinces and territories through their responsibility over property and civil rights. These amendments acknowledge that the provinces and territories are the most suitably placed level of government to implement a protection regime for consumers which responds to the needs and local circumstances that may exist in different jurisdictions across the country.

Let me pause to point out that the proposed amendments would not apply to federally regulated financial institutions such as banks. Banks and other financial institutions in Canada are already subject to federal legislation. The amendments are specifically targeted at a currently unregulated industry. We know that there is provincial and territorial support for these changes to the Criminal Code to occur. This is because many jurisdictions have indicated that the application of section 347 has been a barrier to their being able to move forward and effectively regulate the payday lending industry.

These amendments would address provincial concerns. For example, in my home province, the government has already tabled legislation to regulate the payday lending industry. Other provinces have expressed an interest in taking similar steps. In the case where provinces choose not to regulate the payday lending industry, the Criminal Code will continue to apply.

Some may argue that the payday lending industry has no place in Canadian society. They may argue that the payday lending industry exploits the situation of already vulnerable Canadians and that facilitating the regulation of this industry will only exacerbate the situation of vulnerable Canadians.

The fact remains, however, that the payday lending industry is a part of our society, and a growing one at that, and we must take the necessary steps to bring it within the purview of regulation. Doing so will ensure that Canadian consumers have more effective protection against questionable business practices.

The amendments contained in Bill C-26 provide the provinces and territories the tools they need to respond to the problem in a manner that is appropriate to the realities facing their respective jurisdictions. I am confident that this is a sound approach to a pressing issue and one which I urge hon. members on both sides of the House to support.

[Joy Smith, Conservative, Kildonan—St. Paul, MB]

Mr. Speaker, I want to thank the hon. Minister of Justice for his very forward move in addressing the payday lending industry.

A very recent article in the local paper talked about this industry, about how it was growing and how it affects people. We know that payday lending happens not only with people who are very short of money but also with people who are supposedly very affluent but who find that keeping up with the mortgage and car payments is a real challenge.

My question for the minister is this. Can he tell the House how much interest is made on these loans and how frequently? I know he spoke to it briefly in his speech, but the rate of lending now is quite high for the payday loan industry. What kinds of people actually frequent this? Is it something that people do on a monthly basis or just once in a while to get the money they need to live on?

[Vic Toews, Conservative, Provencher, MB]

Mr. Speaker, those are very good questions.

As I indicated, given that it is for a relatively short period of time and for smaller amounts of moneys, generally speaking, we can see the effective rate of interest sometimes exceeding 1,000%. When one is talking about 10 days for $200 and being charged administrative and other fees on top of the interest rate, and when the interest rate per se cannot exceed 60%, the effective rate of course is much greater than that. That is what we are addressing.

Recognizing that in this context of short term loans the effective interest rate may be well over 60%, there needs to be some regulation to ensure that there are guidelines and regulations in place to ensure exactly what can be charged. That is where the provinces will step in. They will set those regulations. There is no specific requirement that any province set those regulations in a specific way.

In respect of what kinds of people use this, obviously all kinds of people at all kinds of income levels use it, both the middle class and those who are not as economically fortunate. One of the things a study indicated is that many of the payday loan companies recognize that their clientele comes a very short distance from where the actual offices are set up. Often we see these offices in impoverished neighbourhoods.

Judging by that, it is safe to assume that many of the clients who are utilizing these payday lenders are in fact vulnerable and impoverished people who need this kind of consumer protection legislation.

[Sue Barnes, Liberal, London West, ON]

Mr. Speaker, before the Minister of Justice attends committee, I will let him know that my party will be very happy to support this legislation in large part because when we were in government, the consultations started in 2000 with respect to this type of legislation. In fact, we were very close to bringing in legislation when the government was defeated last year.

Good consultation creates good legislation. Broad-based consultation creates good legislation. I think that is a lesson we can learn. If we do wide consultation, not only inside the minister's department but with stakeholders and people affected, we come up with a proper piece of legislation that is capable of moving through this House rapidly.

This is important and a lesson to be learned. Well defined and well consulted legislation makes efficient use of parliamentary time.

I will briefly go over some of the history. The payday loan industry, as we have heard, is a growing industry in this country. Over the last decade it has been estimated that there are more than 1,300 outlets and every year nearly 2 million Canadians utilize some aspect of the industry.

Unfortunately, along with this growth, a smaller portion of people did some practices that included some very costly practices to people who needed these services. In fact, they created things that would have been in contravention of the criminal interest rate, section 347 of the Criminal Code.

Over the course of the dialogue between the Department of Justice, Industry Canada and the Department of Finance, people came to understand that section 347 of the Criminal Code had really been instituted for the criminal organization loansharking type of activity.

The Canadian Payday Loan Association and payday loan groupings try to have a code of ethics and conduct. Even though they are not yet regulated, and hopefully will soon be regulated, in those provinces and territories, they will have to go through the scheme that is in this proposed piece of legislation, Bill C-26. We have some that are working to provide a service in a more ethical manner. Then we have some that obviously work outside the law to create as much money for themselves at the expense of people who are badly needing interim financing.

As the minister pointed out, this is not an attempt to in any way deal with the financial sector. We have the Bank Act and financial services, even though sometimes they would be dealing with less than $1,500 loan situations. We are talking about the payday loan which tends to be an unsecured loan situation for a very short period of time. As the minister has said, it is less than 62 days and the monetary limit is $1,500 or less.

We have here a sensible, working, viable scheme that will exempt those provinces that decide that it is beneficial in their jurisdiction to work with the industry to regulate and come up with some protections and regulations. Those who wish to operate in that area can do so in a manner that will be better protective of the public. That usually is a consumer protection jurisdiction of the provincial or territorial governments and not usually at this level.

That is why we had to move out of that jurisdiction and carve out an exemption in this bill to allow the provinces to do that. Some of the provinces, notably Manitoba, British Columbia, Nova Scotia and Alberta have indicated interest in doing this. Some other provinces may not be as interested. They will still be living under the Criminal Code jurisdiction and will have to enforce that situation in those jurisdictions.

It has taken a few years to get the bill ready. We are in a situation, at least in my party, to say that we do not see impediments, that this does not force any jurisdictions into making a change. It is actually more permissive. It allows them to step in and put legislation forward where they believe it is in the best interests of the people residing in their jurisdictions.

Some provinces, notably Quebec, have already operated in a different manner and the flexibility under the act is there. As noted, the designation of the province will be required under subsection 3 of the bill. In subsection 2 we have the monetary and statutory dates limitation and the licensing authorizations under the laws of the provinces. There has to be an agreement and then the province moves into the designation that is seen in subsection 3.

There is also a provision for revocation under subsection 4 that should not have to be used, but could be used if necessary and that shows some foresight. Again, interest has been defined, payday loan has been defined, and criminal interest rate is already in section 347, which has a maximum rate already.

This is progressive in that it allows jurisdictions that wish it to regulate the industry and to place limits on the costs to consumers of payday borrowing. I believe it would even have been a better ministerial speech had the minister acknowledged the work that predated his government's ascension into power as a minority government. Be that as it may, I listened to the speech by the Minister of Justice and he covered all the bases that needed to be covered in a way with which I would agree.

Having said that, this is legislation that can move forward quickly in the House. I want to reiterate that where my party sees that we can advance pieces of legislation that have been brought forward and we can support, we will do so, but where there are hastily put together, non-consultative pieces of legislation, we have to do different things in different circumstances.

With that I will end my brief comments here today and allow other parties who wish to comment in the House.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

Mr. Speaker, I know my colleague works very hard, particularly with respect to people.

We are talking about these payday loan places. This is obviously a sector of the economy that has a propensity to prey upon those in our society who do not have the means and the wherewithal to have bank accounts or enough money.

I have a question for her. When her government was in office, we raised a number of times, from this corner of the House, the problems of, particularly in rural communities, the number of bank branches that were shutting down across this country. It was just an absolutely massive number of communities. I think of one in my region, Stewart, B.C., now a booming mining town, which has lost all its bank branches.

The Bank Act is controlled by the federal government. It was meant to be there to regulate banking. It is such an important part of our economy. It is an important part of Canadians' lives.

I am wondering if there are any measures her government ever took to curb the loss of banking establishments in rural Canada. If not, what recommendations could she make in conjunction to the legislation that we are dealing with right now to offer some sort of sense of hope to the communities like Stewart, B.C.? These communities are somehow lost in the shuffle of where banks and these payday loan institutions are making their decisions, which is at the bottom of the deck, and very rarely with any respect to the rural communities that some of us represent.

[Sue Barnes, Liberal, London West, ON]

Mr. Speaker, I remember being the chair of the finance committee when we were talking about bank amalgamations. This matter came up at that time during the course of those discussions. As the member well knows, this is not directly relevant to this discussion on the payday loan bill.

However, the Bank Act itself has the sets of notice provisions. I know that they were followed in each and every case where banks made that business decision to cut. We, in all parties, were concerned and made our representations. I know in my own city I made my representations when a bank and a trust company merged together.

However, we do have to understand that the banking industry is a regulated industry and that there was no branch closing that was not done properly by regulation. Nobody got to shortcut any provisions in the Bank Act. In fact, many worked very hard to give the protections as best they could to all the employees in the areas.

Having said that, I do want to comment on the availability of the small time situation on a payday loan. We should not be confusing a small amount of loan, which would be done in a banking institution, with a payday loan. There is a difference. It is a small sum. There is no security given.

I am told the average payday loan is around $280 for a period of 10 days. It is an advance of cash against the customer's next payday. It is not a form of revolving credit. That is not what this is supposed to be. In fact, those things are among the practices, those roll-overs, that we are seeking to get rid of by instituting some of the protection that is in this current bill.

It is more designed for that one time unanticipated expense where somebody just needs help to get over a short trying period. It is not a payday loan, a long term credit project, nor is it a title loan; by that I mean a loan secured by a title to a property or an asset, such as a motor vehicle.

I am told that payday loan customers are Canadians with near median household incomes and the statistics provided by the Canadian Payday Loan Association puts 53% being women and 47% being men.

It is important to say that to qualify for a payday loan a customer has to be employed and have a chequing account. So it is not really preying at a level that I see a lot of concern.

[Joy Smith, Conservative, Kildonan—St. Paul, MB]

Mr. Speaker, I want to thank the member for her comments. I really appreciated a new insight into this industry and the kinds of things she had mentioned. Could the member comment a little more on the provincial side of it because we need to be partners and leaders in terms of ensuring that this bill does get through?

I thank members opposite very much for supporting this bill. It is a very important one. Perhaps the member opposite could also give some more insight into which provinces have regulated payday loans and also comment on what could be done to get the provinces on board to regulate this kind of thing in their home provinces.

[Sue Barnes, Liberal, London West, ON]

Mr. Speaker, I think it will be for each jurisdiction to determine if it wishes to make it. I do not really see the position of the federal government to be one of intruding and demanding that we make it. In fact that would be ultra vires, out of the jurisdiction of this level of government and it is important that we stay in our area.

The whole intent of this legislation is to allow a carve-out and let someone in. I am aware of governments that are interested. I believe that the Manitoba government has tabled but has not yet proceeded with its legislation. I understand that as of May 3 last year, British Columbia's solicitor general had publicly called on us as the federal government to provide him with the ability to properly regulate payday lenders. On May 29 the Alberta solicitor general asked for the authority to regulate the payday loan industry in Alberta. This past summer, on July 13, Nova Scotia's minister of service said in the legislature that Nova Scotia plans to introduce legislation on payday loans. There are some. I know Ontario had been more reticent at this stage.

There are some who would say that this is a downloading to the provinces. I think there are options here and I view it this way. It is similar to when we were developing the best legislation in consultation with first nations. The way we got five bills through in a minority government was to make sure that on a lot of the first nations governance legislation, regarding economic issues in particular, there was wide consultation. Not only was it done in consultation with the first nations, but often the consultation was first nations led. Here we have a comparable situation where someone is coming forward.

I would also be remiss if I did not mention the advocacy of the Canadian Payday Loan Association, which is an umbrella group of about 850 of the currently 1,300-plus payday loan lenders. This group is striving to clean up the industry and in fact operates inside a voluntary code of ethics. The group wants this legislation. In fact it is pushing for it. Representatives of the group came to see me last spring and I said they would have to push the Minister of Justice.

We were prepared to move forward. We had done the consultations and here we are, some months later in the fall. The Minister of Justice, in April last year, said in talking with the Canadian press that he planned to take action to attempt to regulate the payday loan industry.

I will say that when legislation like this comes forward, it cannot just be worked through one department. We have had the cooperation of industry officials inside Industry Canada. They have been working at it with the original umbrella organization since the year 2000. Finance officials have to be involved. When legislation is worked through the appropriate channels and it makes good common sense, it is important to move on it.

[Paule Brunelle, Bloc, Trois-Rivières, QC]

Mr. Speaker, the purpose of Bill C-26 is to provide for stricter regulation of the payday lending industry, which could also be called the wage advances industry. In Canada, the industry began to take root in the 1990s. Its growth has not been uniform, however, since it falls under the jurisdiction of Quebec and the provinces over local commerce and civil rights and is thus subject to the rules governing contracts and consumer protection in each jurisdiction. Accordingly, while the federal government believes that this industry now has over 1,300 points of sale, they are unevenly distributed and there are not very many in Quebec.

Several payday lending companies have joined together to form the Payday Loan Association of Canada. That association represents 22 companies that operate a total of 850 points of sale for financial services across Canada, but none in Quebec.

What is a payday loan? To the Payday Loan Association of Canada, a payday loan is an unsecured small-sum short term loan typically for a few hundred dollars. The average payday loan is around $280 for a period of 10 days. We can see that payday loans are really meant for low income earners, and this is why, at this point, I want to talk about poverty.

When someone needs to borrow at a high rate from this payday lending industry in order to make it to the end of the month or the end of the week, the reason is that the person is poor in Canada. The most recent Statistics Canada figures, from the year 2000, tell us that there are 1.3 million more poor households in Canada than there were 25 years ago. So the poverty rate among the working population, among people who earn low wages and who will have to do business with this payday lending industry, has gone up.

Poverty is rising among the working population. There are poor families, and poor children, in Canada. The most alarming increase in the poverty rate for families has occurred in young families where the head of household is between 25 and 34 years old. We also see that in 1997, 56% of families headed by a single mother were living in poverty, and they accounted for 43% of poor children.

What we are seeing is rising poverty. We are going to try to deal with it by legislating, and this may be legitimate, but the fact remains that what we have seen during that time is that single-parent families, aboriginal people, people with disabilities, members of visible minorities and people with little education are the poorest people in our society. At the same time, the government is cutting funds for literacy training, social housing, the status of women—all measures that are genuinely going to help people deal with what lies at the heart of the problem. It seems to me that we cannot legislate to deal with only one aspect of the situation.

Obviously, the Criminal Code did not include a definition of payday loan. Nonetheless, it is important that we find a way of solving the problems of poverty in a more comprehensive manner, not going at them piecemeal with a bill like this. According to the federal government, a payday loan is defined as:

—a short-term loan for a relatively small amount, to be repaid at the time of the borrower's next payday.

The Financial Consumer Agency of Canada, which falls under the responsibility of the Department of Finance, indicates that it is possible to borrow via a payday loan. This is limited to 30%. I see this amount of 30% on a paycheque after the various deductions and income tax. It is often said that a family should not spend more than 30% of its income on accommodation. This leads to a very problematic situation in which payday lenders will ask their clients to give them a post-dated cheque or pre-authorized withdrawal directly from a bank account, and will add various fixed service charges as well as interest.

This seems to be a downward spiral that is difficult to stop for these less fortunate families, who, I would remind the House, are becoming even more impoverished. Certainly, more prosperous people do not resort to these lending agencies. They are more likely to go to their bank or credit union, as is the case in Quebec.

Quebec has its Consumer Protection Act. Payday lenders were once numerous in Quebec but the consumer protection bureau decided to intervene. After that, the combined efforts of the police and the consumer protection bureau all but eliminated that industry within our territory. Furthermore, the Consumer Protection Act contains strict provisions to regulate the entire lending industry.

Thus, we see that opinions are divided on Bill C-26. The Quebec government shares the Bloc Québécois' concerns because we see that, under this bill, any provinces can be granted an exemption by the federal government under certain conditions.

We feel that by placing conditions on exemptions, the federal government is interfering in one of Quebec's areas of jurisdiction. Indeed, Quebec is already regulating this industry, without having to account to the federal government. The maximum interest rate is set at 35% in Quebec, which is far less than the 60% in the Criminal Code. In addition, with its designation provision, the federal government is reserving the right to veto the measures taken by the province that requests the exemption. Although the mechanism for granting the designation is still unclear, it appears that ultimately, the Prime Minister will determine whether or not to grant the designation. Such a veto, in an area under Quebec's and the provinces' jurisdiction, seems inappropriate to us.

I will remind my colleagues in this House that Quebec does not always welcome vetoes.

The Bloc Québécois is therefore opposed to the principle of Bill C-26. However, the Bloc Québécois feels that although the federal government has the authority to include in the Criminal Code a maximum interest rate beyond which it becomes illegal to lend money, it does not have the authority to regulate industry trade practices.

The federal government does not need to decide to implement a licensing system or judge the merits of how Quebec and the provinces regulate the practices of this sector.

In our opinion, Quebec is free to regulate the trade practices of the companies under its jurisdiction, and the federal government does not need to impose a veto for the legislation to apply. Despite the Conservatives openness and respect during the election campaign, the fact is that the Harper government is carrying on the federal tradition of interfering in the jurisdictions of—

[The Acting Speaker, Royal Galipeau]

The hon. member just mentioned another hon. member by name. She has enough experience in the House to know that this is not done, and I would appreciate it if she did not do it again.

The hon. member for Sherbrooke has the floor.

[Serge Cardin, Bloc, Sherbrooke, QC]

Mr. Speaker, I would like to congratulate my hon. colleague on her speech on Bill C-26.

In listening to her, I put myself in the shoes of citizens listening to the explanations here in the House of Commons. Unfortunately, I think that the 10 minutes given to my hon. colleague were not enough for her to delve further and provide more specific information about this bill and the reasons why the Bloc Québécois is opposed to it.

I would therefore like to ask her to be more specific for the benefit of citizens. Does this bill set a maximum interest rate for borrowers? I would also like her to tell us whether this rate is still usurious or not.

[Paule Brunelle, Bloc, Trois-Rivières, QC]

Mr. Speaker, the bill sets the interest rate at 60%. To me, that seems usurious.

As I said, the Office de la protection du consommateur limits the rate to 35% in Quebec. Even that strikes us as too much.

[Ken Epp, Conservative, Edmonton—Sherwood Park, AB]

Mr. Speaker, I believe the hon. member has some incorrect information on this. The present Criminal Code provides a maximum limit in the 60% range as the amount of interest that can be charged. The amounts of the loans are very small and these companies have to cover their administrative costs, registration and so on, but even charging $10 for one month on a loan of $200 is way over that limit. This bill would permit the provinces to regulate that and ensure there was no abuse of it. However, it still would allow these businesses, which do perform a valuable service, to carry on with their business.

Many firms do this. I received a little thing in the mail a couple of days ago from a retailer I will not identify, indicating that there would be no interest until next year. However, written in small letters underneath, it said a $15 service charge would apply. If we compute that as a rate of interest, it increases it considerably, although it is not called interest. This also needs to be regulated.

I gently correct the member to ensure that what she is talking about vis-à-vis this bill is accurate.

[Paule Brunelle, Bloc, Trois-Rivières, QC]

Mr. Speaker, I thank the hon. member for his remarks.

In our respective provinces, companies clearly sell furniture by saying there will be no interest for one year. However, something else is going on. It is very easy for businesses to increase the price of something and then give us the impression that they are giving us some kind of discount.

That being said, it is not that we are opposed to an interest rate limit at the outer edges of what working people can afford when they have to deal with payday lenders. What we oppose is the federal government administering this program. In our view, this is a provincial jurisdiction. Quebec is already handling it very well, together with the Office de la protection du consommateur.

Our position is always the same. The government that is closest to the people is the one that is best able to understand the situation, set standards, and exercise its constitutional jurisdiction.

[Serge Cardin, Bloc, Sherbrooke, QC]

Mr. Speaker, before putting my question to the member of the Bloc Québécois, I would like to draw the attention of the House to what the Conservative member said.

The member was talking about 60% interest. If someone borrows $200 at 60% interest—interest rates are always calculated on an annual basis—that amounts to $120. If we divide that by 12, it is $10. For a loan of $200, an individual would pay $10 dollars interest per month. That does not seem exorbitant, but when you make the calculation the rate of interest is 60%. Unfortunately for those lenders, it is possible that $10 per month may not cover the administration costs.

That means that, strictly in terms of the profitability of such a service to the public—if it can be called that—the rate of interest would have to be even more exorbitant.

Therefore, I ask my colleague whether, given the conditions relating to the operation of such a business, we should not simply forget all that and create a bank for small loans and in doing so introduce regulations that better protect consumers?

[Paule Brunelle, Bloc, Trois-Rivières, QC]

Mr. Speaker, I agree.

If a family with a very low income needs to borrow a sum as small as $280, it is certain that an additional $10 will perhaps make the difference and enable the family, at the end of the month, to have had the food that they needed. It is not unusual to see this in the poorest families.

The fact that there is a need for companies like these should lead us to ask why there are still poor children and poor families in Canada, when we have been promised so often that there would be no more. I believe that more and more people are being locked into poverty, in a spiral from which they can never escape. They are never able to pay all those charges.

This bill also makes me think that these companies could also profit from people who are compulsive gamblers, for example. Will those people go to these companies and become caught up in the spiral? We must be very careful and try to understand why these companies exist and how we could try to improve the economic situation of families in Canada.

[Ken Epp, Conservative, Edmonton—Sherwood Park, AB]

Mr. Speaker, if I can add clarification to what the two members have just said, first, I understand it is the intention in the bill that provincial jurisdiction will be given. In other words, the in the case of Quebec, it will continue. In the case of other provinces, they regulate this industry on behalf of their own residents. I think there should be no objection from the members of the Bloc on this issue.

Second, I think it is fair to say that these people, instead of having a bank account, will go to one of these short term financial institutions and they will be willing to pay $10 if they can get their short term loan and pay it back.

I happened to just do the math because I had not done it before. If we pay a $10 charge on a $200 loan for 30 days and if we call it interest, it works out very close to 60%. The question is this. Is it really fair to call that interest? As in all cases, there is an administrative component to this that must be covered. If these firms were not permitted to charge that $10 fee, then they would be unable to provide the service and those who want that service would then be deprived of it.

The objective of the bill is to allow those firms to conduct their business on behalf of those who demand that service.

[The Acting Speaker, Royal Galipeau]

The time allotted for questions has now expired, but I will give the hon. member one more minute to answer.

[Paule Brunelle, Bloc, Trois-Rivières, QC]

Mr. Speaker, I can obviously not be in total agreement with my hon. colleague.

Instead of allowing these industries to exist, their relevancy ought to be assessed. Where I come from, we would call it cashing in on other people's misfortune. I would not be very proud of managing a business like that.

[Pat Martin, NDP, Winnipeg Centre, MB]

Mr. Speaker, I was happy when I learned I could enter into the debate on Bill C-26, the Criminal Code amendments regarding payday loans. From experience, the payday loan industry is like a scourge on the inner city of Winnipeg, on the riding I represent. I cannot find the words to speak strongly enough about how critical I am of this exploitative criminal industry. I can say the word “criminal” I think without insulting anyone or without pushing things over the line.

This very bill has been put in effect because the government knows full well what has happened, up until the implementation of the bill, meets the definition of criminal in terms of these so-called payday loans.

In the past in other speeches I have shared the unfortunate and harsh reality that my riding is the poorest riding in Canada. Whether it is measured by average family income or incidence of poverty, Winnipeg Centre is the poorest riding in the country. I bet dollars to doughnuts it has the highest concentration of these exploitative payday loan outfits because they prey on the misery of the poor. They exist solely to take advantage of low income people, desperate people. These people go from the day's drudgery to the evening's despair. They cannot make the end of the week on their meagre earnings, whether it is their paycheque or their social assistance cheque. Because of that, they wind up the victims of these payday loan outfits.

My colleague from London—Fanshawe has raised the point with us as well that every street corner we look at has a payday loan outfit. Every little strip mall that has a vacancy in our ridings is occupied immediately by another one of these payday loan outfits, be it Paymax, The Cash Store or Money Mart. All these reputable sounding names disguise the fact that they rip people off in epic proportions and in complete violation of section 347 of the Criminal Code. For the benefit of Canadians, this section states very clearly that to charge interest at a rate greater than 60% per annum is not allowed.

That provision was put there for a reason. Some of us would argue that 60% per annum is too much, that there is no justification for charging this kind of interest rate. I think the interest rate charged on my Visa is criminal, but it is legal. Visa, at 18%, may make us angry, but these guys, who set up shop to deliberately undermine the law by charging rates of interest that are easily within the realm of criminality, should be condemned, not accommodated by the bill. I call them bloodsuckers and leaches. I call them a scourge on the inner city of Winnipeg for cheating and deliberately exploiting poor people by design.

Let us look at who is doing this and how much money they are making. Where else can people get 1,000% return on their investment? A person would be pretty happy in today's stock market to be making 8%, 10% or 12% interest. In the good old days some IPO in the high tech sector could make 20% per annum interest.

These outfits are making 1,000%, 2,000%, 5,000%, 10,000% interest per annum. One example, investigated by the attorney general of Manitoba, found one cash store was making 10,000% interest, if all the surcharges and service charges are called part of the interest. For the purposes of the law, all those charges end up with net effect of interest at 10,000%.

The industry is completely unregulated. No wonder it attracts people such as the mob, the Hell's Angels and terrorist groups. Where else can they get that kind of money?

These innocuous looking, nice, clean little stores, which are popping up in every strip mall across the country, are not only sucking the lifeblood out of my inner city riding of Winnipeg Centre, but they are starving people and they are involved in clearly illegal activity. They are not only charging usurious illegal rates of interest, but charging people to cash government cheques.

Many members in the House would be shocked to learn that no one is allowed to charge for cashing a government cheque. People do not know their banking rights and that is where the blame has to come down.

We would not be having this debate today or the epidemic of rip-offs going on in our ridings if the banks were doing their job of providing basic financial services to Canadians as per their charters. If the banks had not abandoned the inner cities of Winnipeg, Vancouver, Toronto, Sault Ste. Marie and London, if they had not bailed out on this nuisance financial services industry that they do not want any more, poor people would not need to go to these rip-off outfits.

Fifteen branches of the five charter banks in my riding have left since I have been a member of Parliament. I know that 13 or 14 have left the riding of Winnipeg North, represented by my NDP colleague who is not here today. That is almost 30 branches of inner city ridings.

I am sorry, I will not point out whether my colleague is here or not today. I am actually delivering this speech on behalf of my colleague, the finance critic for the NDP, so people can draw their own conclusions as to whether she is here or not.

The fact is that roughly 30 branches of chartered banks have left, a flight of capital, leaving no financial services in their wake. People do not know that the charter banks have obligations. The charter banks of Canada were given the exclusive rights and privileges to certain very lucrative financial transactions, such as credit card statements, cheque cashing, et cetera, in exchange for providing basic service to Canadians, even when sometimes it is not the most profitable thing in the world to give ma and pa their little mortgage in downtown Winnipeg, even when it is not that profitable to allow people to open bank accounts to cash cheques even when they only have $100.

However, the banks have an obligation and a duty. If the charter banks are not willing to live up to their end of the bargain, we should tear up their charter, throw the industry wide open to foreign banks and see how they like it then. That is what they have done in some other countries when the charter banks got too big for their britches. We would not have this problem in the inner city of Winnipeg and other major Canadian cities if the banks were doing their job by providing basic financial services.

As such, the people who I know, the low income people in the inner city of Winnipeg, have no alternative, nowhere else to go to cash their cheques. They actually sport their Money Mart card, which is, frankly, a licence to be robbed, as one of their main pieces of identification. I have used the phrase before that villainy wears many masks, none so treacherous as the mask of virtue.

These Money Mart stores are trying to portray themselves as providing a necessary service. They set up brightly lit, friendly looking stores, are courteous to the low income people who walk in and they issue important looking cards that are not even credit cards but just ID cards for the Money Marts. People carry them around with some pride because the banks will not talk to them, aside from the fact banks are nowhere to be found. People do not have bank accounts but they do have Money Mart cards.

I have never been able to calculate the amount of money that gets sucked out of my riding every month by these thieves. I will call them thieves, at least until such time as the Criminal Code is changed to where we allow greater than 60% interest to be charged. They are involved in illegal activity and we are accommodating them with this bill. Instead of correcting the problem, the bill actually says that we will not stop this runaway roller coaster so we had better change the law to make it legal.

At least we are ceding the jurisdiction to the provinces so they can hopefully put in place some enabling legislation to control and contain the extent of the problem because the extent of the problem is horrific. These outfits are sprouting up like poisonous mushrooms on every street corner, if I can be forgiven for extending that analogy, because their corporate greed is responsible for a sum total of human misery on the streets of the inner city of Winnipeg that I do not think we can measure.

The very fact that people cannot make ends meet on their meagre paycheques and are forced to obtain one of these payday loans already means they are in some form of financial crisis. It is not the people we see on the TV ads, well dressed, middle class people driving their cars up to the Money Mart because they are $100 short on this month's paycheque.

The way these outfits are structured, people's problems are compounded. Their misery is only starting with the first loan because if they are a day late on that loan, they offer a rollover loan at an even higher rate of interest and more service charges. These companies suck people in and roll the money over until people have reached a level of debt that they can never get out of.

Here are other things that these outfits do. It is common practice to have people voluntarily sign a permit so their future wages can be garnished, never mind going through the courts. If somebody owes a great deal of money, sometimes companies need to apply to the courts to garnish someone's wages. However, payday companies make people sign this away at the front end.

These companies will make people put up property, if they have it, as collateral even for a couple of hundred dollar loan, which seems ridiculous, except that they know how fast a $200 loan spirals out of control to where all of a sudden it is not so ridiculous to have a house as collateral for that loan because the loan is not $200 for very long. Cars and boats are not unusual personal guarantees. Sometimes people need to sign away their right to any kind of arbitration or to the services of a credit manager.

These companies have not only figured out how to charge 1,000% or 2,000% interest, they have figured out ways to preclude the ordinary rights that people might have if they run into credit difficulty to get out from under it. In other words, they own people. Loansharking seems kind compared to these payday loans. I kind of pine for the days when it was just Luigi the leg-breaker who would take care of things. These guys are far more sinister, far more organized, far more corrupt and far more criminal. The leg-breaking that used to go on if people borrowed money at the pool hall, we would probably look forward to that compared to the hold that these companies have.

It is criminal behaviour. It is organized crime. There are chains of these companies, in effect, breaking the law systematically, the very definition of organized crime. Our reaction as a government, unfortunately, is to accommodate them and to pass legislation to allow these companies to charge more than 60% per annum. It does not say that they can charge 2,000% or 10,000% per annum as in the most extreme case that we have come across, but to accommodate them in any way is offensive to the sensibilities of any decent Canadian.

It should make us angry. It should make Canadians angry that the best thing we can think of to do when faced with this organized wholesale criminal activity is to accommodate them when we should be looking at our financial institutions to look at the root cause of the problem, which is abandonment by the charter banks.

The charter banks have packed up their tent and left, not because these branches in the inner city were not profitable, but because they were not profitable enough. Because their branch in the suburbs made more money than the branch in the inner city, they put an addition on the branch in the suburb and told their customers in the inner city to take a bus out to that branch. They closed 15 branches in my riding alone in the inner city of Winnipeg.

It is abandonment. It is a vote of non-confidence. It would not bother me if these were independent private businesses because it is their right to pack up and leave. However, these are charter banks. They exist and enjoy their exclusive monopolies at the pleasure of the House of Commons and the Government of Canada. Has nobody tried to remind the financial institutions of their obligations in recent years? They are making record profits quarter after quarter. They cannot count their money. They are like Scrooge McDuck sitting on piles of money that they cannot even imagine their good fortune and yet they are derelict of their duties and leaving the people I represent vulnerable to rip-offs like the payday loan industry.

The payday loan industry even has an association now, which is how they are striving for legitimacy. Can anyone guess who the executive director of the Payday Loan Association of Canada is?

[An hon. member]

It's not a New Democrat, is it?

[Pat Martin, NDP, Winnipeg Centre, MB]

No it ain't no New Democrat. It is a former Liberal cabinet minister from Hamilton, I believe by the name of Stan Keyes. Stan Keyes has now seen fit to represent these guys. I do not know what could possibly be his thought process to think that would be okay. Even his wife gave him heck. In this newspaper article it says that when he first told his wife that he was serious about taking on the job as the head of the Payday Loan Association of Canada, his wife asked him if he really wanted to do that. She wanted to know what he was doing to his reputation as a respectable stand up guy, working for those shysters.

If he is trying to reinvent himself after 20 years of political life, he is choosing a funny way of doing it by working for the most reprehensible, morally and ethically bankrupt organization in the country.

[An hon. member]

The Liberal Party of Canada.

[Pat Martin, NDP, Winnipeg Centre, MB]

No, not the Liberal Party of Canada. He has moved from the Liberal Party of Canada to the head of the Canadian Payday Loan Association. I do not know what the connection is but maybe this explains why, after years of complaining to the Liberal government that these rip-offs were running roughshod over the law and exploiting the people I represent, it chose to do absolutely nothing year after year.

I went directly to ministers of industry on this very issue looking for satisfaction on this. In fact, I pigeonholed one minister in Manitoba when she was visiting my province. We had our minister of consumer and corporate affairs and we had the federal minister of industry there. I told them both that it was an emergency, a crisis, and that they had to do something. That was years ago, probably 2002 or 2003, and nothing was done.

The Province of Manitoba has been trying to pass its own legislation to stop these guys but it does not have the jurisdiction to do so. It is a federal matter. Now we have the federal government at least paying deference to the extent of the problem and introducing legislation that hopefully we can segue into some satisfaction for the people I represent, although it will still be up to individual provinces to say how tough each one chooses to get.

However, I am here to say that the payday loan industry is out of control. They are a bunch of crooks. They are a bunch of gangsters painted up as honourable citizens but there is nothing honourable about their industry. They are cheats and they are cheating Canadians as we speak.

The sheer number of them shows us how profitable this is, but, as I said in my opening remarks, where else can people get 1,000% interest? Where else can people get that rate of return? No one can make that kind of investment. I do not think that much money is made selling coke, and I mean cocaine not Coca-Cola. I do not think anyone makes that much money dealing dope. It is irresistible. I do not think anyone can make that much money in prostitution or any of the other traditional rackets. This is a racket to end all rackets and we are actually accommodating them and finding a way to make it legal.

I am surprised the Canada Pension Plan Investment Board is not investing in payday loans. They do not have any ethical investment standards whatsoever. They have no ethical screen. In fact, I think we could argue that the Canada pension plan is obligated to invest in the payday loan industry because its very founding trust document says that the only consideration shall be the maximum rate of return. There are no ethical standards: child labour, polluting the St. Clair River, it does not matter. Our pension plan has to invest in them.

I understand I am running short of time, but I raise that as an aside. I do not want our Canada Pension Plan Investment Board to invest in payday loans. I want to stamp payday loan companies out of existence. They should be squashed like a grape under the heel of Parliament for the offence that they have committed against the Canadian people. They do not deserve to breathe the same air as the good people of Winnipeg Centre. They do not deserve to occupy store space. They do not deserve to put up billboards and buy advertising space. They should be run out of business. They should be tarred and feathered and run out of town on a rail. That would be the only suitable way to treat the payday loan industry.

[The Acting Speaker, Royal Galipeau]

It is my duty, pursuant to Standing Order 38, to inform the House that the questions to be raised tonight at the time of adjournment are as follows: the hon. member for Skeena—Bulkley Valley, Government Programs; the hon. member for Saint-Bruno—Saint-Hubert, Bankruptcies.

[Brian Murphy, Liberal, Moncton—Riverview—Dieppe, NB]

Mr. Speaker, the member may want to rethink the use of the name Luigi in his speech, fraught with sensibilities, as the stereotypical lender. I know the member has more respect for the many multicultural Canadians to probably do that.

However, the pith of his statement, in my mind, goes to an abdication of Parliament in not having laws to protect its citizens and in the completely antiquated state of our Criminal Code.

The member will know that a colleague of his, the justice critic from the New Democratic Party, stands with many Liberals in requesting that the Criminal Code, in its entirety, be renewed and revised.

As the member has been a parliamentarian for some time, he would know that section 347 of the Criminal Code of Canada, which has been on the books for some time, does cover square on all fours with the crimes that are associated with 2,000% interest administered by some of the payday loan companies. How is it that it has escaped Parliament all these years and escaped the Criminal Code for protection of our citizens, and what would he suggest in terms of revamping the Criminal Code in specifics and in generalities?

[Pat Martin, NDP, Winnipeg Centre, MB]

Mr. Speaker, I thank my colleague for pointing out that it would be wrong to point out any particular ethnic group or type of people when we are criticizing what I call loansharking and leg-breaking, et cetera. It certainly was not my intention, but under section 347 of the Criminal Code dealing with usury, which is what the term is when a rate of interest is charged which is higher than that allowed by law, there has been only one charge in recent years. It was the province of Manitoba that levied the charge against the company and it is still tied up in endless appeals.

We are concerned that there has been a lack of enforcement, which should not be a matter for politics or the political realm, but for some reason, I suppose, there has been no confidence that we can make these charges stick. Without legislation that accurately reflects the reality of what is going on in the marketplace, and without a modern, efficient language, we are not going to be able to make those charges stick.

My colleague's point is well taken. We need to modernize the Criminal Code so that it at least bears some resemblance to what is actually going on out there in modern-day Canada.

This is a fairly recent innovation and it takes evil people to exploit it. I do not know how they devise these schemes, but bad people stumble across these opportunities and exploit them. They research them. They do not just look for loopholes. They look for poorly enforced clauses of the Criminal Code. That is what has happened. It is against the law to charge 2,000% interest, but these people had the temerity to try. When they did not get busted, more people were motivated to try, and then more and more. Word spread like wildfire.

If one is of the human nature of that sort, who would willingly exploit people and capitalize on human misery, this is a golden opportunity. If one is that kind of person and is that low as a human being, the Government of Canada and our criminal justice system apparently are not going to interfere, because we have appealed to the government. We have tried. We have begged. We brought it to the highest level and nobody seemed willing to interfere with what these guys were up to.

[Ken Epp, Conservative, Edmonton—Sherwood Park, AB]

Again, Mr. Speaker, I have a comment more than a question. This member has his heart in the right place, I think. He is out there fighting for the little guy and so am I. There may be a little difference between him and me, though.

I remember many years ago when I had an NDP friend that I worked with. We had a debate on how to help poor people. During that debate, out of the blue I asked him how much he had given to charity in the last year. He said, “Nothing. It's not my responsibility”. But he believed strongly in the government covering everything. I said, “I guess there's the difference, because I give a lot of money to charity and to individuals I see in need because I believe in that”.

I have a friend right now in the city of Edmonton, with whom I am working and who is in a bad financial situation. He recently got a cheque. It was not a large cheque. He needed to cash it and I asked him why he did not have a bank account. I told him that he could open a bank account, that the bank would open one for him and I would go with him and help him and he could cash that cheque for nothing. He said, “No. I can't be bothered”.

Should we pass a law that forces these people to have a bank account? I do not know if we should. Perhaps we should.

At any rate, he asked me to please stop and he went into one of those instant loan places to cash his cheque. I think they charged him $2 to cash a $200 cheque. There was no interest involved because he did not take out a loan. He had a cheque. It was a $2 charge to cash the cheque. If I go to a bank, I also am charged to cash a cheque because the bank is giving me a service.

I would like to urge the member to stop and think about it. Perhaps these small financial institutions that cater to the small user are providing a valuable service to those people for what is a reasonable absolute charge, but if we compute it into an interest rate it becomes usurious, which is of course the issue in the Criminal Code.

These people are not criminals. They are providing a low level service for a relatively low amount of fees, but when we convert it to an interest rate, which is unjustified in this place, then I think we can get very confused on the issue. I appreciate the heart this member has, but I would urge him to reconsider his vitriolic attack on these people.

[Pat Martin, NDP, Winnipeg Centre, MB]

Mr. Speaker, I will not even bother commenting on getting into a comparison of who donates more money to charity. It is not worthy of this place.

I will come back to the idea about banks not living up to their duty and obligation to provide basic general services to all Canadians as an aspect of their being granted a charter, as are chartered banks. A lot of people do not know their banking rights. Low income people often do not.

A bank cannot turn down people who want to open a bank account even if they do not have a single dollar. Even if they do not have any money but just want to open a bank account to establish a relationship with that bank for future cheque cashing, for instance, a bank cannot turn them away as long as they have a piece of ID.

Maybe people do not know their banking rights. There has been very little effort on the part of banking institutions to make sure people know their rights, because these are considered nuisance services. An individual might be charged $1.50 in service charges, but probably that does not even pay for the administration costs.

People should know their banking rights. The Government of Canada has a role to play in reminding banks that they have this duty and an obligation, not just in the inner city of Winnipeg but in Plum Coulee, Manitoba, or in some small towns that are losing their bank branches too.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

Mr. Speaker, I thank my hon. colleague from Winnipeg for all the work he has done over the years on this issue.

As banks continue to show record profits, and good for them for being able to do that, there also seems to be a breaking of their responsibility and the contract--a compact, in fact--with the people of Canada, which the governments that occupy this place are meant to represent and uphold. Banking institutions are given a certain oligopoly and in bearing that responsibility they bring banking services to Canadians.

Earlier in the debate, I pointed out a small community in my riding, Stewart, B.C., which over the years has contributed hundreds of millions of dollars to the Canadian coffers, both provincially and federally, and yet cannot maintain a branch service, because the banks can make money in the community but not enough.

What responsibility do banks actually have to Canadians? Do they need to be reminded of that responsibility to bring those services to communities by the people elected by Canadians, not by the banks?

[Pat Martin, NDP, Winnipeg Centre, MB]

Mr. Speaker, my colleague from Skeena--Bulkley Valley has made a valid point. Banks were given the exclusive monopoly on certain very lucrative financial transactions in exchange for providing basic services to Canadians, whether they live in the inner city of Winnipeg or the remote northern region of British Columbia.

I know that ministers responsible for financial institutions should have been seized of this issue in recent years because this duty very conveniently seems to have been collectively forgotten by the banks. That is what has left the people of the inner city of Winnipeg vulnerable to these rip-off payday loan outfits.

If I could correct my colleague from Edmonton, these institutions are not charging just $1.50 to cash a cheque; sometimes it is 3%, 4% and 5% of the amount of the cheque. I am not saying this is so in every case, but we know of examples where it is that high. That is an absolute rip-off. Nothing is supposed to be charged for cashing a government cheque, period. It is supposed to be a service available to Canadians. If a customer establishes a relationship with a bank and needs an extra $100 one week, he or she could do an overdraft and the service charge would be 1% or 2%.

[Jacques Gourde, Conservative, Parliamentary Secretary to the Minister of Agriculture and Agri-Food and Minister for the Canadian Wheat Board]

Mr. Speaker, it is my pleasure to rise today to speak in support of a significant piece of legislation, Bill C-26, An Act to amend the Criminal Code (criminal interest rate), introduced on October 6 by my colleague, the Minister of Justice.

This bill amends the Criminal Code to allow for the regulation of the payday lending industry by the provinces and territories. This is a major change which is well received. For years, the payday lending industry was able to operate unnoticed in Canada.

This bill will subject this prosperous sector to regulation and offer greater protection to millions of Canadians and their families who have come to depend on this kind of service. According to the leading industry lobby, namely the Canadian Payday Loan Association, this sector services nearly two million Canadians a year. This is a pretty large number, hence the importance of ensuring that Canadians are well protected against harmful practices in that industry.

The passing of Bill C-26 would first amend the Criminal Code by adding a new provision, namely subsection 347.1, which would exempt payday lenders from the provisions on criminal interest rates where provincial and territorial legislative measures protect consumers in this regard. It would then add a definition of “payday loan”. Finally it would require the provinces to set a limit on the total cost of this type of loan in their legislative measures.

Before examining the content of these amendments, I shall provide a few clarifications on two points. First some background on the payday loan industry in Canada, including its effects on communities across the country, and, second, its debatable practices, which motivated us to take action and propose the amendments before us today.

When they know more about this industry, I am convinced that all the members will agree that the measures put forward in Bill C-26 are pragmatic, balanced and necessary.

The payday loan industry is relatively new in Canada. These convenient establishments with catchy names began to appear here about 1994. The industry began in the West, but today it has spread throughout Canada. In fact there are about 1,350 of these establishments in all Canadian provinces and cities, except in Quebec, and they continue to increase in number. Some 2 million Canadians use these services, borrowing close to $1.7 billion a year. This is an astounding amount when we know that all this activity takes place in an market that is basically unregulated.

These figures show that the payday loan industry meets a real demand by Canadians. According to some, this industry has no place in Canada. On the other hand, it obviously plays an important role in the lives of many Canadians. There are several reasons to explain why our fellow citizens turn to the services of a payday lender. Convenience is one of them, since many of these businesses stay open late and on weekends. Also, some people think that the popularity of this sector may be attributed to the fact that the country’s large financial institutions have closed their smaller branches, leaving a void among services providing quick and easy withdrawal of funds in many communities. There is also the fact that this service is relatively anonymous and emergencies can occur, with immediate financial consequences.

In any case, this industry seems to have its place in our communities. So it is important that we provide adequate protection from certain abusive commercial practices to the Canadians who use payday loan services, especially the most vulnerable people in our society.

The government takes its responsibility for improving the lives of Canadians and their families very seriously and is taking a number of important measures to do just that. Whether it be by strengthening the Criminal Code to make our streets and communities safer or by reducing taxes for our fellow citizens, we are committed to taking effective action such as what we are proposing in Bill C-26.

We will continue to do this to ensure that Canadians have the best possible quality of life.

The measures proposed in Bill C-26 are a careful and effective way of improving consumer protection and meeting the need that has been expressed by various people, including the provinces and territories, for effective regulation of this industry. There are three good reasons for doing this.

Payday loans are very expensive. In some cases, the annual cost of a loan from a payday lender can be very high, because of the interest, which is charged at a rate that is sometimes several thousand or more. It also seems that the contract clauses are not clearly disclosed by these lenders.

Aggressive collection methods also create problems, as does the speed with which the amount of these debts can grow out of control when they are renewed. In some cases, payday lenders even penalize a borrower who pays the loan before the due date, by charging fees.

For all these reasons, it should be very clear to all members that there is strong justification for taking action. The changes proposed in Bill C-26 will ensure that the practices of this industry are effectively regulated.

When we looked for the most appropriate way of dealing with this pressing public policy issue, we also worked very closely with our colleagues in the provinces and territories. We gradually realized that section 347 of the Criminal Code was going to be the linchpin of the new rules.

Under section 347, everyone who enters into an agreement or arrangement to receive interest at an annual rate that exceeds 60%, which is a criminal rate of interest, is guilty of an offence.

People who are convicted of that offence are liable to imprisonment for up to five years.

When section 347 of the Criminal Code was first enacted, its purpose was not to protect consumers. Rather, its aim was to give the police another weapon for fighting organized crime, and more specifically loan-sharking. Whatever the intent of Parliament was at that time, this section applies to loan agreements entered into in Canada, including payday loans.

I would note, however, that the government does not believe that section 347 of the Criminal Code is the most appropriate and effective instrument for protecting consumers from the unethical and unscrupulous practices that have been observed in some segments of the payday loan industry.

We are not the only ones who think that way. Many administrations and several groups in civil society have told us that section 347 is not suited to consumer protection. What is more, these same administrations have told us that the application of section 347 to payday loans presented an obstacle to the adoption of effective provincial regulations. As a consequence, the proposed amendments respond to the needs of the provinces and territories, who are the best placed to provide the required protection to consumers by exempting cases where provinces choose to intervene from the application of section 347.

However, section 347 continues to apply in those cases where the provinces do not intervene. We consider this to be an appropriate solution that enables the provinces and territories that are prepared to regulate the industry to do so.

I would also like to point out that Bill C-26 will not apply to financial institutions that are regulated by the federal government, such as banks. Under the Constitution of Canada, banks fall under federal jurisdiction and their operation is subject to a number of federal laws.

By and large, the proposed amendments would exempt payday lenders from the application of section 347 of the Criminal Code in very specific and well defined cases. That exemption would be provided under a new section, section 347.1 of the Criminal Code.

According to a study, the amount generally loaned in the case of a payday loan is never very high—less than $300—and the duration of the loan is generally short—about 10 days. To be eligible, the borrower must prove that he or she has a bank account and provide a post-dated cheque or pre-authorized debit. The borrower must also provide proof of a source of income.

Bill C-26 describes a payday loan as follows:

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

This definition is important because it clearly describes the kind of agreement behind payday loans. The proposed changes have a very specific purpose. We want to ensure that provinces and territories are able to regulate payday loans in their jurisdictions. We also want to ensure that only payday loan agreements are covered. We are doing this because the public policy issues raised by other kinds of credit are very different. I think that the definition provided in Bill C-26 describes payday loans very well.

Bill C-26 also specifies that only certain types of payday loans will be exempted from the application of section 347 of the Criminal Code. The loan cannot be for more than $1,500 and for any longer than 62 days. These limits reflect the maximum limits on payday loans described earlier.

The bill does not propose any regulations per se, not does it set a national limit on payday loan interest rates. What it does instead, in creating an exemption to the application of section 347, is to meet the needs of the provinces, who want to see the obstacles to the regulation of this industry removed. This is important because it is the provinces and territories that are best placed to regulate the payday loan industry.

The ultimate purpose of the proposed changes is the effective regulation of the industry. The best way to achieve this goal is to give the provinces and territories the flexibility they need to set limits on the cost of loans. Thanks to this approach, the regulations that are adopted will be well suited to the specific situations facing the different provinces and territories.

This bill also provides that section 347 will continue to apply in those provinces and territories that elect not to pass legislation governing the payday loan industry.

If a province or territory has made the decision that payday lenders operating within that province or territory are to be exempt from the application of section 347 of the Criminal Code, it will have to apply to be designated for that purpose by the federal government. In order to be exempted, it will have to show that it has adopted legislative measures that protect anyone who wants to take out a payday loan. What those consumer protection measures are will be left virtually entirely to the discretion of the provinces and territories.

This is a valid approach in that it recognizes the nature of the situation in each jurisdiction, including, specifically, the way that the industry operates there, and also the existing provincial consumer protection legislation adopted under the powers assigned to the provinces by the Constitution in relation to property and civil rights.

Bill C-26 requires, however, that the province provide for limits on the total cost of payday loans in its legislative measures. I believe that this approach reflects three fundamental factors.

First, the provinces and territories are capable of controlling the cost of loans within their jurisdictions. Second, this guarantees that there will be a limit on the cost of borrowing. And third, as we saw earlier, it offers a flexible solution that can be adapted to the characteristics of each province and territory.

The Governor in Council will make the necessary assessment before granting a province or territory the designation applied for. The province will apply to the federal Minister of Justice, stating the legislative measures it has taken to control the cost of loans. Then, on the recommendation of the federal Minister of Industry, the Minister of Justice will ask the Governor in Council to grant the designation applied for. The province will then be given the power to exempt a payday lender, by licence or otherwise, from the application of section 347.

All in all, I believe that Bill C-26 is very important. It offers Canadians greater protection by allowing the provinces and territories to regulate an industry that is in great need of oversight. It sets very clear limits. It defines payday loans and sets a limit of $1,500 for loans that may be made under these rules. It invites the provinces to adopt legislative measures to regulate payday loan agreements, and in particular the total cost of the loans.

Bill C-26 is further proof of the government’s commitment to working with the provinces and territories on matters of common interest. The amendments proposed will have an important and real effect on the Canadians who have come to depend on this service. I hope that all members will join me in ensuring the speedy passage of this bill.

[Serge Cardin, Bloc, Sherbrooke, QC]

Mr. Speaker, since for all intents and purposes we are discussing micro-credit, I would like to point out that the member for Winnipeg Centre and the member for Skeena—Bulkley Valley made special mention of the social responsibilities that banks should have. I remember introducing a bill, on another occasion, that would have allowed banks to play a social role by helping the most disadvantaged and the poorest who have to pay administrative fees. Often bank services are not accessible to these individuals.

I would just like to make an important point. The member for Edmonton—Sherwood Park mentioned that the member for Winnipeg Centre was too kind to the poor and that we have to follow the lead of the government in terms of Bill C-26. I would like to point out that, this year, Mr. Muhammad Yunus received the Nobel Peace Price. He is an economist who established a micro-credit system, with 1,200 micro-credit offices, which today has created jobs for 12,000 individuals. These are small repayable loans made at rates that are probably much lower than 60%.It gives credence to the statement that, and I quote, “Lasting peace cannot be achieved unless large population groups find ways in which to break out of poverty”.

If people need payday loans and, if for all intents and purposes, micro-credit were available for relatively short periods, would it not be important enough to warrant establishing this system within the banks? They could be asked to play a social role and to loan small amounts. We know quite well that, more and more, banks—all banks—make profits in the order of hundreds of millions of dollars, profits often in excess of one billion per year.

Ordinary banks have a social responsibility. I ask the member: would it not be better to ensure that banks fulfill their social responsibilities rather than protecting a loan system which, for all intents and purposes, is usurious?

[Jacques Gourde, Conservative, Lotbinière—Chutes-de-la-Chaudière, QC]

Mr. Speaker, I think that new legislation will provide us with a tool to give the provinces and territories a way to regulate and perhaps help the micro-credit sector we are discussing. Canadians must need these kinds of loans. Payday lenders have monopolized this part of the market, a market that is not currently regulated.

It is really important to regulate this industry to protect millions of Canadians. That is why I support this bill.

[Brian Murphy, Liberal, Moncton—Riverview—Dieppe, NB]

Mr. Speaker, does the member realize that if this bill is passed, there will be many differences between the provinces?

Does the member think that the Quebec model is a good one?

Perhaps he is aware that the Quebec model limits interest rates to 35%, while the Criminal Code limits rates to 60%.

Does he think this is a good model for all of the provinces?

[Jacques Gourde, Conservative, Lotbinière—Chutes-de-la-Chaudière, QC]

Mr. Speaker, the tool we will be providing to the provinces and territories will enable them to set their own maximum rates.

We have a very good system in Quebec, and credit unions are firmly established in both rural and urban communities.

We do not have this problem in Quebec, and I think that is because the banking and credit union services provided by Desjardins are closer to the people. I hope that banking services that meet the people's credit needs will develop in other provinces.

[Paule Brunelle, Bloc, Trois-Rivières, QC]

Mr. Speaker, as far as this Quebec model is concerned, I would like my colleague to know that in Quebec, payday lenders were abolished through the Consumer Protection Act, which has very strict obligations for lenders of every kind.

The annual borrowing rate has to be indicated on the loan agreement. All fees are calculated in the annual rates. There is no possibility of adding other fees such as record creation fees, form processing fees and so on. The law says that an annual interest rate greater than 35% is abusive.

Why present this bill that interferes in provincial jurisdictions?

Every province could adopt its own consumer protection act and thereby regulate this loan industry, which often includes some very abusive lenders.

[Jacques Gourde, Conservative, Lotbinière—Chutes-de-la-Chaudière, QC]

Mr. Speaker, again, in my opinion this legislation will allow territories and provinces to legislate and help this industry that has been around since 1994.

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

Mr. Speaker, I will go back to the question the hon. member for Trois-Rivières asked because her question was not fully answered.

In Quebec, we have a financial system that was implemented by institutions and designed with a view to protecting consumers through a consumer protection network. We are here in this House in the process of developing a new system that may interfere with the one already in place for protecting the most vulnerable from these types of loans.

As my colleague was saying, we are talking about loans with a 60% interest rate. In my opinion, a 60% interest rate is excessive. It practically amounts to usury and exploitation.

I do not understand the need to introduce a bill that interferes in a provincial jurisdiction. The addition of this measure will encourage financial institutions to further exploit the least fortunate in our society, when in Quebec and in other provinces, we already have legislation to protect the most vulnerable and the least fortunate in our society who often use this type of loan. I would like the hon. member to respond.

Why introduce a bill that will harm the most vulnerable in our society?

[Jacques Gourde, Conservative, Lotbinière—Chutes-de-la-Chaudière, QC]

Mr. Speaker, I am pleased to respond to my colleague's question.

The payday loan system was not regulated. We have a duty to introduce this bill in order to help millions of Canadians.

[Serge Cardin, Bloc, Sherbrooke, QC]

Mr. Speaker, when I requested the floor to ask the hon. member a question earlier, it was to remind him that the bill should help not just the provinces and territories, but also the least fortunate in our society.

To come back to what I said in a previous question, this is oddly similar to micro-credit and, in my opinion, it is the financial institutions—which make outrageous profits—who should take responsibility.

[Jacques Gourde, Conservative, Lotbinière—Chutes-de-la-Chaudière, QC]

Mr. Speaker, I think that our bill will solve the payday lending problem.

[Brian Murphy, Liberal, Moncton—Riverview—Dieppe, NB]

Mr. Speaker, I am pleased to rise in the House today to speak to Bill C-26, an act to amend the Criminal Code with regard to criminal interest rates.

This bill is in fact designed to regulate the payday lending industry. This will be done by limiting the interest rates lenders can charge Canadians.

I am quite pleased as well to see that the minority government is taking advantage of the hard work done by previous Liberal ministers of industry and justice. In introducing this bill, it surely gives a sign that what we were doing before was just fine.

It is flattering to see Canada's new government actually putting forward many bills that were in the past proposed by Liberals. Despite what my colleagues on the other side of the House may be saying, they are acting as if what was done before was going in the right direction.

It was the previous Liberal government that worked with our provincial and territorial colleagues to build the consensus necessary for the legislation that we are discussing today. Currently, 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 or to receive a payment that is at a criminal rate.

It is interesting to note that section 347 was introduced initially to deal with the practice of loansharking and its links to organized crime. It was not always the written signed agreement under the shiny lights on the main streets of our cities that these arrangements were entered into, but often in the back alleys and through very informal discussions.

Although section 347 has been interpreted as applying to most lending arrangements in Canada, including payday lending, it was not intended to be consumer protection legislation or a consumer protection tool for economic price regulation when it was first introduced. It would seem that section 347 was attempting to capture criminals who looked like criminals and not criminals who look like storefront entries as many of the payday lending institutions of today's currency do.

In fairness, the Canadian Payday Loan Association itself, unlike the characterization of the member for Winnipeg Centre that would have us believe is made up totally of criminals, is in fact proposing this legislation which will be of benefit to consumers and the people we represent.

However, let us look at the scourge of the bad payday lending experience and what it has visited upon our citizens. In British Columbia a judge ruled in a class action that a payday loan company charged criminal interest rates when it included its late fees and processing fees as interest. That is what the court ruled. The ruling is expected to influence the outcome of many decisions. It is an instance of where the judiciary has stepped in to characterize as interest what may be seen as fees and thereby impinging some payday loan arrangements.

Last year in Ottawa, a small claims court judge ruled that two payday loan companies suing clients for unpaid debts, this is ironic, were themselves avoiding the law and breaking the law. The facts as they came out were that a loan of $280 rose with interest and penalties to $551 per month. That is an annualized interest rate of more than 2,000% and these people had the temerity to bring it to court to get their money.

The judge could not rule that it was in violation of the law because that was not the dispute in front of the court, but it shows the boldness and frankly, the arrogance of some payday lenders in charging that amount of interest and standing by it as if it were not more than 60% which is clearly set out in the Criminal Code.

Bill C-26 would not put an end to payday loans. The industry could easily continue to operate, but it is going to operate with controls. It is important to note that the legislation does not apply to loans over a certain amount, $1,500 and over a certain length, 62 days. This act does not replace the Criminal Code.

I think a principal theme of our discussions today on this bill must address the paucity in the Criminal Code itself to deal with the crime. So anything that is over 62 days that is over 60% ought to be prosecuted.

In studying the bill, we have learned that there are very few prosecutions. It is time for the government to take this information, as if it did not know it before, and tell the administration of justice officials, both federally and provincially, that we have a section called 347 and it should be enforced. If it is true, but we do not know because we have not had a full hearing on section 347, that only a prosecution or two have been made under this section in the last few years, something has to be done about that. The bill will not cure any of the in excess of 60% in loans that are longer and larger in duration than what it attempts to cover. However, it is a start, it is good legislation and we should support it.

It means, however, that the provinces and territories have to get their acts together. I am very hopeful that the new federal government has kept good relations with all the provincial counterparts and has, like we did before, an easy discourse of opinion on how to best influence reasonable rates, like the province of Quebec has administered for some time under its consumer protection legislation.

Several provinces, including New Brunswick, have already announced their intention to regulate payday lending once this bill is passed.

I know that the new Liberal government in New Brunswick will address that situation as soon as this is done.

I know T.J. Burke, the new attorney general for the province of New Brunswick. He is the first aboriginal attorney general in Canada, and he is an excellent law official. Once this legislation passes, I know he will be looking to the models across the country, specifically the model in Quebec, which seems to give to our citizens the best consumer protection.

Payday lending is a growing industry in Canada. Virtually non-existent in 1994, the industry is believed to have grown to more than 1,300 outlets in just 10 years. That is why perhaps this law is just coming to us now. We probably all saw the industry grow, but empirically did not know that 1,300 outlets existed across Canada. Nor would we know, if we are not users of the services, what horror they are inflicting on our citizens.

The number of payday loan outlets now outrank the number of offices of the Royal Bank of Canada. Therefore, it is important to underline that this is not just a Main Street, Stellarton, one-off issue. The bill is dealing with a Canadian issue.

Only 850 or so of these institutions are represented by the Payday Loan Association. They have been very forthcoming in lobbying for a bill to protect consumers. I would suggest to go halfway to also ensure that they have an existence after the passage of the legislation.

One thing we may consider, as the bill travels along the process to committee, whether we will strengthen the legislation and attempt to affect and to curb the impact of usury on our citizens.

I cannot say this strongly enough. While VISA cards regularly get 28%, the province of Quebec has chosen 35% as a ceiling interest rate. I cannot say strongly enough how we, as parliamentarians, in the moral persuasive stance that we have with provinces and territories, might suggest that the Quebec model is a good model for the citizens who we share as electors.

The significant growth of this sector is actually hiding the dire situation facing many Canadians.

A few years ago, holding a full time job was enough to support one's family. Unfortunately, that is not necessarily the case anymore. Times have changed. Many Canadians work full time, and some even work more than one job, but that is still not enough to support their families financially. There lies the real tragedy.

We are doing just a bit to help the working poor in this situation.

As a former member of an Open Hands Food Bank organization in Moncton, New Brunswick, food banks are no longer visited by the very poor and destitute only. They are often visited by the working poor, people who work as a couple with minimum wage jobs, people who need to have two minimum wage jobs, people who have children or people who have a letdown in hours at the video store, one of their minimum wage jobs. This means they are forced to go to the food bank or, as I say, le vrai drame, to the Money Mart, to get a loan at a high interest rate to pay the rent, to have groceries and to ensure their children can go to school.

Does it make sense to borrow money from someone who is going to charge an outrageous interest rate? Of course not. The fact is, however, an increasing number of Canadians have no choice. They have generally been turned down for loans at the chartered banks and other financial institutions. Although many of them have full time jobs and a steady source of revenue, many have no choice but to go for the short term, high interest rate loans to survive between pay cheques.

The real tragedy is that in 2006 working hard and having a job might not be enough to support one's family. I find it troubling that more and more Canadians cannot meet their everyday living costs. In recent years many social groups have pointed out that the number of citizens living under the poverty line is growing and that having a full time job does not necessarily protect one from poverty in today's world. This is very unfortunate, something that is compounded by the fact that if a person goes in to borrow $280, that somehow turns into a $551 per month payment. We are doing something, but very little to help that problem.

While we say the bill is good, what about the social safety net that the new government is putting out for the people who are left to have 60% interest loans, from the legal Money Marts, for 62 days for amounts under $1,500?

Let us not over blow what step this small bill is toward the journey of helping us help the working poor. If we combine the statistics of the working poor, the increased usage of our social service agencies, with the major cuts that the Conservative government announced three weeks ago, it is now clear the new government does not care about those most in need, the poorest citizens and the minorities throughout our country.

Let us face it, the Conservatives are leaving the most vulnerable behind. A true national child care program, aboriginal health initiatives, literacy funding, homelessness, affordable housing initiatives, these were all mechanisms to help low income families, they very people who are most victimized by the ravages of the Payday Loan Association members.

All the measures I suggested have been cut and cramped in the recent Conservative announcements, such as national child care, teaching children how to succeed in life, literacy, teaching children and adults that they can read and they can get better jobs, tackling the homeless initiative, which was once made a very national and prominent program under the former member for Moncton—Riverview—Dieppe, the hon. Claudette Bradshaw, are all gone as priorities in the government.

Although the government will do some lip service to the Payday Loan Association, mainly because it is a good lobby and it might get some credit for helping the working poor, it is really saying it will not go that far and reinstitute programs, which were of national importance for eradicating the spectre of cyclical use of social services and organizations, such as payday loan institutions.

The same low income family that works hard to survive but cannot afford to put money aside for rainy days is forced to live from paycheque to paycheque. Exactly the same people are being denied loans from banks and they end up at the payday loan services, probably just before or after they go to the food banks. Before having to do this, they probably had time in their day to get some literacy training, or they may have been able to access some child care initiatives. However, they are not going to be any better off with the Conservative government as the years go by.

The real point is that this is a good step in a long road. The Conservative government must understand it entails much more than just initializing a law that was started by a former government, which is a needle in a haystack with respect to the battle against poverty, especially among the working poor.

This bill will ensure that those who turn to payday lenders do not fall victim to questionable practices, criminal interest rates and unfair collection techniques. More importantly, it will help make sure that they are not sucked into the vicious circle of debt and outstanding loans.

Bill C-26 is a positive, necessary step in the right direction and it battles loansharking, but it does not do enough at this point. The House should encourage all provinces and territories to look at the model is the model of Quebec. I hope this will happen at the committee stage.

As we move along the legislative process, we find that many of our models for a just and fair society have come from the province of Quebec. Programs like the national child care program and the legislation for consumer protection are best modelled in Quebec. In our discussion we should encourage the provinces to follow those examples.

The finance minister for the province of Manitoba is in the process of deciding how to deal with the brief put forward by the Payday Loan Association. The president of the Payday Loan Association says that Manitoba's proposed law is in line with the code of best business practices adhered to by its members. It operates 800 of the 1,350 payday loan offices in the country.

What is not known is the fee cap the province would set. The finance minister, Mr. Selinger, is proposing to make fees and rates on payday loans subject to public review by the local public utilities board. If the Quebec model is not the model provinces choose to follow, by having consumer protection legislation govern the scheme, then the model of having the public utilities board review rates of interest that can be charged by payday loan associations, which survive this document, would be very preferable.

We seem, as the federal sphere, to have gone away from consulting and advising the provinces with respect to best practices, and not necessarily mandated practices. By this I mean giving them a cheque and telling them they must do this or they must do that. Rather do it in a true constitutional sense, as partners that share the same citizens, the people who vote for them vote for us, and suggest they look at the models, which include the Quebec consumer protection legislation and the suggestion of the very wise finance minister in Manitoba of public utility board regulating interest rates.

The public utility boards across the country are made up, by and large, of non-partisan people interested in consumer protection in the areas of energy and transportation. In this case, Manitoba would invade the field by suggesting interest rates on short term loans would be properly in the public domain of the public utilities board. In many provinces public insurance is dealt with at a provincial level and the rates of insurance are decided by a public utilities board.

Again, this is a very good step. It follows on Liberal legislation, which was being thought of before the government fell. It is enough at this point to say we support it. However, at committee perhaps suggestions as to the how, not the why, the bill will play out across the country can be discussed along with our desire as parliamentarians to ensure the bill is implemented in as even a fashion across the country as possible.

In closing, I thank the citizens ofMoncton—Riverview—Dieppe for giving me their input on this most egregious example of lending at usurious rates. I assure them, in supporting the bill, that it is not a cure, not the be-all and end-all. It is a tiny step on the long road to helping the working poor in our country.

[Ken Epp, Conservative, Edmonton—Sherwood Park, AB]

Mr. Speaker, I think we are losing sight of something that is important here and that is the magnitude of the problem.

The member opposite talked about usurious interest rates and the member for Winnipeg Centre before him talked about the way credit card companies are ripping us off.

Let us take an interest rate of 18%, which is the rate of a typical credit card. I would like to ask the member this. Let us say he was walking down the street and a stranger approached and said, “Will you lend me $100 and a month from now I will give you $101.50, if I happen to show up, with no security?” Would he lend the stranger the money? I suspect he would not. Yet to charge $1.50 on a $100 loan for one month is 18% per annum.

I think we need to get away from the idea that the fee charged is a straight interest charge. We know that many short term loans go into default, so the money is gone. These companies do not get the $101.50. They do not get the original $100 back. It is gone. For them to charge a little more because of the risk of the situation I do not think is terribly unreasonable.

Furthermore, to charge $2 for a $100 loan for a month hardly covers the cost of the employees and certainly not the cost of the store for which they have to pay rent, utilities, taxes and so on. They are going to charge maybe $2 or $3 for a $100 loan for a month. That is a service they are providing. If we take that away, then our poor people have nothing.

I have other questions, Mr. Speaker, but just from your posture of sitting on the edge of the chair I know I have to shut down for now.

[Brian Murphy, Liberal, Moncton—Riverview—Dieppe, NB]

Mr. Speaker, very briefly, I would not dare to guess what the hon. member's community is like, but I suggest that it is fairly similar to mine. In my community, the owner and operator of the Money Mart is not the chamber of commerce president. He is not the Rotarian president. He is not a person in society who symbolizes best business practices.

In short, it is a very risky business in terms of loaning money. That is why loan sharks are in it. They like risk but they also have enforcement, and I see no difference between the example of Louie G., posited by my friend from Winnipeg Centre, who would break a leg, I suppose, if a loan were not repaid, and the owner of the payday loan business, who would basically bankrupt a person into not being able to afford the necessities of life.

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

Mr. Speaker, I think that the remarks of the member opposite are somewhat out of sync with my beliefs.

The question we have to ask ourselves is: why do people borrow money at rates as high as 60%? Often, these are disadvantaged people faced with a lack of money, services and community support.

After slashing the literacy program for women and Aboriginal people, why do the Conservatives continue to take advantage of the most disadvantaged with their devastating policies?

[Brian Murphy, Liberal, Moncton—Riverview—Dieppe, NB]

Mr. Speaker, I completely agree with the question.

Once again, I support the province of Quebec's model. Thirty-five percent is plenty. Sixty percent is in the Criminal Code. Personally, I find that interest rate incredible and criminal. It applies in Canada. For the fourth time, it is better in Quebec.

The House resumed from October 24, consideration of the motion that Bill C-26, An Act to amend the Criminal Code (criminal interest rate), be read the second time and referred to a committee.

[Colin Carrie, Conservative, Parliamentary Secretary to the Minister of Industry]

Mr. Speaker, today we are debating Bill C-26, An Act to amend the Criminal Code (criminal interest rate). Canada's new government has brought forward this legislation for one basic reason, to protect Canadian consumers. Bill C-26 will provide much needed flexibility to the provinces and territories in the area of consumer protection, flexibility to enable them to address various problems posed by the alternative consumer credit market, specifically the practice known as payday lending.

I would like to compliment my colleague, the hon. Minister of Justice, on his excellent work on this important issue. Let me state that the consultations carried out over several years by a group of senior federal, provincial and territorial consumer protection officials, known as the consumer measures committee, which led to the development of this bill were instrumental in its creation.

It is not easy being a consumer in today's exceedingly complex, fast moving marketplace. Canada's marketplace has been transformed in recent years by the staggering proliferation in the number of consumer goods and services that are on the market. New technologies, the growth of services and open markets bring both benefits and potential hazards to consumers. The payday lending industry is a good illustration of just how rapidly things are moving on the consumer scene.

Only a few years ago payday loans were virtually unheard of in Canada, yet now street corner loan offices are open in most provinces, in rural communities and in our downtown cores. This burgeoning alternative credit scene certainly does pose significant consumer issues. This is why many non-governmental consumer watchdogs, from the Public Interest Advocacy Centre to Service d'aide au consommateur, and many others as well have addressed this very important issue.

Last year Industry Canada's Office of Consumer Affairs established an extremely informative and timely document which I highly recommend as reading to my hon. colleagues. The “Consumer Trends Report” highlights the rapid and fundamental changes that have transpired in the consumer marketplace over the last 20 years. While many of these changes have been very beneficial, new challenges have also arisen. In many ways consumers today need more expertise because products and services are changing more rapidly and in more fundamental ways than ever before.

In the opinion of many experts it has become more difficult for consumers to determine value and weigh risk in the marketplace and their marketplace transactions. At the same time consumers themselves have also undergone many important social, economic and demographic transformations that can make certain groups particularly vulnerable in this marketplace.

In fact, the payday lending issue we are considering today is a very good example of the way in which the consumer environment is changing rapidly with the potential to have negative effects on consumers. As the “Consumer Trends Report”, the CTR, notes, the alternative financing services can be some of the most expensive ways for consumers to borrow, ranging from using payday loans and pawnbrokers to shopping at rent to own operations.

According to the CTR, when stated on an annual basis, the rate of interest paid on a typical payday loan ranges between 390% and 650%. On the other hand, there is genuine consumer demand for this product as seen by the increase in the number of outlets. The CTR states, “a prominent provider of the payday loan and cheque cashing services indicated that its number of franchised and corporate branches increased from 100 in 1994 to 200 in 2000, and was approaching 300 in 2003”. This is Money Mart. According to the media, the industry which lends about $2 billion each year services about two million Canadians annually.

What we have with payday lending is a relatively new product of some financial complexity that Canadian consumers are using in considerable numbers. However, it is also a product that can sometimes be sold in ways that can present hidden pitfalls and can have serious consequences for consumers.

In 2002, a report released by the Public Interest Advocacy Centre, PIAC, with funding from Industry Canada entitled, “Fringe Lending and 'Alternative' Banking: the Consumer Experience” stated that a cursory examination of the fee structures and practices of some payday lenders suggests that they expend little effort to assist the financial literacy of payday loan customers and probably contribute to customer confusion.

Many payday lenders offer no explanation for the fees they charge to their customers and often use ambiguous terms such as verification fee or finance charge among others. Without proper disclosure and explanation of fees, customers could be making financial decisions based on misunderstood and unclear information.

Research conducted by the Public Interest Advocacy Centre, the PIAC in 2002 shows that a relatively high number of payday loan customers either did not know the cost of their loan or underestimated the cost.

The timeframe of a payday loan is very short and the cost can be very high. Many borrowers have found that they are unable to pay off the loan in full at the time it comes due. Borrowers could however pay a fee for an extension on the original loan called a rollover. By doing this they could enter into a cycle of renewals including possible increased fees, interest or NSF charges added on without reduction of the principal of their loan. This situation may be financially devastating for a borrower but profitable for the lending company.

The legislation before us today is a very good fit with Canada's consumer protection framework. It is built upon the concept of ensuring that the jurisdiction most able to protect consumers in a particular issue have the legal capacity to do so. It would exempt payday lenders from the current provisions of section 347 of the Criminal Code which sets the criminal rate of interest in Canada, but only if those lenders operate in a province or territory that regulates the payday loan sector and if the province or territory sets limits to the cost of borrowing for consumers.

Each province and territory will have the freedom and flexibility to address its own market conditions and to best respond to the interests of its own customers. Bill C-26 typifies an effective and flexible approach to consumer protection. It is based on cooperation with the provinces and territories along with other governmental departments and non-governmental organizations. Bills C-26 helps Canada's markets work well for consumers, for growth and for our economy.

The legislation before us will bring payday lending in from the somewhat sometimes shady world of unregulated financial activity, so that consumers can operate with more confidence and assurance. The process of obtaining a payday loan will become more transparent and more straightforward for consumers. The provinces and the territories are best placed to regulate the payday loan industry. Bill C-26 will give them the power and flexibility to do so.

The bill's approach is typical of the innovative ways that we must approach consumer issues in the contemporary marketplace. All partners, including the federal government, the provinces and territories, non-governmental organizations and educational institutions, must work together to support consumer efforts and make wise choices in markets in Canada and the world.

Bill C-26 is further evidence that Canada's new government fully recognizes the importance of Canadian consumers and is committed to fostering their ability to function in fair and efficient markets.

[Pierre Paquette, Bloc, Joliette, QC]

Mr. Speaker, I am pleased to take part in this debate on Bill C-26, an act to amend the Criminal code (criminal interest rate), proposed by the Minister of Justice. This bill, which may appear minor and generous, is in fact a good illustration—despite the promises made by the Conservative Party during the election—of the fact that they are once again taking a back-door approach to a very important matter, trying to have veto power over decisions that come under provincial jurisdiction, particularly Quebec.

Although the bill appears very generous on the surface, that is, a way to fight a new form of financial exploitation of the most vulnerable employees, it is nonetheless understandable that the Bloc Québécois opposes this bill due to a number of points that are not clear enough and, as I mentioned, that leave the door open to federal government veto powers over how things are done in Quebec, which already monitors similar activities, for instance, under the consumer protection act.

I will remind the House of some of the content of Bill C-26. Its objective, as stated earlier by my colleague, is to meet the demands of certain provincial and territorial governments, and consumer advocacy groups that feel that greater regulation is needed in the payday loan industry. Provisions already exist in the Criminal Code and the Interest Act, however they do not specifically target this new form of loan, which has developed over the past 15 years or so.

Bill C-26 is the response to those demands, because the payday loan industry is largely unregulated. Furthermore, some very dubious practices employed by such companies have been identified, for example, very high rates for loans against future salary, contractual terms and conditions that are insufficient, unclear, or often absent or completely set aside in contracts between lenders and borrowers, as well as unfair collection practices.

In a moment, I will return to the definition of a payday loan.

Obviously, as I said, this is something that affects a certain number of low-income working men and women and illustrates some hard facts. I would note in passing that it is interesting to see that the Conservative government, which in fact tends to minimize the problems associated with poverty in many regards, has been obliged to recognize those facts by the back door, once again. The fact is that right now, in Canada, as is the case in a number of western countries, it must be noted, a person can work, earn a wage, have a full-time job, and be living in poverty. People can then find it necessary, before the end of the two-week pay period, to take on this kind of debt in order to be able to make ends meet temporarily and to get the money that is necessary to meet their basic needs.

This bill is therefore recognition of the fact that, right now, the face of poverty is quite different from what it might have been in the 30 years after the Second World War, when a full-time job, for an employee on a payroll, was normally a guarantee that while the person might not live in the lap of luxury, he or she would be able to make ends meet and not have to take on these new kinds of debt. This is something new, in that in Canada the industry mainly began to develop in the 1990s, but we must recognize that its growth was by no means uniform.

What we see is that as a result of existing laws governing local commerce, because we have civil law and rules governing contracts, in particular those in the Consumer Protection Act, even though there may be 1,300 outlets identified by the federal government throughout Canada, there are very few in Quebec. An association has even been created: the Canadian Payday Loan Association. It represents 22 companies that operate 850 financial services outlets all across Canada, but none in Quebec.

This certainly tells us something, because with the tools that the Government of Quebec already has available, we have been able to oversee and regulate this industry to the point that people who wanted to use this niche to get rich quick did not think it wise to set up shop in Quebec and went elsewhere in Canada to do it. Obviously, that does not mean that we do not need to be vigilant and constantly careful to modernize, improve and update consumer protection legislation in Quebec.

What is a payday loan? The Canadian Payday Loan Association defines it as follows:

Payday loans are unsecured small-sum short-term loans typically for a few hundred dollars. The average payday loan is around $280 for a period of 10 days.

To date, as I said, the Criminal Code has not provided a definition of payday loan, so one of the primary objectives of Bill C-26 is to define what it is.

Here is how the government defines a payday loan:

A payday loan is a short-term loan for a relatively small amount, 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 specified percentage of the net pay, for a period of 1 to 14 days, ending on the payday. The borrower provides the lender a cheque, post-dated to the borrower's next expected income payment date, for the total amount of principal, plus interest and other fees.

A payday loan is therefore a loan against future pay. This may give the people who are watching a better understanding of the new reality that is payday loans. Payday loans are also called payday advances. These advances come with all sorts of administrative fees, which are sometimes abusive, and interest rates that, if not usurious, are very high.

Payday loans are therefore an extremely expensive way for consumers to meet their temporary credit needs. The Financial Consumer Agency of Canada, which reports to the Department of Finance, says that the amount of a payday loan is usually limited to 30% of the net amount of the borrower's next pay cheque, that is, the final amount after the various deductions, including income tax.

The agency gives the following example: a person with net pay of $1,000 every two weeks could usually obtain a payday loan of roughly $300.

As mentioned in the definition I gave previously, to ensure that the loan will be repaid, payday lenders ask their clients to provide a post-dated cheque or authorize a direct withdrawal from their bank account for the amount of the loan, plus applicable fees and interest charges. As I said, there are numerous fees. The interest charged on the principal adds considerably to the amount to be repaid.

This is a new situation that corresponds to the reality that I was describing earlier whereby it is now possible to have a job and live in poverty. Bill C-26 seems to be a response to a growing and worrisome social problem. At first glance this might seem to be an interesting initiative by the federal government.

I will describe the initiative of Bill C-26. This bill essentially contains two measures. First, it enshrines in the Criminal Code the definition of a payday loan and it also adds section 347.1 to the Criminal Code, establishing a mechanism for exemption at the same time.

I will reread the new definition of a payday loan:

An advancement of money in exchange for a post-dated cheque, a preauthorized 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.

The first measure of the bill is to enshrine this definition in the Criminal Code. And the exemption mechanism has two parts.

The first part is to specify 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 or otherwise specifically authorized under the laws of a province to provide such loans.

It is therefore the responsibility of the province to regulate this aspect of the industry. The other aspect is that any loan less than $1,500 with a term of less than 62 days falls under the Criminal Code.

The second part—and this is where we have a problem—involves a political act by the federal government. We could describe it that way since it 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.

The provinces have to apply for such designation, but must also have passed legislative measures that protect payday loan recipients and set a ceiling on the total cost of the loans.

Unfortunately, there are limits to that designation since it can be unilaterally withdrawn when, in the eyes of the federal government, the province concerned no longer meets the conditions, and therein lies the problem; for example, when legislative measures are no longer in force or do not meet the expectations of the federal government.

Clearly, section 347.1 would permit the payday loan industry within a given province, to be exempted from a criminal interest rate if the province in question makes a request to the federal government and if it complies with a number of conditions established by Ottawa.

It is important to make it clear that these amendments will not apply to financial institutions regulated at the federal level, such as banks. That is understandable because we are not talking about the same industry.

As I have said, that creates very real difficulties for us because, in our view, very clearly, the federal government is giving itself the power to be in a position to say yes or no to legislation, to authorize or not authorize an exemption from section 347 of the Criminal Code and section 2 of the Interest Act.

I remind members that in Quebec there is a Consumer Protection Act that already includes nearly all of these aspects and as a result of that, as I mentioned at the beginning of my remarks, this industry is less common, or at least less flourishing, in Quebec than in other parts of Canada.

We know that payday lenders were once more numerous in Quebec and the Office of Consumer Protection decided to step in. The joint action of the police and the Office of Consumer Protection has meant that this industry is nearly non-existent in Quebec because the Consumer Protection Act contains strict obligations governing all types of lending. Whether it is a payday loan, a pawnbroker or others, the annual interest rate must be stated on loan contracts. In addition, all fees must be included in the interest rate. It is not possible to add fees for opening a file, for forms, for closing a file or other fees.

Finally—and I believe it is extremely important—case law has established that an annual interest rate of over 35% is unconscionable, while under the Criminal Code the rate called “criminal” is set at 60%.

It is very evident in regard to Bill C-26 that Quebec has no need for this legislation. The Government of Quebec is concerned, as is the Bloc Québécois, about the effects that the passage of Bill C-26 could have.

I remind the House of the Government of Quebec’s position.

The Government of Quebec believes that the federal government is imposing on compliance exemptions conditions that infringe on the jurisdictions of the provinces and Quebec.

The proof, as I said, is that Quebec already has rules governing the practices of this industry without being accountable for them to the federal government. Why would we start now being accountable to the federal government when we have managed very well so far to limit the growth of this industry, which often, unfortunately, takes advantage of vulnerable working people who are in temporary financial difficulty?

I repeat: the maximum interest rate in Quebec is set at 35%. This is substantially less than the 60% in the Criminal Code.

The designation feature is another point of considerable concern to the Government of Quebec. Through it, the federal government retains veto rights over measures taken by those provinces that request an exemption. That is true of the other provinces and of Quebec as well. All the successive governments of Quebec have been extremely sensitive about federal infringements on areas of jurisdiction that belong to Quebec and the provinces.

Although the mechanism for designating a province is still rather murky—I suppose we will have a chance to clarify this in committee—it seems that ultimately the Prime Minister will determine whether or not he wants to designate a province depending on what he thinks of its legislation. This kind of veto in an area of jurisdiction that belongs to Quebec and the provinces is totally inappropriate and unacceptable as far as we are concerned.

In short, the Bloc Québécois is opposed in principle to Bill C-26. The Bloc realizes that certain provinces and territories wish to manage the payday loan industry themselves. It feels, however, that the federal government, even if it has the authority to set the maximum lending rate beyond which a loan becomes illegal, does not have the jurisdiction required to regulate the commercial practices of industries. Quebec, for instance, with its consumer protection act, already supervises this industry and prohibits unreasonable practices. This is why the Bloc Québécois is criticizing the conditions imposed by Bill C-26 on the provinces—Quebec in particular—that wished to be exempted from section 347 of the Criminal Code.

The government has no business to decide on the implementation of a licensing system or on the merits of supervision of practices in this area of activity by Quebec. This is also true for the other provinces. In the opinion of the Bloc Québécois, the Government of Quebec and all Quebec stakeholders in this file, Quebec is free to supervise the commercial practices of businesses under its jurisdiction. The government has no business using its veto so that the legislation can apply or not through this non-application mechanism, which I have already talked about.

In conclusion, in spite of the open-minded and respectful discourse of the Conservatives during the election campaign, we must conclude that the Conservative government is demonstrating the same determination to encroach on the jurisdictions of the provinces and Quebec as the former government, but packaging things differently.

It is still that same reflex of believing that the federal government knows better what the solutions are to certain real problems and that it must supervise the provinces to make sure they are on the right track. This paternalistic attitude—which characterized the Liberal reign from 1993 to the last election—is the government’s trademark. This is very clear in the example of Bill C-26 and in other files.

I will establish a parallel with the Kyoto protocol. The Minister of the Environment took the liberty of judging the validity of the plan put in place by the Government of Quebec. This plan could perhaps stand to be improved, but it is in stark contrast to the denial of global warming by the Conservative government. We took the liberty of saying, in a play on words, that this plan did not contain any mandatory regulations or conditions, which is true.

When the other provinces, in particular the western provinces, have met the targets that Quebec has already met, then we can have a serious discussion of the whys and wherefores of the Quebec act. Until we have evidence to the contrary, Quebeckers, the National Assembly and even the Liberal government of Quebec are in a better position to know what Quebeckers need in terms of the environment and of payday loan regulations.

[Colin Carrie, Conservative, Parliamentary Secretary to the Minister of Industry]

Mr. Speaker, I listened quite intently to the member's comments. He may or may not be aware that federal, provincial and territorial governments have long been concerned over unscrupulous and questionable business practices that have characterized segments of the payday lending industry. The federal government is attempting to bring this under the scope of the effective legal regulations under the provinces and territories.

The member has said that the Bloc is against this legislation. He mentioned how it would mostly affect low income and low wage earners. That is the reason why we have to bring the bill forward. We have to protect consumers. If he is against the bill, does he have any amendments that he would like to suggest to improve it?

[Pierre Paquette, Bloc, Joliette, QC]

Mr. Speaker, I thank the parliamentary secretary for his question. The federal government already has provisions available in the Criminal Code. For example, we could quite easily lower the criminal interest rate from 60% to 35%, as is already the case in Quebec jurisprudence. This would be within the authority of the federal government. However, regulating the business practices of such sectors as the payday loan industry does not fall under federal jurisdiction. In addition, we find it unacceptable to use Section 347 of the Criminal Code and Section 2 of the Interest Act in order to meddle in regulating business practices.

My suggestion to him is to work on reducing the criminal interest rate. I know that my colleague responsible for this matter will have the opportunity also to make other changes in committee. Without trying to prejudge the outcome, perhaps we will be able to agree on a suitable mechanism that will provide Quebec with complete jurisdiction and that will satisfy the concerns of the provinces and the territories. Perhaps there will be a provision that will exempt Quebec outright from the application of Bill C-26.

I am convinced that my colleague from Hochelaga has all the imagination and creativity required to suggest solutions to the government.

[Robert Carrier, Bloc, Alfred-Pellan, QC]

Mr. Speaker, I would like to thank my colleague from Joliette for his very good presentation on this bill. I represent 80,000 people and I often hear comments about how governments tax people's earnings too heavily. I would add that duplication of responsibilities—when both governments are responsible for the same jurisdictions—is another example of unnecessary expenditure.

I understand from my colleague from Joliette's wonderful presentation that in Quebec, the law already provides the kind of protection we are talking about and that the consumer protection bureau is the relevant authority for the types of loans targeted by this bill.

I would like to ask my colleague whether he thinks that the current government is failing to keep its promise to respect the jurisdiction of other levels of government in Canada.

[Pierre Paquette, Bloc, Joliette, QC]

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

He is quite correct. Indeed, we have seen absolutely no indication that the Conservative way of governing is in any way different from that of the previous Liberal government. This can be seen in all kinds of files, for instance, concerning the fiscal imbalance. Despite its promise of December 19, despite the fact that it was reiterated in the Speech from the Throne and although they repeated in the recent budget speech their commitment to correct the fiscal imbalance in the next budget in February or March, we sense that the government—especially the Prime Minister—has been trying for weeks to find excuses, claiming that a consensus cannot be reached among the provinces. However, everyone knows that such a consensus will never be reached and that, when he made the promise, he committed to solving the problem once and for all, despite the differences among the provinces. Let us hope that this is the case and that a global resolution to the problem can be found in the next budget.

That said, I go back to the hon. member's question. It was noted that the federal government, even under the Conservatives, had a tendency to increase its operational expenditures much more quickly than its transfer payments. In that sense, things are getting worse, to the detriment of basic services provided to Canadians by the provinces and by Quebec, particularly in health care, education, infrastructure and in terms of the fight against poverty.

Here are some figures off the top of my head. From 1993-94 to 2004-05, federal operational expenditures increased by 50%. During that time, despite the health care agreement and other agreements they have gone on about over the past few months, transfer payments have increased only 29%. This is a sign of the fiscal imbalance. It is a sign of federal spending power and its interference in the jurisdictions of the provinces and of Quebec in particular. In that respect, nothing has changed since the last election.

[Michael Chong, Conservative, President of the Queen's Privy Council for Canada]

Mr. Speaker, we have a plan to restore the fiscal balance.

We have done many things in the 2006 budget. We have reduced taxes, respected provincial jurisdiction and given a great deal of money to federal institutions.

We are going to take other measures in the 2007 budget to restore the fiscal balance. We are going to create a new federal infrastructure plan, an equalization plan, a plan for post-secondary education and a plan to spend part of the federal surplus. That is how we propose to restore the fiscal balance.

I would add that the Bloc Québécois can promise the moon, because it will not form the government.

[Pierre Paquette, Bloc, Joliette, QC]

Mr. Speaker, I would remind the hon. member that we voted in favour of the budget for the very reason that in it, the government promised to correct the fiscal imbalance. Otherwise, we would have brought down the government.

I would also remind the hon. member that the Bloc members were the first to talk about the fiscal imbalance in this House. If the Bloc Québécois had not had a massive presence here, the Conservatives never would have made the promise they made on December 19. Now, they have an obligation to produce results. They have to keep their promise and live up to Quebec's expectations. I will repeat what I said during question period today: finance minister Michel Audet said in the National Assembly on April 12 that Quebec expected $3.8 billion, and not a penny less, to correct the fiscal imbalance.

We will see when the budget is tabled. As we announced, if the promise the Prime Minister made is broken, the Bloc Québécois will vote against the coming budget. Nevertheless, we can always dream and hope that the government will take the sensible course of action and find a lasting, comprehensive solution to this recurring problem.

[The Acting Speaker, Andrew Scheer]

We have enough time for a short question and an equally short answer.

The hon. member for Sherbrooke.

[Serge Cardin, Bloc, Sherbrooke, QC]

Mr. Speaker, I would like to ask my colleague a question. I would like to return to the matter under consideration.

There have been exchanges concerning the fiscal imbalance, but people who are forced to take out small loans, small as they may be, at an interest rate of 60% also have to deal with a financial imbalance.

Payday lending is almost the equivalent of microcredit. I would like to point out that the 2006 Nobel Peace Prize was awarded to professor Muhammad Yunus of the Grameen bank. At present there are almost 1,200 microcredit branches that employ 12,000. We know very well that banks today make outrageous profits. Most are in the order of billions of dollars. Does my colleague not think that banks could play a social role by providing microcredit at acceptable interest rates?

[Pierre Paquette, Bloc, Joliette, QC]

The concerns of the member for Sherbrooke are quite valid. I remember that it was our concern when we examined the issue of bank mergers in the Standing Committee on Finance a few years ago.

We realize that many of our fellow citizens no longer have access to banking services despite regulations that should oblige banks to allow them to open a bank account. Thus, they find themselves in a parallel market where they are extremely vulnerable. We have some soul searching to do with regard to banking services as public services.

[The Acting Speaker, Andrew Scheer]

It is my duty pursuant to Standing Order 38 to inform the House that the question to be raised tonight at the time of adjournment is as follows: the hon. member for Victoria, Literacy.

[Deepak Obhrai, Conservative, Parliamentary Secretary to the Minister of Foreign Affairs]

Mr. Speaker, it is my pleasure to rise today to speak in support of an important bill, Bill C-26, An Act to amend the Criminal Code , which was tabled on October 26 by my colleague the hon. Minister of Justice .

The bill would make changes to the Criminal Code to enable the regulation of the payday lending industry by provinces and territories. This is an important and welcome change.

For years, the payday lending industry has operated in Canada under the radar. The bill would bring this burgeoning industry within the scope of regulations, and in so doing, provide greater protection to millions of Canadians and their families who have come to rely upon the services of the industry.

Indeed, according to the industry's principal lobbying and advocacy organization, the Canadian Payday Loan Association, the industry provides services to nearly two million Canadians each year. This is a substantial figure and demonstrates the importance of ensuring that Canadians are protected against harmful practices in the industry.

Bill C-26 would accomplish the following. It would amend the Criminal Code by adding a new provision, section 347.1, which would provide an exemption scheme for payday lenders from the criminal interest rate where a provincial, territorial consumer protection scheme is in place. It would define payday loans as part of the provincial legislative schemes that are established. It would require the provinces to set a cap on the total cost of borrowing for a payday loan.

Before moving to the discussion of the substance in these amendments, it is important to appreciate two things, first, the history of the payday lending industry in Canada, including the impact it is having on communities across our country; and second, an overview of the questionable practices which have served as a clarion call to action and which forms a basis as to why these specific amendments are proposed.

After learning more about this industry, I believe that all hon. members will agree that the amendments proposed by Bill C-26 are pragmatic, measured and necessary.

The payday lending industry in Canada is relatively new. Storefront operations with catchy names and flashy advertising began popping up in communities throughout Canada around 1994. The payday lending industry began its operations in western Canada. Today, however, the industry is truly national without outlets stretching from coast to coast. In fact, there are an estimated 1,350 payday lending outfits currently operating in every province and city in Canada, except Quebec, and the number continues to rise.

The two million Canadians who use the services of a payday loan company are borrowing nearly $1.7 billion each year. This is simply a staggering amount when one considers that all of this has occurred in an essentially unregulated market. These numbers illustrate that the payday lending companies are clearly responding to a demand from Canadians for their services.

It is true that there are some who would argue that the payday lending industry should not exist at all in Canada. On the other hand, it is clear that the industry is playing an important role for many Canadians on a daily basis.

There are many reasons why Canadians may come to use the service of their neighbourhood payday lending outlet. It may be for convenience, as many of the stores keep late hours and are open on the weekends. Others have suggested that the reason is due to the fact that many of the major financial institutions in Canada have closed the smaller branches, thereby leaving a void in many communities for fast, convenient locations to access cash. It may be due to the relatively anonymous nature of the service or unforeseen emergencies which come with immediate financial consequences. Regardless of the reason, the industry appears to be filling a niche in Canadian communities.

Given this fact, it is important to ensure that those Canadians who do use the service of a payday lender are provided with necessary protection from exploitive business practices, particularly so among the most vulnerable members of our community.

The government takes its responsibilities to improve the lives of Canadians and their families very seriously, and we are taking many important steps in this regard.

Whether it is through strengthening the Criminal Code to ensure that our streets and communities are safer or lowering taxes to help everyday Canadians, we have committed to make a difference. We will continue to take measures such as those proposed in Bill C-26 to ensure that Canadians can have the very best quality of life.

The proposed amendments contained in Bill C-26 are a thoughtful and effective way to provide for enhanced consumer protection. They respond to the needs expressed by many including the provinces and territories for effective regulation.

There are good reasons to ensure that this industry is regulated. Payday lending is a very expensive way to borrow. In some cases, the costs of borrowing money from a payday lender can range in the 1,000% when annualized. Concerns have been expressed in relation to insufficient disclosure on contractual terms by the lender. In addition, there is a concern with the aggressive debt collection practices and the relatively quick way in which these debts can spiral out of control,as a result of rolling over loans. In some cases payday lenders will even charge an early repayment fee to those who would choose to repay their loan ahead of time.

For all of these reasons it would be abundantly clear to all hon. members that there is a significant need for action in this area. The changes proposed in Bill C-26 will help ensure that action will indeed be taken to provide for the regulation of this industry.

In exploring the most appropriate response to this pressing public policy issue, we worked closely with our provincial and territorial colleagues. Through this work, it became increasingly clear that section 347 of the Criminal Code was a key factor in establishing a new regulatory regime.

Section 347 of the Criminal Code provides for an offence for entering into an agreement or arrangement to receive interest at an annual rate of more than 60%. Effectively, this creates the offence of charging interest at a criminal rate. Those who are convicted of this offence can face sentences of up to five years imprisonment.

When section 347 of the Criminal Code was first introduced, it was not intended to serve as a consumer protection measure. Instead, it was meant to provide law enforcement with an additional tool in the fight against organized crime and specifically the practice of loan sharking. Regardless of its original intent, it is applicable to lending arrangements in Canada including payday lending.

Let me be clear though, section 347 of the Criminal Code is not in this government's view the most appropriate or effective way to protect consumers from the unethical and unscrupulous practices which have been connected with segments of the payday lending industry. We are not alone in this assessment. We have heard from many jurisdictions as well as members of civil society who have indicated that section 347 is not a suitable mechanism for consumer protection.

Moreover, these same jurisdictions have noted that in their view the application of section 347 to payday lending companies acts as an obstacle to effective provincial regulations. And so, with these proposed changes we are responding to the needs of the provinces and territories who are much better placed to provide for the necessary consumer protection measures.

We are removing the applicability of section 347 in those instances where provinces choose to act. In instances where the provinces do not act, section 347 will continue to apply. We believe that this is an appropriate solution which will enable those provinces and territories that are ready to regulate the industry to do so.

It is important to briefly point out that Bill C-26 will not apply to federally regulated financial institutions such as banks. Banks are a matter of federal responsibility under Canada's Constitution and there are numerous federal pieces of legislation which regulate these institutions.

In general terms, the amendments would provide an exemption from section 347 of the Criminal Code for payday lenders under very specific and circumscribed instances. These exemptions would be set out under a proposed new section, section 347.1 of the Criminal Code.

The type of loan provided in a typical payday loan situation is generally a small amount, under $300, according to one study, and the usual terms are short, about 10 days. To qualify, a borrower must establish that he or she has a bank account and provide a post-dated cheque or pre-authorized debit. The borrower must also establish an income source.

Bill C-26 appropriately captures this common understanding of payday lending. It would define a payday loan as:

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 or property and not through a margin loan, pawnbroking, a line of credit or a credit card.

This definition is important, as it clearly sets out the particular type of lending arrangement that will constitute a payday loan.

Our policy objective behind the proposed amendments is targeted. We want to be able to ensure that provinces and territories are able to regulate the practice of payday lending that occurs in their jurisdictions.

We also want to ensure that only those arrangements which are truly payday loans are captured. This is so because the policy considerations in relationship to other forms of credit are quite different. I believe the definition found in Bill C-26 accurately captures the practice of payday lending.

In addition, Bill C-26 would specify that only certain types of payday loans would be eligible for exemption from section 347 of the Criminal Code. Notably, the loan would not exceed $1,500 and its term would not exceed 62 days. These limits correspond with the upper limits of payday lending described above.

Bill C-26 is not proposing regulation per se, nor is it proposing to set a national limit on the amount of interest that can be charged for payday loans. Rather, in creating an exemption from section 347 of the Criminal Code, Bill C-26 is responding to provincial concerns over the need to remove impediments to the regulation of the industry. This is important because the payday lending industry is most appropriately regulated at the provincial and the territorial level.

The ultimate goal of the proposed change is effective regulation. This can best be achieved by providing the provinces and territories with the flexibility they require to be able to set limits on the cost of borrowing. This approach ensures that the regulation is done in a manner which best reflects the local realities of the jurisdiction. At the same time, it recognizes that should a province or territory choose not to legislate for the purpose of regulating the payday lending industry, section 347 will continue to apply.

If a province or territory has made the determination that it will seek an exemption from section 347 of the Criminal Code for payday lenders operating within its jurisdiction, it will need to obtain a designation from the federal government. In order to succeed, it will need to establish that it has legislative measures in place which afford protection to those who seek payday loans. Those consumer protection measures will be left almost entirely up to the province or territory.

This approach is justifiable, as it recognizes the individual realities of each jurisdiction, including, for example, the practices of the industry in that province, as well as already existing consumer protection legislation enacted under the provincial constitutional authority over property and civil rights.

Bill C-26 would, however, require that as part of its legislation the province or territory must include a limit on the total cost of borrowing. In my opinion, this addresses three fundamentally important considerations: first, it recognizes that the provinces and territories can control the cost of borrowing in their jurisdiction; second, it guarantees that there will be a clearly defined cap on the cost of borrowing; and finally, as has been noted before, it provides a flexible solution to the individual circumstances of each province and territory.

The assessment of whether to issue a designation to a province or territory will be made by the governor in council. The province would write to the federal Minister of Justice detailing the cost control measures set out in the legislative scheme. The Minister of Justice would then, on the recommendation of the federal Minister of Industry, ask the governor in council to grant the designation.

Upon the governor in council doing so, the province would then be eligible to exempt, via licence or other legislative means, a payday lender in its jurisdiction from the application of section 347.

In short, I believe that Bill C-26 is an extremely important bill. It will provide greater protection to Canadians by enabling the provinces and territories to regulate an industry that is in desperate need of regulation.

Bill C-26 sets clear limits. It defines payday loans and limits the maximum one can lend under the exemption scheme to $1,500. It requires provinces to legislate measures to govern payday lending agreements, including limits on the cost of borrowing.

Bill C-26 demonstrates this government's commitment to working collaboratively with provinces and territories on a matter of common concern. The impact of these proposed changes will make a real and significant difference to those Canadians who have come to rely on this service.

I hope that all hon. members will join with me and support the quick passage of this bill into law.

[Robert Carrier, Bloc, Alfred-Pellan, QC]

Mr. Speaker, I listened with interest to the presentation by my colleague from Calgary East regarding the bill, which seems to apply, given that the federal government has the necessary jurisdiction to regulate the business practices in question.

The subject was raised earlier, but I want to ask him whether he knows that the provinces are free to legislate or regulate the business practices of the companies under their jurisdiction.

The Government of Quebec, with which I am more familiar, has in fact defined this practice, by the Office of Consumer Protection, which provides very good oversight for the industry and prohibits unreasonable practices. To my knowledge, this industry is well regulated in Quebec at present. I think that other provinces also intend to legislate in this area.

What does he think of the point of this bill? Has everything else the government has to deal with been solved already? Earlier, we were talking about the fiscal imbalance. In the last budget, they promised to solve it, and yet no solution has yet been drafted. Are there no more important bills, that are not under the jurisdiction of the provinces and for which the federal government has full responsibility?

[Deepak Obhrai, Conservative, Calgary East, AB]

Mr. Speaker, just before I rose to speak, my colleague, the Minister of Intergovernmental Affairs, answered the questions that the hon. member is asking regarding fiscal imbalance and all the other issues that he says are more important.

Let me relate for the member a personal experience. In the last federal election, the election of 2006, my campaign office was next door to a payday lending office. I was just flabbergasted and quite sad to see the operation of this payday loan establishment. We could see that the people who were going in there were those who could not get normal lending from other institutions. People were relying on this establishment for quick cash but they were paying a big interest rate. That particular office was open every day until about 10 o'clock at night and we could see people walking in at all hours.

As I have stated in my speech, some of these institutions are using unscrupulous methods to prey on the disadvantaged of our community. I am sure the member does not want that to happen in Canada, to have somebody takes advantage of those who are disadvantaged. It is necessary for the government to look at this.

I am sure that with his help we would, as I have stated in my speech, pass this law very quickly. It would be there to protect the disadvantaged. Then we could move on to the other business of the House that he so wants to do.

[Derek Lee, Liberal, Scarborough—Rouge River, ON]

Mr. Speaker, my colleagues have invited quick passage of this bill in relation to which there seems to be a fair bit of support, and I certainly agree with that. One of the ways we can pass it quickly is not to do too much talking about it, and my remarks are offered today as part of the remarks of the official opposition on this bill.

Colleagues have probably had their attention brought to the recent decision of the Supreme Court of Canada in a case called A OK Payday Loan. That was a circumstance where customers of this particular operation had sued in a class action. At issue was the very high interest rates being charged by this payday loan business. As the court eventually determined, as I understand it, the moneys charged by this operation were at a level that constituted a criminal rate of interest, which is defined in the Criminal Code of Canada. That means an interest rate that exceeds 60%. Most of us will regard that as a pretty exorbitant rate of interest.

The point here is that the two jurisdictional worlds, the criminal on the one hand and commercial law on the other, clashed. As our colleague from the Bloc just mentioned, commercial activities outside of banking are normally regulated and administered jurisdictionally by each of our provinces under the property and civil rights heading in section 92 of the Constitution Act.

How do we draw the line between what is criminal and what is commercial? Our laws attempted to do that many years ago. The big difficulty we faced as a society when section 347 of the Criminal Code was first enacted was that organized crime/loan sharks were showing up in material ways across the country, and it was felt that the type of lending they did, which had no regulation, should be criminalized as being anti-social, so the criminal rate of interest rate was selected in such a way that anyone who lent an amount of money and collected at an interest rate beyond and above 60% was found to be in breach of the Criminal Code.

Doubtless that section of the Criminal Code, section 347, has protected many Canadians over the years, but with the growth now, with the proliferation of financial instruments, lending and access to credit and money, there are many ways that consumers now can access credit. One of those ways is this payday loan mechanism, whereby an individual who is employed can obtain a loan or an advance equivalent to some percentage of his or her paycheque and obtain it very quickly and easily from a payday loan business.

People may regard the payday loan business as kind of a bank loan. It is not a bank. It is simply a lending business that will lend money to the individual on the credit of a forthcoming paycheque a week or two weeks down the road. It looks like many Canadians find this a useful device, because the number of payday loan operations in Canada now has mushroomed in the last dozen years or so to the point where we have 1,300 payday loan operations right across the country. It looks like the consumer likes this mechanism.

I point out that it is generally for small amounts and for a very short period of time. It may be filling a niche that credit card companies, banks and credit unions are not. The issue has become, at what price are Canadians required to pay for their payday loan borrowings? In the case I mentioned earlier, equivalent interest rates are in excess of 60% per annum on the amount loaned. I suppose in our society now a knowledgeable consumer should be allowed to spend over 60% in interest if he or she wishes to have the money quickly. However, we are not removing the Criminal Code provision in what we are doing here.

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. The Criminal Code will say that if a province is regulating interest rates and amounts and providing a supervisory regulation of that type of lending mechanism, then the federal jurisdiction will exempt that lending mechanism from our criminal law. We need to do that because under our Constitution, federal jurisdiction has paramountcy over provincial laws except where there is an exclusive provincial jurisdiction. Where there is an overlap, the federal law will normally govern.

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.

This does not mean that loan sharks will have a field day. This means that genuine lending businesses, which I described as payday loan operations, can carry on with their legitimate lending services in cities and localities across the country, just as they have up until now, without fear that their practices will offend the criminal law. Their practices might offend the provincial regulatory law that has to be in place, but they will not have to deal with the Criminal Code provisions. Usually it is a lot more difficult for a citizen or a business to deal with a Criminal Code provision than it is for them to deal with a commercial provision. There is no stigma attached to compliance with regulatory requirements as there is to non-compliance with Criminal Code provisions.

The legislation took a number of years to develop. The initial consultations began a few years ago under the previous government and it involved reaching an agreement with the provinces and the territories that would allow them to assume a regulatory role. Those agreements, understandings, consultations and accommodations were all accomplished, and the government now finds itself in the happy position of simply having to introduce the law and getting it passed. I am assuming there will be a fairly high level of support for this. The official opposition will support the bill and we hope it will receive passage soon as well.

[Robert Carrier, Bloc, Alfred-Pellan, QC]

Mr. Speaker, I listened with interest to the presentation by my colleague in the official opposition. I note that he supports the bill. It is very clear that the federal government is responsible for setting the maximum interest rate. The law allows it to do that. In principle, however, it does not have the authority or the jurisdiction to regulate business practices, something that the Government of Quebec has done very well. It has met its responsibilities, and in fact, on the question of maximum interest rates, it has even set the rate at 35% rather than 60%.

We therefore have the impression that this is a bill that is being pointlessly superimposed on the jurisdiction of the Government of Quebec. That is why we will not support the bill, because we do not support pointless duplication of all the regulations or jurisdictions of two levels of government. It is important to preserve provincial jurisdictions as they stand. This was in fact a commitment made by the Conservative government, to respect the jurisdictions of the provinces. By introducing this bill, it is not honouring that commitment. I am surprised that my colleague seems to be supporting this.

From his point of view, is the reason that we have this bill really to make up for the incompetence or neglect of certain provinces that have not regulated their business practices as Quebec has properly done? Is this why he would want to support the bill?

[Derek Lee, Liberal, Scarborough—Rouge River, ON]

Mr. Speaker, the hon. member should realize that this bill would allow the federal government to vacate an area where it had paramountcy, where it had jurisdiction, and allow the provinces to assume their rightful jurisdiction in regulating commercial transactions.

If the member has any complaint, it may have been that 75 or 100 years ago the federal government did occupy the jurisdictional matter of loansharking. At this point in time, there has been an agreement that the federal government will walk from its criminal jurisdiction involving loansharking if the provinces expressly assume their responsibilities in regulating these commercial transactions. It is a happy ending. It is not a creation of something new. It is the reworking of the federal legislation to precisely allow for provincial jurisdictions to operate.

My friend should be happy with the proposed outcome contained in the legislation. It does not at all attempt to regulate in areas of provincial jurisdiction. If that had happened, it happened 75 or 100 years ago. What is happening now is that the federal government is simply proposing a conditional withdrawal from this otherwise provincial area of commercial activity. On that basis, I think he would want to support the bill.

[Yvon Lévesque, Bloc, Abitibi—Baie-James—Nunavik—Eeyou, QC]

Mr. Speaker, if I understand the allegations of our Liberal Party colleague correctly, the federal government is introducing a bill that would allow it to go to the provinces to regulate usurious loans, while admitting that this is a sector in which the federal government has interfered in years past and which it has promised to leave to the provinces to deal with. He is talking about a complementary approach by the federal government for provinces where rules were nonexistent or inadequate.

Could my colleague assure us that, in the committee that considers this bill, he would be prepared to work on limiting the federal government's ability to intervene in provinces that do not have such a bill or such protection legislation?

[Derek Lee, Liberal, Scarborough—Rouge River, ON]

Mr. Speaker, first, I sit with the official opposition, not the government. I am not in a position to give much of an undertaking here.

If the member will realize that the structure of the bill involves the federal government withdrawing from its enforcement of loansharking prohibitions in a way that allows the provinces to assume their proper commercial jurisdiction in regulating person to person institutional commercial transactions, then I can say pretty easily there is no need to give an undertaking that the federal government will not respect those other jurisdictions. The whole purpose of the bill is to recognize those other jurisdictions and to allow the federal government to essentially withdraw.

It is clear, however, that the bill retains, not imposes, the existing federal government jurisdiction over what it has always defined as a criminal rate of interest, which is the term that was used. In this place we call it loansharking. The foundational jurisdiction to proscribe and criminalize loansharking remains, but will not be used or applied if the provinces step in and regulate, as I understand the province of Quebec has.

[Blaine Calkins, Conservative, Wetaskiwin, AB]

Mr. Speaker, I am pleased to have this opportunity today to speak in favour of Bill C-26, An Act to amend the Criminal Code regarding criminal interest rates.

What is a payday loan, one might ask. The Library of Parliament explains it this way.

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 payday 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/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.

Some payday lenders will cash the borrower’s post-dated cheque or process the direct withdrawal on the due date of the loan. Others will require that the borrower repay the loan in cash on or before the due date, and may charge an additional fee if the loan is not repaid and they must cash the cheque or process the direct withdrawal subsequent to the loan due date. If there are insufficient funds in the borrower’s account, the borrower may also be required to pay a return fee to the payday lender and/or a non-sufficient funds...fee to his/her bank or credit union. In this instance, the borrower may have the option of “rolling over” the loan — that is, taking out another payday loan to pay off the original loan — for an additional fee.

Mr. Speaker, I invite you to read the library's excellent paper on payday loans from which I have just quoted.

With an estimated 1,350 storefront locations and representing annual revenues of approximately $1.7 billion, payday lending is one of the fastest growing industries in Canada. This industry appears to be filling a gap that exists in the availability of credit from the chartered banks and other traditional lending institutions.

There may be different reasons for this gap. Perhaps it is because such institutions are not willing to offer the type of short term unsecured credit that payday lenders do, or simply because local bank branches have been closed in many population centres, thereby making access to credit for many customers very difficult.

The payday lending industry may also be succeeding because of the relative convenience of their operations and the relatively anonymous nature of the commercial transaction.

The payday lending industry has been operating for just over 10 years now without any effective regulation, resulting in some payday lending companies charging outrageous and often crippling fees that trap many an unwary customer. In light of these questionable business practices, which may also include ineffective disclosure of contractual terms and aggressive debt collection practices, many have been right to criticize the current situation, including provincial and territorial governments, consumer groups and the payday lending industry itself.

For example, consumer groups have argued that consumers who would not otherwise have access to this type of short term credit, sometimes feel they have no alternative but to accept the terms and conditions of the payday lender. This can lead to their becoming vulnerable to unfair practices. Consumer groups want to see this issue brought under control.

On the other hand, lenders who have offered loans on reasonable terms and follow a voluntary code of conduct fear that their conduct is being questioned and thus seek regulations in order to give their industry both legitimacy and long term viability in Canada.

The provinces and territories have expressed concern as well. They, too, wish to ensure that Canadians who live in their communities are protected from unscrupulous practices and have noted that section 347 of the Criminal Code, the criminal interest rate provision, stands in the way of them effectively regulating this industry.

The government has heard the criticism and the concerns that have fueled the calls for legislative reform and Bill C-26 is a reflection of our resolve to address them. Our government has been working closely with our provincial and territorial colleagues to examine options for the most effective response to this pressing issue. Indeed, the situation has been the subject of discussion and examination by federal, provincial and territorial ministers responsible for justice and consumer affairs.

Bill C-26 is the result of that collaboration. I believe it would mean enhanced protection for those Canadians who have come to use the services of the payday lending industry.

Who uses payday loans and why? Again I want to go back to the excellent Library of Parliament paper that I quoted from earlier. The library researchers found:

In early 2005, the Financial Consumer Agency of Canada placed questions on the Canadian Ipsos-Reid Express...— a national omnibus poll of Canadian adults—about Canadians’ experiences with, and motivations for, using cheque-cashing and payday loan services. The survey found that approximately 7% of survey respondents had used a cheque-cashing or payday loan company. Cheque cashing was the most frequently used service (57%), followed by payday loans (25%) and tax refund anticipation loans (5%). Certain respondents were more likely to have used these services, including: men; those between the ages of 18 and 34 years; urban residents; residents of British Columbia, Alberta, Saskatchewan and Manitoba; those with household incomes less than $30,000 per year; and those with some post-secondary education

Those are causes for concern. The ongoing and expanding presence of payday loan companies suggest that some Canadians are willing to pay usurious rates of interest in excess of that permitted under the Criminal Code for their payday loans. This situation raises important questions about whether and how issues in the payday loan industry should be addressed, by whom and with what consequences for the industry and its customers.

The drafters of Bill C-26 must have also read the library paper because they found that section 347 of the Criminal Code, often seen as a de facto regulatory provision to limit the maximum lending rates for commercial and consumer loans, had to be considered in any discussion of payday lending. Indeed, section 347 is at the heart of the amendments proposed in Bill C-26.

I will come back to the substance of the proposed amendments a bit later but first I will explain the origins of the section and why, in my opinion, it is not an appropriate tool to use in regulating consumer lending.

Section 347 was not enacted to regulate commercial or consumer lending per se. The policy goal of the section was instead to enhance the ability of our police forces to target the harmful activities of organized crime syndicates. More specifically, the goal was to address the loansharking activities of these syndicates and the related practices of threats and violence that are often used when collecting payments. The adoption of a specific interest rate limit in the Criminal Code immediately next to the provision for extortion was to facilitate proof of extorted loans. This was clearly not about regulating legitimate lending activities.

Section 347 provides serious criminal penalties for entering into an agreement or receiving payments where the interest charged exceeds the defined criminal rate of 60%. When charges proceed under indictment, the offender is liable for a term of imprisonment of up to five years and, when they proceed summarily, for a fine of up to $25,000 and a term of imprisonment of up to six months.

This government does not believe that section 347 is the most appropriate way to regulate the payday lending industry and provide consumer protection. Bill C-26 would address the concerns noted by the provinces and territories by creating a narrowly defined exemption from section 347 of the Criminal Code to facilitate provincial and territorial regulation of payday loan agreements. In instances where a jurisdiction has chosen not to enact consumer protection legislation directed at payday lending, section 347 would continue to apply.

The exception created by Bill C-26 removes the application of section 347 of the Criminal Code, as well as section 2 of the Interest Act where a payday loan agreement is for an amount that does not exceed $1,500 and runs for a maximum term of 62 days and where the province in which the lender operates has been designated as having in place an appropriate regulatory scheme which must include limits on the total cost of borrowing.

It is clear that the exception only applies where the province in which the lender operates has made the appropriate amendments to its legislative scheme that governs consumer protection matters. The province would also have to request the federal cabinet for the necessary designation which allows for the exemption in respect of section 347. The criminal interest rate from section 347 would continue to apply in any province or territory which chooses not to implement qualifying regulations for payday lending agreements.

In Manitoba, bill 25, the consumer protection amendment act regarding payday loans, is now ready for a third reading and provides a good example of the type of complementary consumer protection legislation at the provincial level that would properly leverage the exception.

Manitoba's bill 25 establishes a licensing and inspection scheme for payday lenders, defines limits on certain loan agreement terms and parameters, sets out a lender's information disclosure obligations and defines a borrower's right in terms of cancellation and redress. This cooperative framework of a narrow Criminal Code exception, coupled with suitable provincial regulations specifically addressing the payday lending industry, should meet the goals and objectives of consumers and their advocacy groups, as well as those of legitimate payday lending companies and their industry associations.

In closing, this government believes strongly in protecting consumers from the unscrupulous practices of unregulated payday lenders. Bill C-26 is an important and necessary first step in establishing a fair and equitable regime under which to regulate the activities of payday lending institutions, giving consumers the best possible protection in accessing this type of credit.

I urge all hon. members to join me in support of Bill C-26 and ensuring its speedy passage.

[Robert Carrier, Bloc, Alfred-Pellan, QC]

Mr. Speaker, I listened attentively to the remarks of my colleague from the Conservative party. First, I want to tell him that the Bloc Québécois will oppose the bill, not because we are against the principle, but because the Government of Quebec has already legislated in this field through the Office of Consumer Protection since this falls within its responsibility.

All types of lenders are subject to strict obligations. For the information of my fellow citizens who are now listening to our debates, the Office of Consumer Protection sets the annual interest rate that must be stated in loan contracts. All fees are calculated in the annual rate and it is thus not possible to add fees for opening a file or for forms. Finally, the jurisprudence has established that an annual interest rate above 35% is excessive. Therefore, Quebec consumers are already well protected by the Office of Consumer Protection set up by the Government of Quebec.

This is a flagrant example of duplication by another level of government, the federal government, that now wants to regulate everything that is already regulated within the province of Quebec, and surely in other provinces that are now considering the subject or that do not regulate it because they do not consider it necessary. It is the responsibility of the provinces to regulate all business practices related to loans.

This is really an example of duplication on the part of a government that promised during the election campaign to respect the jurisdiction of the provinces and to consider the effectiveness of its legislation. In fact, what it is doing is adding a bill that affects provincial jurisdictions.

I would like to know how he feels about what I am saying.

Does he agree that the government is encroaching on the jurisdiction of the provinces and is thinking for them?

Does he believe that the provinces are not intelligent enough to legislate in these areas?

If they have already legislated in this field, does he agree with the fact that they are being exempted from this bill? Other parliamentary procedures will therefore be necessary. That is what constantly involves additional cost, and that is why the public is complaining so much about paying high taxes to all levels of government.

[Blaine Calkins, Conservative, Wetaskiwin, AB]

Mr. Speaker, I do not think the hon. member actually understands what the bill is proposing. He has gone on at length talking about how the government of Quebec has already put regulations in place and how this would be seen as a duplicate.

In actual fact, the Criminal Code of Canada applies to all of Canada. Bill C-26 seeks to amend the Criminal Code of Canada and not interfere in any way, shape or form with provincial jurisdiction.

As a matter of fact, the bill is actually meant to exclude certain aspects pertaining to Canadian payday loans from provincial jurisdiction. In that way, provinces such as Quebec and the western provinces, including Alberta, which is the province I am from, have the ability to protect their consumers in a way that they see fit.

I actually do not understand the nature of the question. It seems a little bit hypocritical, when the member from the Bloc Québécois, who obviously wants this consumer protection and the individual ability of Quebec to regulate this particular industry. He is opposing this bill. He is essentially saying, and is pitting Quebec against the rest of Canada, that if it is good for Quebec then Quebec can have the regulations. If he is opposing it, he is basically denying the ability of these regulations for the other provinces, such as Manitoba, which is already able and willing to proceed.

I reject the premise of his question. This is not a duplication at all. The Criminal Code is being amended here and it applies across Canada. It will actually create an exemption which will allow provincial jurisdictions, such as the provinces of Quebec and Alberta and any of the other provinces or territories in the country, to proceed in a way that they see fit to protect their consumers where the payday loan associations and payday loan institutions are concerned.

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

Mr. Speaker, I am pleased to speak to Bill C-26 before the House today and to give the unequivocal support of the New Democratic Party for passage of this legislative proposal. In fact, it would be our wish, given the succinct nature of this legislation, to have it approved on short notice at all stages, dealt with on an expedited basis, and prompt action taken in an area that is long overdue.

I want to begin by thanking the Conservative Minister of Justice for actually listening to the concerns of people all across Canada and especially provinces which were ready to act. In particular, I want to highlight the work of the Manitoba NDP government which has long been a champion of action in this area of unregulated payday lending and has led the country with a progressive legislative approach. That legislative approach, however, requires the federal government initiative to set aside the Criminal Code.

As members will now know, the Criminal Code sets an interest rate of 60% as the limit of interest that can be charged on a payday loan. We know from the past decade, that has seen an exponential rise in payday lending all over this country, that this approach does not work. In fact, I would like members to think hard and tell me if they know of any cases where this 60% criminal rate of interest was used in terms of actually charging a payday lender who has taken advantage of an individual in this country.

I can think of one. There was a recent case in Manitoba where charges were laid and a trial is ongoing. There has been one charge, one action after a decade of payday lenders and other fringe financial services flooding our marketplace. That is not a record of which to be proud. It speaks very much to a problem in our whole legislative system. It speaks to an issue that has not been dealt with and it needs a new approach.

The desired approach would be to have a national solution. I would much prefer to have one set of standards for this whole country, so that there is a rule that all payday lenders must abide by wherever they live, whatever province they reside in, and that we avoid any possibility of these outfits closing down a shop in one province and moving to another to take advantage of more lax rules or a more lucrative environment.

I would prefer to have seen the provinces and the federal government get together and come up with one plan, but they tried for years and they could not do it. Numerous discussions were held at the federal-provincial level among consumer affairs ministers and officials. Numerous forums were held, dialogues and discussions took place, but there was no solution and no one united position that came out of that prolonged set of discussions. All the while payday lenders and other fringe financial institutions have been popping up everywhere in this country. In the last decade, we have gone from zero to 1,350 such outfits in our society today.

I speak from direct political experience coming from a constituency like Winnipeg North which has, in the space of 10 years, lost all of its banks. The north end of Winnipeg, which covers a significant area from the tracks in the south end to Inkster Boulevard in the north end, from Red River in the east to McPhillips Street on the west, has a huge area of residential neighbourhoods with small, large and medium size businesses. However, there are no bank branches left in that entire area. They have been dropping one by one over the last decade.

What has happened in the interim? What has happened as a result of that kind of negligence on the part of the banks, their decision to abandon an older community like Winnipeg North? I am sure it is not unlike many other communities in this country: inner city, north end, and older neighbourhoods that are not quite as lucrative for banks as suburban outlying areas. They pick up and leave without accountability and consequences, leaving people abandoned, high and dry, and without access to banking services.

In the case of Winnipeg North, we are talking about a community that has a very high proportion of senior citizens, numerous high-rises and senior citizens apartments and, as well, on average, an income distribution that is at the low end. We are talking about people more likely living in poverty or eking out an existence on a day-to-day basis more so than in other parts of the country. It is an area that has a significant number of people with disabilities, a high number of people who made the transition from living on reserve to an urban environment. And there are no banks. There is nowhere for people to do banking; nowhere to cash a cheque without being ripped off; nowhere to set up a banking account, a savings account; and nowhere to learn how to budget and how to plan for their families. All the banks have left.

At this point, if it is all right with you, Mr. Speaker, I would like to split my time with the member for Surrey North.

[The Deputy Speaker, Bill Blaikie]

Given the lateness of the request, I would have to seek the unanimous consent of the House. Is there unanimous consent for the hon. member to split her time with the hon. member for Surrey North?

[Some hon. members]

Agreed.

[The Deputy Speaker, Bill Blaikie]

The member does have two minutes and 34 seconds left in her 10 minutes.

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

Mr. Speaker, payday lenders and other financial institutions have risen up in a community like Winnipeg North to fill the gap. This is an area that is not regulated. Consumers are left in a very vulnerable position, without regulations, without accountability, and many in fact are being ripped off.

I am not here to suggest that all payday lenders are bad, are vultures, or are trying to take advantage of ordinary folks, but I am saying that there are some. It is an area that has to be regulated, given the numbers in the field today, and given the fact that so many people rely on them.

I do not need to go into the horror stories, members know them. We know about individuals paying something like 1,000% or more interest for a short term loan, getting into a cycle of indebtedness and not being able to get out of it, and losing their homes and not being able to provide for themselves and their families.

So, it is an issue that has to be dealt with. The only way that we can deal with it is to set aside the Criminal Code, so that provinces like Manitoba, which has a very sophisticated regulatory scheme, are able to exercise their powers and provide some governance in an area that has been largely neglected. That is what this bill simply sets out to do. It sets aside the Criminal Code for those provinces that have demonstrated they have a regulatory scheme ready to kick in and deal with the problems at hand.

It is not something that takes away powers from the provinces. It does not give new powers to the federal government. It does not touch this whole issue of federal-provincial relations. It is not an issue for Quebec because it has put in place its own regulatory provisions around lowering the criminal rate of interest from 50% to 35%. That means it is dealing with this issue in its own way.

We are saying that the rest of the country needs to have a mechanism for doing so. It is impossible under the current provisions. So, we look forward to supporting this bill on an urgent basis and getting it up and running, so that Canadians have some protection in this important area of payday lending and other financial institutions.

[Blaine Calkins, Conservative, Wetaskiwin, AB]

Mr. Speaker, I listened to my colleague with great interest. There are payday lenders In several communities in my constituency. They provide a greater access when banking hours are sometimes restrictive and when people can not otherwise get their cheques cashed. I can just imagine the horror of having a paycheque in one's hand, having a young family to feed, but not having access to the bank to deposit the cheque or not having a debit card.

However, I am also concerned. When people are in a vulnerable situation like that, they can be taken advantage of, and that is an unfortunate thing. I really appreciate hearing the hon. member say that she and her party fully intend to support these changes. I am glad for that.

Could she elaborate on some of the clauses in Bill C-25, which I just spoke to a few minutes earlier? One area that is of particular concern to me is the ability of payday lenders to rollover, which means that if there is a loan that is not paid back in time, the payday lending organization, because it is unregulated, may charge a second set of fees over and above the additional interest rate. We know the interest rate charged on these is fairly minimal. It is the fees and everything that gets added onto these payday loans that make them quite expensive.

Would she support legislation that would take care of this rollover problem in her province?

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

Mr. Speaker, first, the Conservative member makes an important point about the use of these payday lenders on a more frequent basis, not simply because banks have up and left the town, but because sometimes the hours, terms and conditions for doing banking are not conducive for ready access. In fact in parts of Winnipeg many individuals cannot access a bank because they do not have the right ID or cannot fit into the schedule of the bank.

The member is right. There are other reasons why payday lenders have grown in this period of time and why we need to have regulations in place.

With respect to the question of provincial legislation, I think the Manitoba bill provides a model for the country. I know six other provinces are looking at this as a model. It is a bill that prohibits rollovers. This is the first important principle that is enunciated in Bill C-25, introduced by the finance minister, Greg Selinger.

It also ensures that payday loan companies must operate within a comprehensive regulatory framework. It does this by amending the Consumer Protection Act and by working through the Public Utilities Board as a regulatory body to ensure that all rates are set according to a set of principles in an open, upfront basis, with a publicly administered board, so there can be no questions about how the rates are applied and what penalties are at play.

I could go on at length, but I would recommend Bill C-25 as a blueprint for going forward. The Manitoba government is ready to have it proceed to the final stages in the Manitoba legislature, as soon as there is some guarantee from this place that the Criminal Code provisions have been set aside so the regulatory framework can get up and running.

[Merv Tweed, Conservative, Brandon—Souris, MB]

Mr. Speaker, the member has talked about Manitoba and the ability of moving forward with its consumer protection act.

What we really have is a payday lending institution that is just completely unregulated. We have certainly heard from members here today about the difficulties this can create. I certainly agree with my hon. colleague on some of the issues that we face, not only in the major centres but in smaller communities too, where the lack of access to banking and banking facilities becomes a bit difficult.

Has the member thought at all about what happens if provinces or territories choose not to regulate? Does the member have any ideas of how that would pan out with one province moving forward with regulations and, for example, the neighbouring province not?

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

Mr. Speaker, the issue of payday lenders is a problem in all communities across the country, whether they are urban communities or rural communities. I appreciate the perspective that the member has brought to this debate.

I believe that once this legislation is up and running, it will not be very long before all provinces are onboard. In addition to Manitoba, B.C., Alberta, Saskatchewan, Nova Scotia and New Brunswick have expressed an interest in regulating payday lenders. We are over halfway there. If other provinces see what a plus it is to move in this direction, they will soon be onboard.

However, the member has identified a problem which we will have to address when the bill goes to committee. We will have to ensure that there is no way operators can move shop to a province and cause some people to be vulnerable in one part of the country and not another and to cause a lack of national approach overall. It is a good point and it is an issue with which we have to deal. It can be dealt with in the framework of this legislation.

[Penny Priddy, NDP, Surrey North, BC]

Mr. Speaker, I thank the member for sharing her time with me.

I rise to support this legislation. If there were some way that my words would make it go faster or expedite it, I would happy to use whatever words those would be. I think it will move quickly because everyone understands what this means to the people in their communities. Even as we stand here today talking about it, there are people who are losing their homes and assets because they have found themselves in this irreversible cycle of interaction with payday loan companies and they cannot get out of it.

We perhaps would not necessarily expect, particularly in these economic times, many people to be in the situation where if they had an emergency before their next paycheque, they would not be able to manage it. This is not about people who fit a model where people understand why those people go to a payday loan company. Many people live from paycheque to paycheque. It could be a dental emergency for a child, or expensive medication, or a repair to a house, which they did not expect, and all of sudden they are stuck.

No one says there should not be payday loan companies. As the member has said, as did other members, I know there are times when those companies can provide assistance to people who otherwise cannot get it. However, if they are already in difficulty, they do not need assistance to become bankrupt. They do not need to lose all those things they were trying to keep because of that one financial outlay and the truly criminal rates that many payday loan companies charge.

We have many payday loan companies in the community in which I live. I am sure some are operating honourably. I have had payday loan companies say to me that they want to have regulations. They know the reputation of other kinds of payday loan companies is spilling over on to everyone.

This legislation shows that we can look at something and find a way, if we wish to, to respond to these issues without a big broad sweeping brush. As the member who spoke before me said, Manitoba is ready to bring in legislation. Quebec already has legislation and other provinces are looking at it, although as I look at these provinces, some may be looking at it more closely than others. I am not sure, but they are certainly working on legislation.

I think it shows that we can find a way, that this is not the heavy hand of the federal government saying to the provinces that it does not care what good things they have done, that those things are gone and that it will now go in and tell them. We recognize the good work the provinces have done. We also recognize that we cannot exploit the most vulnerable people.

The research and polling I have seen says that there certainly is a percentage of people who use a payday loan company once or twice in an emergency and do not go back, so they are fine. However, some people get caught in that cycle because of the interest rate, and they will never, ever be able to get out of it until they have lost all of their assets. We see people across this country who are in that situation.

I would like to believe that voluntary regulation works in anything, but my experience is that voluntary regulation does not work in very much. I know that the payday loan companies have introduced a set of voluntary guidelines, but we still see the abuse going on. No matter what the issue, I have yet to see voluntary guidelines that have been picked up by everybody. We have to provide a better solution for people in Canada, better than having the good people following voluntary regulations while the others do not.

We could recognize Manitoba's regulations or Quebec's, but having this piece of legislation in place across the country means that we would not have hundreds of companies suddenly packing up and moving to the province where they can make the most money because there is no regulation there. That is the last thing we want.

We have seen this with other businesses. They just move to where they can make the most money with the least restrictions. We cannot have that either, because it means that people in one province become even more vulnerable than other people have been across the country. This legislation ensures that companies are not able to do this. We have had court cases brought before the court by individuals or groups of customers, but they still do not provide safety for everyone in Canada.

The other issue this raises for me is that there are several places in Canada that do not have banking services. Some have been mentioned. Some are very small communities where the banks have closed up and moved out of Dodge, but there are also very poor urban areas where banking facilities are not available. In the downtown east side of Vancouver, with one exception brought in by some colleagues, there was no place for people to bank. People cashed their cheques somehow. They carried the money around and were very much at risk. There was no kind of banking service available. While I agree that it is primarily in small communities that banks leave, there are very poor parts of urban areas where banks do not exist and people do not have the services or the resources.

Nor do many people have information about payday loan companies, so the companies do not get caught. I do not know if any of their rates can be called reasonable, but if they know what a reasonable or a more common rate would be, they do not get caught. But when we go to a payday loan company because we have an emergency, we are desperate. Most people do not do this because they choose to. They do it because they are desperate. People do not have time to sit back, research, read some pamphlets or talk to someone about it. They use payday loan companies because they have an emergency situation. They are very vulnerable.

One point raised in a question from a colleague from the Conservative Party was about what would happen if a province chooses not to be involved. I think there are some issues that people can work out at committee, but given the circumstances in which people live in the country, given the incredible exploitation, given that people have lost their homes and do not have a place to live or resources for their children, I would hope that the bill would proceed expediently through committee so that Canadians will be protected as soon as possible.

[Robert Carrier, Bloc, Alfred-Pellan, QC]

Mr. Speaker, I listened carefully to the presentation by the hon. member from the NDP and the presentation by her colleague a little earlier.

They understand that Quebec already has legislation that protects against usurious loans, which is very good. Nonetheless, the bill also has conditions for every province wanting to be exempt from section 347. The federal big brother will impose its conditions on provinces wanting to be exempt from the application of the legislation. This is yet another encroachment by the federal government into provincial jurisdiction, which clearly states that the framework of commercial practices is a provincial responsibility.

The problem is that this becomes a bad habit of the federal government, even though Quebec can be exempt from the application of the legislation. The idea is that if Canadian unity is to be maintained, the jurisdictions of each entity must be respected. It is through such respect that Canadian unity should be achieved and not by continuing to interfere in provincial jurisdictions.

[Penny Priddy, NDP, Surrey North, BC]

Mr. Speaker, I heard a statement. I am not sure I heard a question. I think people have recognized that Quebec has its own legislation and it does work. I do not believe that this is an attempt to override the legislation being brought forth by Manitoba or the legislation of Quebec. If the member believes that to be the case, then I would hope that those questions could be raised and debated at committee. I do not see this as an attempt to override the legislation that Quebec already has in place.

[Brian Fitzpatrick, Conservative, Prince Albert, SK]

Mr. Speaker, I listened with interest to some of the observations of the New Democrat members, especially the member from Winnipeg, about the bank hours, and probably the hours of the credit unions too. She talked about that creating problems of accessibility for a lot of people who then become trapped into dealing with these groups that are on the outside or the periphery of the issue of banking and availability of financial services.

I am curious. There is some speculation that Wal-Mart may be moving into Canada and providing banking services through its outlets. Knowing Wal-Mart's hours, those stores would likely be open as many hours as they can, seven days a week and in the evenings and so on. I think the Wal-Mart corporate philosophy is to increase the standard of living for people by reducing the cost of living to people. Arguably, Wal-Mart does that.

I know this is perhaps only a bit germane to the discussion about the legislation, but what are the member's views about Wal-Mart moving into this area? Would Wal-Mart be part of the solution to reducing some of the problems and some of the vulnerability of low income people who cannot access banks and credit unions? Might this be a positive?

[Penny Priddy, NDP, Surrey North, BC]

Mr. Speaker, I must say that I would need to have a very careful look at what Wal-Mart would intend to do in terms of bringing banking within their scope of business.

The member is correct when he says that Wal-Mart has extended hours, but Wal-Marts are not likely to find themselves in the same areas as those places that are under-serviced, such as the downtown east side of Vancouver or small rural areas that do need extended banking hours and are not likely to be within driving distance, walking distance or bus distance, if there is a bus, of a large anchor store such as Wal-Mart.

I do support anything within reason that would bring extended hours to people. Maybe there is a message for another kind of banking as well. The bank that eventually developed in the downtown east side of Vancouver offered a great deal more flexibility to its members than regular banking hours do. It recognized that the people who used that bank either did not work regular hours or did not have regular hours and were able to come in at times that other people could not. I think there would be an interest in anything that would provide more flexibility for banking. I must admit that I would want to see more carefully what Wal-Mart would intend to do with its banking, but we do see this within Safeway.

[Brian Murphy, Liberal, Moncton—Riverview—Dieppe, NB]

Mr. Speaker, I would like to ask the member for her observations on a few points.

Despite the Criminal Code of Canada making loans with excess interest rates illegal, and given that there have been so few prosecutions in the area such that this law has become necessary to fill the gap, why does my colleague think there was such a paucity of prosecutions? What could we have done about this? What should we do about it? As she knows, there is a limit to this payday loan exception.

Why are 850 of 1,300 payday loan sites supporting the bill? Does it make the member a little nervous? Is it perhaps it is a bit like the wolf setting the terms for the sheepdog's tenure on the sheep pasture?

[Penny Priddy, NDP, Surrey North, BC]

Mr. Speaker, one of the reasons why we have seen a very small number of cases go forward is that we have to look at the people who have been exploited. These are not people who are likely to get a class action suit together and take it to court. These are people who do not have the resources to do that. They may not have the knowledge about how to do that. Almost unanimously, the most vulnerable people are not the people who are going to take a court case forward.

Am I worried about the people who want regulations? No, I am not. I will be watching very carefully, though, to make sure that those regulations are followed. I will take them at their word that they want those regulations and that they will follow them.

[The Deputy Speaker, Bill Blaikie]

Is the House ready for the question?

[Some hon. members]

Question.

[The Deputy Speaker, Bill Blaikie]

The question is on the motion. Is it the pleasure of the House to adopt the motion?

[Some hon. members]

Agreed.

[An hon. member]

On division.

[The Deputy Speaker, Bill Blaikie]

The motion is carried. Accordingly, the bill stands referred to the Standing Committee on Industry, Science and Technology.

(Motion agreed to, bill read the second time and referred to a committee)