Finance Committee on July 7th, 2020

[Elisabeth Lang]

Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you both.

We have Ms. May, followed by Mr. Julian.

Elizabeth.

[Elizabeth May, Green, Saanich—Gulf Islands, BC]

Thank you very much, and merci. Oh, I shouldn't speak French, because I put myself on the English channel. I was going to thank Gabriel Ste-Marie properly for giving me some time.

This discussion, as I'm sure the chair of this committee will recall—though many of you wouldn't have been around—was really championed by James Rajotte a lot, going back maybe 10 years now, in bringing forward financial literacy and the need to educate Canadians.

I'm looking at the behaviour of Canadians during the COVID pandemic and that of residents south of the border, and it's striking. I wonder if I could ask you, Ms. Lang, to comment on it.

My understanding of the different reactions is that Americans were saving quite a lot more before the pandemic hit, and that when they got any emergency relief money during the pandemic, they tended to save it. Canadians were spending more before the pandemic, and when we got emergency relief money, we tended to spend it. While retail sales plummeted across Canada, consumer spending, particularly gigantic leaps in online sales, continued to basically keep pace with consumption. Obviously, there was a reduction, but even in the economic uncertainty we're facing, it didn't seem to result in an increased impulse among Canadians to save. I wonder if that impression is correct and if you've looked at that and can help explain it.

[Elisabeth Lang]

I haven't looked at it, other than to say that when we look at where the economy is going and try to think about what's going to come in terms of insolvency filings.... I think The Globe and Mail reported in June that the household saving rate in Canada actually increased quite significantly.

On the spending side, I would say that for those who can afford to spend.... Consumer spending is a significant part of our GDP in this country, and so it's not necessarily a bad thing for those of us who can afford to spend, particularly in these times. Hopefully, we will think locally and help our small businesses.

[Elizabeth May, Green, Saanich—Gulf Islands, BC]

I feel the same way. I think one of the reasons the economy has dropped relatively less than the worst-case scenario is that Canadians have been continuing to spend.

To the other points we've talked about today, I also want to echo the thanks of my colleagues on the actions taken to help keep Canadians from going into bankruptcy, to help counsel people and to provide information.

However, looking at this issue of payday loans and the high interest rates, I know you don't regulate in this area, but are you in a position to recommend any policy prescriptions for that kind of indebtedness, which I think is shocking to a lot of us on this committee?

[Elisabeth Lang]

We would certainly be able to share our data. I think the data almost speaks for itself in terms of the usage, and then the increased usage on a repeat filing basis. I have looked at some other countries that have tried to find solutions to this problem. I think the number one thing that strikes me—again, it's not my mandate, so this is personally, as somebody who cares about indebted Canadians—is that you need to replace it with something. There is a need for access to funds that can't just be taken away.

I think recent reports from subprime lenders suggest that they are not seeing defalcations right now, either. I think the majority of people who do take out those loans do manage to repay them, but as I think you heard from the FCAC, the cumulative interest rates, fees and charges can be significant. Our registrar on bankruptcy in Toronto commented that in one case it amounted to 700%, I believe.

[Elizabeth May, Green, Saanich—Gulf Islands, BC]

Holy mackerel.

I know I'm probably running out of time, but you mentioned that you looked at other countries. Which other countries' policy prescriptions in this area do you think we should have a look at?

[Elisabeth Lang]

I'm trying to remember. I will see if I can pull that up and get back to you.

[Elizabeth May, Green, Saanich—Gulf Islands, BC]

Okay.

Thank you.

[The Chair, Liberal, Wayne Easter]

You have time for one more, Elizabeth.

[Elizabeth May, Green, Saanich—Gulf Islands, BC]

Oh, my heavenly days. Sorry, Mr. Chair, this never happens.

My last question would be this. Given what you're seeing happening in the pandemic, how are you monitoring the reactions from businesses? Will you be monitoring to make any kind of changes as you see upticks or responses? How responsive can your office be to changes in bankruptcy rates and stresses?

[Elisabeth Lang]

As I mentioned, engagement with stakeholders has been one of my strategic objectives for the organization. We've increased our dialogue with the licensed insolvency trustee community significantly. This has really helped us be in touch with what's going on on the ground. That is why we were able to respond so quickly in mid-March, and we would continue to do that.

I have biweekly calls with the Canadian Association of Insolvency and Restructuring Professionals. We get a sense of what the needs are and what the challenges are. Licensed insolvency trustees across the country never hesitate to have productive and innovative solutions for our office on how we can help to improve things.

[Elizabeth May, Green, Saanich—Gulf Islands, BC]

Thank you for your work. It's much appreciated.

[The Chair, Liberal, Wayne Easter]

Thanks to you both.

Mr. Julian will be next. Then we'll have Mr. Kelly and Mr. Fraser. We'll have room for one more from the Conservative Party, and we'll end with Mr. McLeod.

Mr. Julian.

[Peter Julian, NDP, New Westminster—Burnaby, BC]

Thanks very much, Mr. Chair.

I'd just like to reiterate, Ms. Lang, following Elizabeth May's question, that it would be very helpful for us to have the international solutions that other countries have brought to bear, due to what is becoming chronic in Canada. I mean, the level of family debt is unbelievably high. The profits in the banking sector are unbelievably high. I think people make the correlation that it's government policy that is putting this concentration of wealth into a few people's hands. The one per cent, the wealthiest Canadians, have as much of the wealth of the country as the bottom 80%. There's a problem there. Certainly the bottom 20% have barely one per cent of the nation's wealth. That, in a nutshell, is why so many people come to you.

I'm interested in the factors you cited earlier, which were mentioned more anecdotally, it seemed, in terms of the reasons for filing. As I recall, 23% were because of medical reasons, which could be long-term illness or disability, and 15% because of the breakup of a relationship. We all know what a tremendous financial cost that can be for families. Putting those together, 38% or almost 40% of bankruptcies are caused by circumstances beyond control. That is a very interesting fact. We'd appreciate having more information.

The other fact that I think we would love to probe into is the number of consumers who are in high interest rate relationships with their bank, with payday loans or with credit card companies. We really haven't seen the banks adjust their levels at all. In fact, they've reaped $5 billion in profit so far in this pandemic, which many people consider to be despicable. It's supposed to be all hands on deck, rather than profiteering from the immense largesse they've received from the federal government.

Do you have numbers around the percentage of consumers and small businesses that are victims of this high interest rate charge that's based on your credit rating, which really is a way of skimming the public? Certainly, payday loan companies, as you mentioned, with up to 700% interest, are a sad example of that with no government action. Do you have a sense of what consumers and what small businesses are subject to these high interest rates that contribute to their bankruptcy?

[Elisabeth Lang]

Let me start with your first point.

When I looked at other countries to try to find solutions to subprime lending, I didn't at the time find anybody who had actually solved the problem, so I'll add that caveat.

In terms of interest rates charged, my belief is that our intake forms do not ask that question. We ask the name of the creditor. For payday loans, we can look for certain keywords to determine if they're payday loans, subprime loans, but it's not based on other information, so we wouldn't be able to report on actual interest rates charged in the majority of bankruptcies.

[Peter Julian, NDP, New Westminster—Burnaby, BC]

For other countries, some of the solutions that have been put out are lending circles, which provide low-interest loans through local credit unions, and the co-operative movement. Some countries, as you're probably aware, have publicly owned postal banking, so that's a window in the industry that forces the commercial bank rates down because they can no longer collude to boost rates; they have to compete with a public sector bank.

In your initial calls out to other countries, have you seen any of those things as possible solutions for folks who need to have these loans but need to not have to pay an arm and a leg to access credit?

[Elisabeth Lang]

We have not discussed that aspect at all on our calls so far.

[Peter Julian, NDP, New Westminster—Burnaby, BC]

Okay. That would be something I'd certainly urge you to look into, and if you get any information, I'd urge you to share it with the committee as well.

Are there any other factors that you track in terms of statistics for people, either consumers or businesses, who are applying for bankruptcy? Are there any other factors that we haven't talked about at this committee meeting that are taken into consideration or that come up as you see people making these applications?

[Elisabeth Lang]

We have a range of data. I'm not sure what you mean. If you're asking about the different reasons for financial difficulty, as I mentioned, that's an open text field, so the number of reasons that we can find is actually endless. The ones I listed are the top five.

[Peter Julian, NDP, New Westminster—Burnaby, BC]

Okay, but I guess I'm looking for tidbits of information as part of the application process that are relevant for the committee that we haven't asked you about yet.

[Elisabeth Lang]

There are none that jump to mind. We collect a lot of data on debtors, and a lot of it is available through our statistics.

[Peter Julian, NDP, New Westminster—Burnaby, BC]

Okay.

Mr. Chair, you're being very generous. Do you want me to ask a few more questions?

[The Chair, Liberal, Wayne Easter]

I'm sorry, no. I was on mute, so I couldn't cut you off, Peter.

Just spinning off that, Ms. Lang, from the regulatory side of things, are there any shortcomings that you face that the government needs to look at?

[Elisabeth Lang]

Again, that would be a policy question for my colleagues at ISED to address.

Generally, I think that the Canadian insolvency system—