Thank you, Mr. Chair and committee members, for having me here today to represent 4 Pillars Consulting Group.
Thank you for giving us this opportunity.
4 Pillars Consulting Group is a franchise network of small business owners who provide debt consulting, financial education and credit rehabilitation services to those facing insolvency. We have been in business for 20 years, with 50 offices located throughout Canada. Over our long history, we've assisted tens of thousands of Canadians to navigate the complexities of the insolvency system as they face crushing debt loads. We support them through their unique situations by providing debt relief and recovery solutions.
We appreciate that this committee has been taking testimony for months now on the post-pandemic economic recovery. You're more than aware of the statistics, and many have expressed concerns for the pre-pandemic rise in debt levels being held by Canadian households. Today I want to focus my remarks on what these statistics look like on the ground for the tens of thousands of clients we serve.
The people who come through our doors every day are often overwhelmed, ashamed and without hope. Overwhelming debt negatively affects a person's mental health, family stability and productivity. I have a deep concern for this moment Canadians currently find themselves in, but our concern has been growing for many years.
Canada's Bankruptcy and Insolvency Act is intended to provide honest Canadian debtors with the right to a fresh start, the right to deal with and move beyond overwhelming debt. What we have observed, however, is that the legislation and the system that supports it have some significant systemic challenges that make their fresh start far from certain.
Given that the recovery of our national economy will require Canadians to achieve a sustainable and solid financial footing, our main recommendation to this committee is to undertake a thorough review of the Bankruptcy and Insolvency Act from the viewpoint of the debtors. In particular, I have three areas of focus that I believe require your consideration.
Number one is the debtor's right to an equal playing field. The current system is preferentially weighted towards the creditor. Banks have extensive resources and a mandate to make money for shareholders. They have considerable ability to access legal and financial advice on how to pursue claims against debtors.
The Office of the Superintendent of Bankruptcy is charged with being a fair, transparent arbitrator between creditors and debtors. The agents of the OSB, licensed insolvency trustees, are presently the only entity prescribed by federal law to administer proposals and bankruptcies under the BIA. However, trustees are compensated by the size of the debt settlement debtors pay back to creditors. The trustee is also not responsible for the financial rehabilitation of the debtor. In our credit-driven society, debtors are the little guy, but unlike in Canada's judicial system, there is presently no entity assigned to be a sole advocate for the debtor.
Number two is the debtor's right to make informed financial choices. The ability to make informed choices is fundamental to the right of choice. Within our current regulated debt and insolvency system, no one is really responsible for the crucial step that 4 Pillars has come to call “aftercare”. Right now, insolvent debtors are required to take two mandatory counselling sessions that are administered by the trustee. In practice, this aspect of the legislation acts more as a punishment than as a support, and statistics show that it is not driving the desired results, as the recidivism rate continues to increase.
Number three is that we have very limited data on debtor behaviour, and what we do have is held by different entities and jurisdictions. If we do not collect the data that allows us to understand the various root causes of how Canadians come to carry excessive debt, we will be unable to design effective interventions. In addition, we have limited ability to forecast or insulate Canadians against the kinds of economic shocks we are now experiencing.
The Canadian Debtors Association, of which 4 Pillars is a member, advocates for debtors. As we all attest, access to credit is now a necessary part of our lives. Like 4 Pillars, the Canadian Debtors Association is also expressing the need for an overhaul of the BIA. Recently, some of its board members have been in touch with some of you to discuss ways to have a review at the parliamentary level.
4 Pillars believes the debate must shift towards a more debtor-focused approach. Should the sky-high debt loads that we're seeing today become tomorrow's insolvency crisis, then putting debtors at the centre of the solution is the only way forward.
In closing, please allow me to offer our support. We have experience and knowledge to contribute to this work and do not feel it is for the public sector to shoulder this burden alone. We look forward to the opportunity to work with you to improve Canada's consumer debtor outcomes.
Thank you.