Evidence of meeting #129 for Finance in the 44th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was witnesses.
A video is available from Parliament.
12:05 p.m.
Liberal
The Chair Liberal Peter Fonseca
We thank you, Ms. Mulholland. We understand.
You still have another minute and a half, MP Morantz.
12:05 p.m.
Conservative
Marty Morantz Conservative Charleswood—St. James—Assiniboia—Headingley, MB
If you look at the current proposal, it would peg the criminal rate of interest at 35% APR, which is 30 percentage points above the current bank rate of 5%. One problem of pegging it at 60% or 47% APR was, when that happened in the 1980s, the bank rate was actually 20% or 21%. As interest rates came down, the spread as to what was criminal became larger, so it became also impossible to charge because very few lenders really needed to get to that criminal rate.
Wouldn't it make more sense to peg the criminal rate to the bank prime, so that if it moved down or moved up...? For example, for 30 percentage points above bank prime, if it goes down to 3% then the criminal rate would be 33%, for instance.
What do you think of that type of suggestion?
12:05 p.m.
Research and Communications Coordinator, ACORN Canada
We've maintained a fixed rate more than keeping it variable. Obviously, a lower rate is better than a higher rate of 35%.
We are encouraged by the fact that the federal government is moving toward lowering it. We did see further consultation to further lower the criminal interest rate from 35%—once it is 35%—to whatever level. We are happy this is going further. It's hard to predict how....
We saw the interest rates changing fast, so some level of fixed rate or predictability is probably better at this point. We do agree that a lower interest rate is definitely something we'd prefer.
12:05 p.m.
Liberal
The Chair Liberal Peter Fonseca
Thank you.
Thank you, MP Morantz.
Now we'll move to MP Dzerowicz, please, for five minutes.
February 27th, 2024 / 12:05 p.m.
Liberal
Julie Dzerowicz Liberal Davenport, ON
Thank you, Mr. Chair.
I want to thank our witnesses, minus one, for their excellent presentations.
I had questions for the second one, but since we have only our two witnesses from ACORN, I will direct my questions only to them.
I'm actually going to start off with Ms. Borden.
Ms. Borden, you provided testimony about the need to take out an instalment loan. I would say that the average Canadian actually doesn't know what an instalment loan is. Could I maybe ask you to explain why it is you felt you had to go to an instalment loan and what other options you might have considered? I just want the average Canadian who might be listening to understand how you got to where you are and what other options....
You have about a minute to do that because I have a few other questions. Thank you.
12:05 p.m.
National Representative, ACORN Canada
Sure.
I went to the Royal Bank, which was my bank for 30-plus years. I wanted to consolidate all of my debts so that I would have the one payment. They said that I didn't have bad credit but that I had too much credit. They referred me to CitiFinancial, saying that they would be able to help me. I never even knew about them until the bank referred me to them.
12:05 p.m.
Liberal
Julie Dzerowicz Liberal Davenport, ON
The bank referred you to them.
You said that you took out a loan of $10,000 and five years later had paid.... Was it $24,500?
12:05 p.m.
Liberal
Julie Dzerowicz Liberal Davenport, ON
It was Royal Bank that actually recommended that you go to this organization.
12:05 p.m.
Liberal
Julie Dzerowicz Liberal Davenport, ON
When you were signing on to this instalment loan, was there full and clear disclosure of the costs before you signed the agreement?
12:05 p.m.
National Representative, ACORN Canada
They showed me the agreement, and I asked the questions. I thought I was asking the proper questions. I thought I knew how interest was calculated. They said it was like a credit card. I asked them all these questions, and then she said, “Oh, yes, yes.” She showed me the statement. I asked her about the different fees, and she said, “Oh, no, that's only if you don't pay it off. You pay this many payments for this many months, and it's paid off.” However, it just wasn't. It was just never paid off.
12:05 p.m.
Liberal
Julie Dzerowicz Liberal Davenport, ON
Okay.
Thank you so much, and thank you for sharing your experience with us. It's very helpful.
12:05 p.m.
Liberal
Julie Dzerowicz Liberal Davenport, ON
My next question is for Ms. Jhamb.
Ms. Jhamb, I have a press release from the Ontario Association of Chiefs of Police and the Canadian Lenders Association. One of the quotes in this press release with regard to the legislation that we're proposing says:
Under the legislation, illegal predatory lenders could take advantage of Canadians by operating online from outside the bounds of Canadian jurisdiction. By forcing legal, responsible lenders out of the marketplace, we worry Canadians will be targeted by this type of criminal activity.
It seems like there is a concern out there that these changes might increase criminal activity and might actually push people like Ms. Borden to other options that might be worse. I wouldn't mind if you could comment on that, please.
12:10 p.m.
Research and Communications Coordinator, ACORN Canada
We believe that this is really a false claim. Like I said, when we were pushing to lower the fee for payday loans, it was the same argument—that people will be forced to go to loan sharks and that this industry will cease to exist—but none of that happened. The payday lending industry continues to exist.
What really pushes people into crime is poverty, not these fringe lenders. We don't want these predatory lenders to take advantage of people who are already in a vulnerable situation, and that's exactly what's happening today.
The lowering of criminal interest rates will really help reduce harm, as we've been saying. It's a positive step, and we really support this move. We don't think that it's going to lead to an increase in criminal activity.
Donna wants to say something.
12:10 p.m.
Liberal
Julie Dzerowicz Liberal Davenport, ON
Yes. Actually I want to go back to you, Ms. Borden, just to ask what you would have done if you didn't have access to an instalment loan. That's question one.
Question two is this: Is there anything else you might want to respond to in terms of the question I just asked Ms. Jhamb?
12:10 p.m.
National Representative, ACORN Canada
If I didn't, I probably would have just tried to go to family to borrow money from family, or I would have just stuck it out and paid all the separate payments, but I did go there.
I'd also like to point out that near the end when I tried to file a complaint against this company, I was told that they were bulletproof and that they could do what they wanted and nobody would do anything to them. I went to several complaint agencies, and there was no process.
I did go to the police to file a complaint because they threatened me. They threatened to come and smack the money out of me, and they threatened to come to my home. When I did go to the police, the police officer said to me, “If you were going to take out a loan, you would have been better to have taken out a loan with a loan shark because we would have gone after them and already arrested them.” He said, “We don't know where these people stand, and we don't have any regulations. We have nothing to go by.” He said, “If you go to court with them and it says they did something wrong, then we'll charge them.”
However, other than that, they couldn't do anything.
12:10 p.m.
Liberal
12:10 p.m.
Liberal
The Chair Liberal Peter Fonseca
Thank you, MP Dzerowicz and our witnesses.
Now we're going to MP Ste-Marie, please.
12:10 p.m.
Bloc
Gabriel Ste-Marie Bloc Joliette, QC
Thank you, Mr. Chair.
First of all, I want to inform you, Mr. Chair, that I'll be giving my next turn to my fellow member Mr. Morrice from the Green Party.
I'm going to start with a comment.
Ms. Borden, your story touches me a great deal. I find it appalling, and I sincerely hope that we, as legislators, and the government will manage to put rules and laws in place so that this type of situation never happens again.
I would like to ask a slightly more technical question. I'm referring again to the “Consultation on Fighting Predatory Lending by Lowering the Criminal Rate of Interest”, published by the Department of Finance in 2022. It says, “Since the criminal rate of interest is applicable to all credit products in Canada, except for payday loans made in accordance with section 347.1 of the Criminal Code, it is a very broad measure.”
Here are two quick questions.
First, should there be additional exceptions?
Second, should payday loans be subject to the criminal rate of interest?
12:10 p.m.
Research and Communications Coordinator, ACORN Canada
We don't believe that there should be any exemptions. In fact, there was a consultation recently about making bond loans an exemption, and we believe that even bond loans equivalent to less than $1,500 shouldn't be an exemption because bond loans are also equally predatory.
Regarding the payday loan specifically, there was a specific exemption carved out for payday loans, and that's when the whole regulation of payday loans moved to the provinces. That's really led to this whole differential interest rate that we see across different provinces and territories, and it's very high. It's 400% to 500% APR, for payday loans. Yes, we do believe that payday loans should come back under the ambit of the Criminal Code of Canada.
12:15 p.m.
Bloc
12:15 p.m.
Bloc
Gabriel Ste-Marie Bloc Joliette, QC
Okay, I'll leave it at that, because my next question will be too long.
Mr. Morrice will take my next turn.
Thank you again to the witnesses.