Finance Committee on Feb. 27th, 2024

[Donna Borden]

Yes.

We have so many homeless people because the government hasn't stepped up and hasn't had proper rent control. ACORN said, prior to the pandemic, that people were going to end up homeless, that they were going to end up on the streets if we didn't do something soon because the rents were being jacked up. However—

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

I do appreciate that. I just have limited time.

[Donna Borden]

Yes.

[The Chair, Liberal, Peter Fonseca]

MP Lawrence, avoid the crosstalk and allow the witnesses to answer your questions.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

It is my time.

[The Chair, Liberal, Peter Fonseca]

Yes.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

There's one thing I do want to get on the record as well. One of the things that I think could really help those folks who are at least in a position to review their financial position.... Some people aren't in that position, and I think we should acknowledge that. If you have no money to eat, no matter how much disclosure you have, you're not going to make the right decision. That's just the reality of it.

However, for those folks who are in that position where they can make a decision, don't you think that open banking and the ability to switch between financial institutions...and with that...? I think you've talked about transparency and being able to choose from a multitude of vendors so that you can get a better rate. More competition would also be helpful.

[Donna Borden]

Yes, but also with these particular companies, the instalment loans, all of us could go in there and we're all going to be charged the same amount. They don't have any, “Oh, we'll review your financial situation, and you're going to pay 11%, and you're going to pay 20%.”

These other alternatives, like the banks, the other loan companies and the different types of financial loan...they were willing to review your financial situation and say what they can charge you. Then, after you pay for so long, you develop your credit, and then you can pay lower interest.

These companies don't do that. They go right to the top, and they charge you all these fees. They charge you interest. They charge you insurance without your permission. They renew it without your permission.

You're right that what we want is alternatives. We want people to have a choice and to be able to go and find a loan where they want to without being turned away, unfortunately, like me. Even though I had the money and was at a bank for 30 years, I was told to go to the instalment loan company.

[The Chair, Liberal, Peter Fonseca]

Thank you.

Thank you, MP Lawrence.

Now we're—

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

I have a point of order.

I'm wondering if Mr. Lawrence would like for the committee to invest in a Ouija board so that he can call Ayn Rand as a witness and perhaps get the answers he—

[The Chair, Liberal, Peter Fonseca]

That's not a point of order. We're going to actually go on. We're not going to address Ouija boards here.

We're going to go to MP Thompson, please, for five minutes.

[Marty Morantz, Conservative, Charleswood—St. James—Assiniboia—Headingley, MB]

Milton Friedman would be good, as well.

[Joanne Thompson, Liberal, St. John's East, NL]

Thank you.

Ms. Jhamb, I'll start with you, please.

In 2007, the Harper government decided to exempt payday lenders from adhering to the Criminal Code's maximum interest rate and transferred the regulatory enforcement to the provinces. Some argue that this resulted in a patchwork of inadequate regulation and enforcement and enabled payday-loan interest rates to soar, topping 600% in some areas.

Since then, there are stronger payday-loan regulations across the country, and that's really thanks to your work at ACORN and your advocacy. However, instalment lenders still fall through the regulatory cracks.

I wonder if we're seeing lenders turn towards instalment loans instead, following provincial policy changes. If so, where is this most prevalent? Can you speak to that, please?

[Dr. Bhumika Jhamb]

Obviously, we are seeing a jump in the uptake of instalment loans. When we did the survey in 2016 and then did it in 2021, there was a 300% uptake in instalment loans. Instalments loans are definitely becoming popular. That's exactly why we want this move to go ahead. Instalment loans are much higher amounts of debt payable over a longer period of time. A person who has a debt of $10,000 is paying a huge amount of interest and is probably never going to pay the debt that they owe.

Definitely there has been an increase in the number of people who have taken instalment loans. Also, the entire industry has adapted to offering more and more instalment loans—payday loans also. I don't think it's either-or. Both kinds of products are quite common in the absence of fair credit alternatives.

[Joanne Thompson, Liberal, St. John's East, NL]

Thank you.

How will federal changes interact with provincial and territorial regulations? Does this federal change lead to a close in the regulatory gap?

[Dr. Bhumika Jhamb]

What we did learn from the last fall economic statement is that the federal government wants to put a cap of $14 per $100 on the fee for payday loans. Obviously, that's a positive move, but it's still high. Obviously, $15 per $100 is equivalent to 400% or 500% APR. That's still a very high amount of interest that payday lenders will continue to charge.

A long-term solution would be to bring payday loans back into the ambit of the Criminal Code of Canada, which also regulates instalment loans, because right now there's an exemption. That would be a long-term solution. The federal government would again have the power to regulate payday loans as well.

[Joanne Thompson, Liberal, St. John's East, NL]

Thank you.

Given our current environment of higher interest rates and rising costs of living, vulnerable Canadians may increasingly be forced toward high-cost loans, which tend to aggravate and not alleviate existing financial challenges.

Have you seen this—in other words, people falling into the debt trap—more frequently in the last two years?

[Dr. Bhumika Jhamb]

We haven't specifically. Obviously, we don't have the numbers to cite, but as I said in my initial remarks, we did a survey back in 2023 of 623 of our community contacts. A lot of our members resort to payday loans and instalment loans, which are high-cost loans. This is exactly why we want the interest rate to be lowered. In the absence of fair credit alternatives, people don't have a choice but to resort to these kinds of loans.

Definitely, as the cost of living increases and we don't have fair credit alternatives, these loans become more and more popular.

[Joanne Thompson, Liberal, St. John's East, NL]

Thank you.

[The Chair, Liberal, Peter Fonseca]

You have time for one more question.

[Joanne Thompson, Liberal, St. John's East, NL]

That's perfect.

I have one quick, final question.

Ms. Borden, maybe you could speak to this as well, but I'll start with Ms. Jhamb.

Existing government programs, certainly through the CRA, are used in communities to allow people to understand the importance of being part of the CRA and to be able to maximize the benefits they receive from government and also the existing supports that the government provides to people to help with affordability issues.

How is this impacting the vulnerable sector that you're seeing through ACORN, and how is it that we can expand the supports or the availability of supports to help people with financial needs?

[Dr. Bhumika Jhamb]

One of the measures that Prosper Canada has also been recommending is automatic tax filing. That's something that will really help a lot of Canadians, low-income Canadians especially—especially those with children—who currently don't have access to those tax benefits. They would be able to access those benefits if automatic tax filing were something that was pursued.

Yes, there are all those benefits, but a lot of people are unable to access them at this point.

[The Chair, Liberal, Peter Fonseca]

Thank you.

Thank you, MP Thompson.

Now, witnesses and members, we are moving into our final round, our third round.

We have MP Morrice. You have five minutes. Just so you're aware—because there's been a lot of generosity here—you're going to get another five minutes after MP Baker, who comes after you.

MP Morrice, you have five minutes, please.

[Mike Morrice, Green, Kitchener Centre, ON]

Thank you, Mr. Chair.

Thank you, colleagues.

I appreciate the chance to be a part of this conversation; it's a very important one.

I want to start by thanking ACORN and Prosper Canada for your advocacy this afternoon. This particularly applies to ACORN, not only for your advocacy here in Ottawa but in my community also. The chapter in the Waterloo region has been a wonderful ally for folks who are facing renovictions. Thank you again to the good folks at ACORN for how you're bringing your lived experience to some really important advocacy, both in the Waterloo region and of course here this afternoon.

Ms. Borden, thanks for sharing some of your lived experience. It reflects what many in my community have shared with me in terms of the debt trap. I appreciate the story you shared in terms of borrowing $10,000. I think you shared that you paid back $24,000 and still owed $7,000 by the end. It speaks to the real injustice of the issue that is meant to be addressed by this change. To reduce these predatory interest rates down to 35% is certainly a step in the right direction.

My question is for Ms. Jhamb. Specifically with respect to the association representing lenders who started this letter-writing campaign, my office has received two of these letters. I know that ACORN and Momentum have put out a statement that refutes the myths shared in these emails, including by pointing out that in Quebec this 35% maximum interest rate has already been in place for years, yet the industry seems to still expand in that province. I know that ACORN is pushing to reduce the maximum rate even further.

Ms. Jhamb, can you summarize in a minute or so the myths that ACORN has dispelled to help folks make sense of some of the emails we're receiving?

[Dr. Bhumika Jhamb]

Thank you, MP Morrice.

One of the biggest arguments posed by the Canadian Lenders Association is that this industry will cease to exist and that borrowers will have to go to loan sharks. We've maintained, as you mentioned, that in Quebec the interest rate is already capped at 35%, yet Goeasy, one of Canada's biggest installment lenders, boasts to its investors that it is going to expand in Quebec and other urban markets. If they were incurring a loss or if it were really affecting their profit margins, why would they go and expand further into Quebec?

It's very clear that there's enough of a profit margin even if the interest rate is lowered. In their annual report, they also say very clearly that they are very well placed to adapt to this lower interest rate. In the U.S. also, in state after state, we have seen the lower interest rate, and still this industry thrives.