Evidence of meeting #35 for Finance in the 45th Parliament, 1st session. (The original version is on Parliament’s site, as are the minutes.) The winning word was interest.
A video is available from Parliament.
President, MNP LLP
I'm not really sure how to answer the question. I'm not really sure I understand it, to be honest with you.
Conservative
Greg McLean Conservative Calgary Centre, AB
Okay. Let me explain it a little more clearly.
No matter how much the Bank of Canada lowers the interest rate, the five-year rate doesn't seem to respond, so the mortgage rate is still elevated compared to the bank rate. That indicates there's a crowding out in debt markets. The big actor in debt markets continues to be the government.
Can you see that maybe, if the government weren't taking as much debt space, there would be lower rates available to Canadians?
President, MNP LLP
It seems like a good question for an economist rather than a trustee, but that is a potential.
Conservative
Greg McLean Conservative Calgary Centre, AB
Okay.
Given how much Canadians are in debt here, they're making choices. The number one choice Canadians make when they spend money is food, food for their family, and you have more than two million Canadians per month lining up at food banks. Do you have any idea, from your research, how much more outstanding consumer debt there would be if this availability of food banks wasn't there for Canadians, at the very basic level, at this point in time?
President, MNP LLP
We haven't done any empirical studies on that whatsoever. All I can say is that the people who come to see us who are suffering financial concerns rely on credit to pay for some of their food essentials.
Conservative
Greg McLean Conservative Calgary Centre, AB
Are the people who come to you for credit already using food banks?
President, MNP LLP
I haven't done that corollary or those equations to determine whether they're doing the same thing.
Conservative
Greg McLean Conservative Calgary Centre, AB
They're either going to food banks or, if they're seeking credit protection, they're putting their purchases of food on credit cards at this point in time. Would you say that? That's at 22% or 24% interest.
President, MNP LLP
That's something we are seeing. They are using credit for essentials like utilities and food.
Liberal
The Chair Liberal Karina Gould
Thank you very much, Mr. McLean. That concludes your time.
We'll continue now with Mr. Sawatzky for five minutes.
Liberal
Jake Sawatzky Liberal New Westminster—Burnaby—Maillardville, BC
Thank you, Chair.
Mr. Dijkema, thank you so much for your introductory remarks. I find very similar concerns when it comes to gambling and how widespread this has become.
I'd like to note that the Maryland Center of Excellence on Problem Gambling reports that individuals with a gambling disorder have a suicide rate five to 10 times greater than the general population, and 4% to 40% or higher will attempt suicide. When you think about how common sports betting has become, this is a serious issue. It's become very normalized when it comes to watching sports. Gambling becomes part of what people are doing.
You mentioned Marty Deacon's bill. This has been supported by my colleagues MP Bardeesy and Bardish Chagger. I'm very happy to hear that there's some movement there. I share your concerns.
One thing I want to ask you about is how real-time betting plays into this. People are watching sports and making these impulsive decisions while the sports are ongoing.
President, Canada, Cardus
Thank you very much for that question. Your insights are accurate. The increase in suicidal ideation and otherwise is very much there.
What real-time betting does is it creates an environment where betting on a sports game resembles more and more a slot machine. Studies have shown that the closer something comes to a slot machine, with the speed, the ability to go up and down very quickly and the need to make quick decisions, it triggers dopamine hits in one's mind that make it more addictive. In line, you can get higher wins and higher losses at the time. For people who have done any betting, that's what actually drives the excitement and what drives the addiction.
A number of studies, including studies that we've cited in our papers, show that in-game betting actually creates a situation that resembles an electronic gaming machine. Those are the most addictive. Studies have shown that those are the most addictive. Effectively, what you're doing is you're turning a hockey game, which you should be watching and enjoying the ups and downs with your family or your community or in your local pub, into a slot machine. If anybody's been in a casino, you can see the affect on the face is not one of the excitement that we see in the advertisements. It's actually a very flat affect. That is what drives the addictions, and the addictions are what drive the questions of suicide that the member has noted.
That is one of the challenges. As we've turned more and more sports events into slot machines, we see higher levels of addiction, particularly, as I noted, among young men, who have their own mental health challenges. Our goal is to try to create a bit of a wall around that.
One thing we could do is Senator Deacon's bill, which would ban sports advertising. We would be in favour of that. We would suggest that for the members around the table, regardless of the party, it's one of these beautiful issues that the left and the right can agree on. The left wants to protect the vulnerable, or at least that's the stereotype, and the right wants to ensure good fiscal decisions. With betting, the house wins, but it's never the household. It's always BetMGM or, in this case, the state, which I think is also addicted to the revenue.
I think that was a very good question. Thank you so much.
Liberal
Jake Sawatzky Liberal New Westminster—Burnaby—Maillardville, BC
Thank you, Mr. Dijkema.
I actually have a friend who is going through an issue like this. They noted exactly what you said about the facade of sports betting, and how once you're in the app, it becomes slot machines and casino-like gambling methods. That's very interesting.
Could you speak a bit to the widespread advertising that we're seeing? With every sports game you're watching, you're starting to see tons of ads being pumped for sports betting. Could you speak to that, please?
President, Canada, Cardus
Absolutely.
I will just note that your friend's observation about driving them toward the casino is exactly true. That's exactly what the companies want. Again, those are the most addictive games and that's where they want their revenue. The sports betting is actually a hook to get them into that.
As far as the advertising is concerned, I shared with you some of the data on the amount of time that people are spending watching advertising. It's about a fifth of a total production. You can see now that even the analysis is brought to you by companies. I think there's been a Faustian bargain with producers of hockey games—Rogers, Sportsnet and others—where they have exchanged the cash of the advertising for, effectively, a colonization—
Liberal
The Chair Liberal Karina Gould
Thank you, Mr. Dijkema. I'm going to have to conclude this round here.
Thank you, Mr. Sawatzky.
Mr. Garon for two and a half minutes.
Bloc
Jean-Denis Garon Bloc Mirabel, QC
Thank you very much.
Professor d'Astous, there is no question in my mind that the marketing strategies of financial institutions—and the sales pitches of mortgage brokers, in particular—can influence people’s debt levels and the type of loan they take out.
When we read your résumé or CV, it’s clear that you know a lot about personal finance. It’s very public.
If you go to see a mortgage broker and they read your CV, do you think they’ll try to sell you a product differently than they would to someone they assume is uninformed?
What would be the difference in the sales pitch, and what might be the impact on the contract selected in the end?
Associate Professor, HEC Montréal, As an Individual
That’s an excellent question.
I won’t speak from personal experience, but research has also been conducted on the impact of financial advice. I would say that, all things considered, in our experimental studies with real financial advisors, we see that the decisions or recommendations they make are generally sound. We don’t see any major mistakes, but it’s certainly true that, like everyone else, financial advisors can also have biases. The literature shows that, sometimes, financial advisors tend to recommend products they own themselves, products they trust, or products they’re familiar with.
As for determining whether these products are good or not for the consumer, that’s a step that goes a bit beyond what my research could show, but the literature demonstrates that there is a slight familiarity bias involved in what is recommended.
Bloc
Jean-Denis Garon Bloc Mirabel, QC
We have one minute left, so I'll keep my question short.
In your opinion, do banks prefer higher or lower minimum payments on credit cards?
Do they want people to stay in debt and risk defaulting on their payments, or would they rather people pay off their debts?
Associate Professor, HEC Montréal, As an Individual
A study was conducted on a bank that had decided to raise the minimum payment on its credit cards. Some consumers were affected and others were not, and the result was quite clear. Raising the minimum payment leads to an increase in payment defaults. The bank, in general, won’t like this, because it will suffer losses.
For the bank, finding a balance is difficult, because lower minimum payments allow it to earn more interest income, while higher minimum payments help ensure that the debt will be repaid. So, it’s not that simple to answer this question.
Liberal
The Chair Liberal Karina Gould
Thank you.
We'll continue now with Ms. Cobena for five minutes, please.
Conservative
Sandra Cobena Conservative Newmarket—Aurora, ON
Mr. Bazian, you just finished mentioning that, unfortunately, a lot of Canadians rely on credit card debt to cover the basic essentials, some of which, of course, are groceries. Statistics Canada also released that transportation, housing and food are costing Canadians approximately 104% of their income, and that Canadians are about $200 away from not being able to meet their financial obligations.
What do you see as the root cause of this trend?
President, MNP LLP
I think it's a combination of many things. We've talked about gambling today. Gambling is part of it. There's also drug addiction, illnesses, job loss and family breakups. Those all combine to cause this. I wouldn't attribute it to one particular outstanding issue. You have to look at it as a case-by-case situation.
Keep in mind that when people say they are feeling $200 away from being insolvent, it means they're not going to be able to make their payments in an orderly fashion. They may rely on debt after that $200 amount.
Conservative
Sandra Cobena Conservative Newmarket—Aurora, ON
Have you seen a concentration within any given group of Canadians?
President, MNP LLP
I would say you're probably seeing a little bit more in the younger generation, because they have more debt to deal with. They typically have mortgages, car loans and youngsters they have to care for with day care, as opposed to the older demographic, which typically has those debts paid off. It's a little bit more common in the younger generation and with those who have a lower income.