Thank you, Mr. Chair.
I want to thank the committee for allowing me to speak today on this very important consumer issue of payday lending. I'd like to introduce my colleague David Clarke, who has been the senior policy officer on this issue for the past number of years. He is an active member of the federal, provincial, and territorial working group of committees that continues to study the payday lending issue.
I'll be pleased to answer questions you may have today concerning the background to this file, particularly on any federal, provincial, or territorial dimensions or consumer protection issues.
I have a few words, just for a moment, on payday lending. It's a form of short-term lending through which the consumer typically borrows several hundred dollars for 10 days to two weeks. The borrowing costs are very high, as you probably know. They are usually in the range of, for example, $40 to $75 for a $300 loan for two weeks or less.
The concerns expressed about this type of borrowing in the general community have included its very high costs, obviously; the lending practices associated with it, such as inadequate disclosure of costs and terms; and rolling over of loans--that is, the sequential structuring of loans one after the other, and the accumulation of interest and principal costs therein. You very quickly spiral your costs.
The industry, which originated in the United States some time ago, is a relatively recent phenomenon in Canada. It emerged in western Canada in the mid-1990s and rapidly spread eastward over a very few years. It is now a major presence in many urban areas in the country. There are approximately 1,300 retail outlets, and the number is growing. Estimates place annual lending at $1.3 billion or more per year.
Payday lending and other fringe financial services are known collectively as the alternative consumer credit market by the consumer measures committee. They were first identified as a federal-provincial-territorial issue by British Columbia in the late 1990s. In 1998, at the request of some western provinces, the federal-provincial-territorial committee of justice ministers considered the alternative consumer credit market, which by the way includes cheque cashing, chattel mortgages, and pawnbroking. The justice ministers referred the issue to federal, provincial, and territorial consumer ministers, who in turn asked the consumer measures committee of officials to look into the matter on their behalf.
Since the year 2000, CMC officials have been pursuing a detailed program of work, most of which can be found on the CMC website: www.cmcweb.ca. The work has included research by officials and others, for instance Professor Iain Ramsay of Osgoode Hall Law School; a survey of practices employed within the industry; and a roundtable meeting early on in Victoria, with governments, industry, consumer and academic representatives.
In 2001, federal and provincial consumer ministers used that work as the basis for their decision to direct officials to develop options for future action in such areas as best practice guidelines for the industry, consumer education and awareness, and regulatory mechanisms.
In 2003, a national public consultation was held on the legal framework and consumer protection issues for the alternative consumer credit market.
In 2004, FPT Consumer Ministers expressed their concern about the abusive practices and excessive costs encountered by consumers in the alternative market, for example payday loans, cheque cashing, rent-to-own. With an emphasis on payday loans, they asked officials to undertake work related to a consumer protection framework, including measures to address the issue of rollovers of loans, concurrent loans from multiple lenders and the habitual use of payday loans, industry best practices, and consumer education on the true cost of these loans.
In 2004 and 2005, a second national public consultation was held specifically on regulating payday lenders. Subsequently, provincial and territorial senior officials and several ministers formally sought federal legislative action to facilitate regulation of this sector. As you know, in the fall of this year Bill C-26 was introduced in Parliament.
To date, Mr. Chairman, two provinces, Manitoba and Nova Scotia, have passed legislation in anticipation of the possible passage of Bill C-26. There are numerous indications in the media that several other jurisdictions intend to proceed with some form of regulation as well.
A considerable amount of work over a long period of time has brought the federal-provincial discussions on payday lending to this point. I would be pleased to answer any questions you may have in that regard.
Thank you, Mr. Chair.