Evidence of meeting #139 for Industry, Science and Technology in the 44th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was consumers.
A recording is available from Parliament.
Jean-Denis Garon Bloc Mirabel, QC
Thank you, Mr. Chair.
I must admit that things can get a little confusing sometimes. On the one hand, I heard Mr. Généreux tell us, with good reason, that bank and credit card statements must be simplified. On the other hand, I heard Mr. Perkins say that the solution is to add 10 pages of information on the carbon tax. I have a hard time understanding that. As I said, fortunately for Quebeckers, the carbon tax doesn't apply in Quebec.
I'd like to ask Mr. White some questions about what Quebec has done, what the provinces can do and what the federal government must do that the provinces can't do.
As I understand it, consumer protection legislation comes under provincial jurisdiction, as do credit contracts, since contracts fall under civil law. The same is true for the definition of “usury” in these contracts, as well as for deferred payment contracts, which let people buy something and pay for it later, for example. All of that falls under provincial jurisdiction, so Quebec has had free rein to protect consumers. There's also An Act respecting financial services cooperatives, which applies to Desjardins.
So Quebec has been able to make significant progress on all these regulations to protect consumers, but they also enable consumers to make better decisions and informed financial decisions in this market, which, let's face it, is complex for the average person.
Mr. White, what measures does the federal government have the power to take to protect consumers when it comes to personal finances and credit and enable them to make better financial decisions?
Executive Director and General Counsel, Public Interest Advocacy Centre
I suppose one of the reasons this is so tricky is that it is a shared jurisdictional subject matter.
Your Liberal colleague opposite, I believe, made two very concrete recommendations that I think should be pursued very seriously: limits on the amount of debt and more vigorous disclosure rules to ensure the issuing lender has a full picture of what the consumer has, in terms of debt. It's like a stress test, as they call it in banks. It's a stress test on a household to make sure they can pay it.
Then, look at it within the scope of federal regulations. You have a big opportunity to do something with federal regulations for banks. It remains to be seen how well provincial laws work, but we're looking to Quebec as an example of how the federal government can incorporate that at the federal level and bring those standards together into a harmonized system.
There's no reason why this should be happening. It's causing a lot of stress for Canadians.
Liberal
Bloc
Jean-Denis Garon Bloc Mirabel, QC
You're being fair. Thank you very much.
Mr. White, I'd like to come back to this federal-provincial issue.
We Quebeckers naturally tend to turn to our national government, the Government of Quebec, to ensure our protection. This is a normal reflex for Quebeckers. We are a nation, which the House of Commons recognized through a motion.
What happens in the other provinces? How is it that we have a dynamic in which Quebec is moving forward and taking advantage of everything that falls under provincial jurisdiction, but then we come to Ottawa and say that the federal government should indicate in its own regulations that the provinces can do that? What's happening in the other nine provinces? Are provincial governments asleep at the wheel when it comes to protecting consumers? Correct me if I'm wrong, but why do we always want to rely on the federal government when the provinces can also take decisive action?
Executive Director and General Counsel, Public Interest Advocacy Centre
I recognize Quebec as a distinct society. I live in Quebec.
There are two things this industry committee should do to alleviate the pain for Canadians. My group did a study a couple of years ago about how Canadians were sacrificing money for medicine and clothing so they could afford home Internet service. You could do something about the cost of telecommunication services and something about the cost of debt.
Those are our recommendations.
Thank you.
Liberal
NDP
Brian Masse NDP Windsor West, ON
Thank you, Mr. Chair.
I'll go back to the telecom comparison, which I think is quite relevant. Telcos now have to at least provide...when they're going to gouge you for roaming in the United States. I come from a border town. Even without leaving the country, we get roaming charges.
Would it be a similar strategy to at least advise consumers on their statements, if they're going to use a credit card or something like that, about hidden charges on the conversion of rates, which is often not well understood? Should we move to a similar mandated model? That's a weak suggestion, in my opinion, in terms of what I'm offering. I'm asking whether, at the very minimum, there should be an advisory recorded every time you purchase something foreign. We have transaction fees on our bill. If we do get them, they're hidden away.
Should we have better advocacy, in terms of people knowing this?
Executive Director and General Counsel, Public Interest Advocacy Centre
I went to law school in Windsor, so I know that phenomenon well, non-international roaming.
It's yes and no. Regarding disclosure, you can put cancerous hearts and lungs on cigarette packs, but people will still smoke. We alluded to debt being like gaming. It's addictive. It's a crutch. People can't afford their lives right now. It's because essential services like energy, telecom and fair credit.... The cost of all these things is going through the roof. You get issued a new credit card. That issuing agent is not telling you, “Well, let's look at all the other credit cards you have and do the monthly run, in terms of how that's going to catch up with you over time.” That would be the type of disclosure that I think would really.... That would be the cancerous lung on the cigarette pack of the debt world.
I think it could shock people, but it doesn't fix the underlying issue of interest rates being borderline criminal.
NDP
Brian Masse NDP Windsor West, ON
I appreciate that. That's my point too. We can tinker all we want with those things, but we need something bigger and bolder.
I'll turn quickly, with the last of my time, to the Competition Bureau. I did use your website to look at some of the credit cards and the rates. One interesting thing that pops up there is that 9.9% is the lowest you can get, but you have to pay $400 in annual fee to get it. That basically takes away 95% of my constituents from that.
There are numbers that I get stuck on—12.99% and 20.9% and 19.9%. Is there anything you can do to...? It really is up to Parliament to decide how the Competition Bureau can do what it wants to do, and the tribunal and what it does. That's legislated by law. That's our responsibility, not the tribunal's and not the Competition Bureau's. But within that framework, when we have capsulized things that are consistent—it's the same as some other industries—is there not some value in there?
Lastly, how do you deal with all these other things—grocery card credits, Air Miles and so forth—that also make it difficult for people to move around in competition? If they are stuck within a system and they lose all those points, then that's a practice of abuse in many respects too, in the sense that it's the value.... Retailers, unlike the people we had in front of us, are actually often paying for those things that you get on the benefits of the card. But that's a side point.
How do you deal with that issue?
Deputy Commissioner, Monopolistic Practices Directorate, Competition Bureau Canada
Thank you for the question. There are a lot of very good points in there.
On the rates, again, our focus under the act would be looking at any evidence or any allegations that those are higher or more consistent because there is anti-competitive behaviour going on or some kind of agreement between competitors.
On disclosure of information and what consumers are seeing, while a lot of that falls more specifically under consumer protection, we are very focused on ensuring that consumers can benefit from accurate information. My colleague spoke briefly about the false or misleading information provisions in the Competition Act. If there is any suggestion that consumers are being misled in their decisions, that could be something we would look at as well under the act.
You bring up a very good point about the loyalty programs. That type of stickiness or barrier to switching is very much something that is relevant in a number of our investigations when we're trying to determine harm that might flow from bad conduct.
Associate Deputy Commissioner, Policy, Planning and Advocacy Directorate, Competition Bureau Canada
Perhaps I could pick up on the previous discussion about opportunities for price comparisons.
This is taking a step back, but we were discussing the potential of open banking earlier. It really has been touted as one of the potential opportunities if we can get open banking implemented in Canada. It is not only allowing customers easier switching. It is also allowing new competitors to come into the market to help them compare the other offers out there, see what the options are and then let competition work for them by easing switching.
Liberal
The Chair Liberal Joël Lightbound
Thank you, Mr. Masse.
Finally, we have Mr. Patzer for five minutes.
Conservative
Jeremy Patzer Conservative Cypress Hills—Grasslands, SK
Thank you very much, Mr. Chair.
Thank you to everybody for being here today.
Mr. White, I want to pick up on the theme of transparency you were getting at with Mr. Masse. I actually used to work for a telecommunications company. I can tell you about one of the most frustrating things for me in going to someone's house as a customer service technician. You know that the service you're installing is up to 10 megabits per second, but the customer asks why they're only getting five: “I bought 10 megabits, didn't I?” No, they didn't. They bought “up to” 10 megabits. The problem was that they were being sold something that wasn't true.
I know that my colleague Dan Mazier has brought in a bill to make sure that telecoms are providing all of the upfront information at the point of sale. That way the expectation for the customer is realistic.
I feel that we don't have that when it comes to credit cards. I'm wondering if you can talk a little bit more about how we could strengthen transparency around this to make sure that the consumer gets accurate information prior to getting their card. I want to qualify that by saying that I do think it's a little bit up to the consumer to do the research prior to that, but in the same breath, I do think there is an element that falls on the company.
Executive Director and General Counsel, Public Interest Advocacy Centre
That's fair. I'd love to talk about telecom for hours with you, but I'll ask my colleague to focus on the issue.
Articling Student, Public Interest Advocacy Centre
Yes. For public interest, obviously transparency is huge, especially for people who are vulnerable or may not have a lot of experience with credit products. Again, I'm thinking specifically of young people like myself, gen Zs, who are just coming into the credit market, learning about credit scores and learning about how all of these different things work.
Honestly, it could be as simple as this: If you are offered a credit increase by your credit card, there should be something explaining to you whether using a certain percentage of your credit limit is good or bad for your credit score and things like that, which are very tangible and in plain language. I know plain language was mentioned before. It can be just a broken down, very simple, “This is exactly what you're paying for in terms of credit card rewards programs.” Those can be really confusing, because I could pay a higher fee, or I could potentially get better rewards, but I don't know for sure if I'm going to get those rewards, or how I'm going to use them, or if the cost to redeem some of the rewards is going to go up and the points are going to be tripled by the time I come to redeem them.
So, yes, absolutely, transparency is very important for public interest and consumers. It can be very simple, and it can be simplified and easily implemented by banks if they wanted to, or if they were compelled to.
Conservative
Jeremy Patzer Conservative Cypress Hills—Grasslands, SK
Okay, on being compelled to, do you think there should be a legislative framework mandating more transparency?
Articling Student, Public Interest Advocacy Centre
I don't know if I can directly speak to that—maybe Geoff can—but yes, in certain ways. Every province has its consumer protection and disclosure legislation that talks about that, because this is governed by the private law of contracts.
What I would say is that if there is a best practice that is found in a province, it would be great if that became the standard across the country, or a knowledge-sharing, best practice-sharing tradition that is developed or a habit that's developed between the provinces, so that the best disclosure should become the floor, essentially, for consumers.
Conservative
Jeremy Patzer Conservative Cypress Hills—Grasslands, SK
Yes. Right on.
This is for the Competition Bureau.
Again, just looking at where interest rates have been, the best way for somebody to get into a market.... I'm from Saskatchewan, so I'm using a telecommunications model. SaskTel basically had a monopoly on telecommunications. When it was opened up and Bell, Rogers, Telus and others came in, they came in at a lower rate to try to incentivize people to switch from SaskTel to them. They did that with pricing. We're not seeing that in credit cards. Would it not make sense?
You go back to the 1980s, and credit cards have all kind of maintained the status quo. It was only a 2.25% margin between lending rates and interest rates on credit cards. Right now it's about 15%, the gap in that. If we're talking about price-fixing, we have to go back to the 1980s to look at this. Would you not agree?
Deputy Commissioner, Monopolistic Practices Directorate, Competition Bureau Canada
What I would say, again, is that if there was any evidence of price-fixing or other agreements between competitors that was driving that higher, that would be exactly within the scope of what we could look at under the act and something that we would take very seriously.
Conservative
Jeremy Patzer Conservative Cypress Hills—Grasslands, SK
I just think it's odd that nobody has bothered to try to really grab onto the market by bringing in lower rates. I know they offer super-low interest cards, but quite often your credit limit is only $1,000, whereas if you get these 20% cards, all of a sudden, $30,000 is your credit limit.
Deputy Commissioner, Monopolistic Practices Directorate, Competition Bureau Canada
Yes. I think one thing that's important is that, at the credit card network level, and I mentioned it briefly before, there are high barriers to entry. You're right that usually high prices would incentivize entry, but there is a real chicken-and-egg network effects issue at play, where you need to already know that there are a lot of issuers and consumers ready to use your card to convince merchants to take it. Likewise, merchants want to know that you already have a lot of consumers and issuers on hand ready to use the card. Those network effects, that chicken-and-egg issue, are quite a meaningful barrier to entry, I think.
Conservative
Jeremy Patzer Conservative Cypress Hills—Grasslands, SK
The other thing I found interesting in some research here was that, generally—I've actually experienced this in my own personal life—if you do get a loan at prime plus 1%, or whatever it might be, the demands on collateral, on your assets, are quite high to try to back up that loan, but when you look at getting a 20% credit card, they're all too happy to just shuffle you that super-high interest card that they know they can really get you with. When you look at what the difference between credit card revenue and mortgage revenue is for the banks, it's almost on par. Is that not alarming?
