Industry Committee on Oct. 28th, 2024

[Brian Masse, NDP, Windsor West, ON]

Tiers.

[Meg McKee]

We want all of our customers to be using products that are right for them—

[Brian Masse, NDP, Windsor West, ON]

I specifically want to know why 20% is even necessary in a business model when there doesn't seem to be the risk level that requires that.

[Meg McKee]

As an issuer of credit cards, we're focused on designing products that resonate with Canadian customers and meet their needs and expectations. Our goal is always to offer competitive products and services that meet our customers' needs while remaining competitive in the market.

[Brian Masse, NDP, Windsor West, ON]

Do you think your customers need a 20% interest rate compounding when Canadian taxpayers did financially support the banks during a number of different issues? On top of that, interest rates are lower.

Why is it required for your bank and your credit card to have a credit card in your system that's at 20%? What's the reason for the 20%?

Can you share with us the profile of that 20%?

I suspect the ones at 20% are probably lower on the income scale than others that have a reduced credit card fee for other reasons. That's generally what consumer markets say.

Why is 20% required?

[Meg McKee]

For a credit card, as an unsecured form of credit, that's only one of the factors that we need to think about when considering an individual card type. You also have to think about the benefits, the rewards, the fees and other attributes of those products. We'd have to consider all of those aspects, as well as whether Canadians are paying their monthly balances, in which case, customers pay no monthly interest.

[Brian Masse, NDP, Windsor West, ON]

Would you then contest that you're making significant, if not record, profits off the model right now? Why would you not lower your rate when the Bank of Canada rate for borrowing has just been lowered as well? Why is there no consistency there?

[Meg McKee]

Again, it's important to note that we have a variety of cards that are available for customers to choose from if they prefer a lower rate, with maybe fewer benefits or rewards. Those cards are available, as well as those with no fee or low fees.

What's important to us is to provide a lot of choice and a breadth of offering [Inaudible—Editor] in a very competitive market.

[Brian Masse, NDP, Windsor West, ON]

On those choices, do you have any public data or information about who your 20% customers are and who maybe your 9% customers are or the ones who pay a fee? I know some of those cards that you offer require payments or other types of compromises by the consumer or have an income level that's higher. Do you have a model or do you have data about who has what credit cards from TD Bank, for example?

[Meg McKee]

I think it's a wide array of customers. Depending on the demographic, it's really down to customer choice. We offer more than 15 different products, all constructed very differently. It's really about designing products that resonate with Canadian customers.

[Brian Masse, NDP, Windsor West, ON]

That doesn't answer any of the questions on that.

I'll move to the Royal Bank of Canada.

More data on income received from the banks has come in. Why is it that rates still don't reflect anything with the Bank of Canada for credit cards? Why do you guys put a 20% interest rate on customers? If I walked into a bank anywhere and they said, “Do you want 20%...?” People aren't snapping that up. They're taking it because they have to. Who's asking for this 20% in your customer base?

[Ramesh Siromani]

Along the lines of what my colleague, Ms. McKee, said, we offer different types of products, including low-rate products, low variable rate products. For example, RBC lowered the prime rate immediately after the Bank of Canada—

[Brian Masse, NDP, Windsor West, ON]

Why do you need one at 20% when I don't know anybody out there who wants a 20% credit card? They're stuck with a 20% credit card. They're also mostly the people who can't afford to pay a monthly fee or an annual fee, or they're giving up other point systems. Who out there wants a 20% card?

How can you justify a 20% interest rate? What's in your business model that's so poorly designed it requires subsidization so significantly from people at 20%?

[Ramesh Siromani]

We provide products according to what customers want in terms of their choice. We provide value according to what they want, and the convenience. The benefits of credit cards for customers, whether it's access to unsecured credit, interest-free credit from the time of purchase until the end of the billing period.... Seventy per cent of Canadians pay their credit card balance in full. For them, the interest rate is zero. There is instant certainty of payments for merchants, a lot of rewards and benefits, such as air travel points, car insurance, damage insurance, extended warranty programs.

I think the answer to your question is that we provide the choice to our customers and we educate them about the choice and convenience available.

[The Chair, Liberal, Joël Lightbound]

Thank you very much, Mr. Masse.

Mr. Patzer, the floor is yours for five minutes.

[Jeremy Patzer, Conservative, Cypress Hills—Grasslands, SK]

Thank you, Mr. Chair.

I'm going to go rapid-fire through all the different banks here.

BMO, what is your current low-cost interest rate card?

[Jennifer Douglas]

I believe it's 13.99%.

[Jeremy Patzer, Conservative, Cypress Hills—Grasslands, SK]

Thanks.

RBC, what's your low-cost interest rate?

[Ramesh Siromani]

We have a couple. One is 12.99%, and there is another one that is connected to our prime rates, prime plus, so that could vary according to the prime rate.

[Jeremy Patzer, Conservative, Cypress Hills—Grasslands, SK]

Scotiabank, what's your low-cost credit card?

[D'Arcy McDonald]

We have a 12.99% and a 13.99%.

[Jeremy Patzer, Conservative, Cypress Hills—Grasslands, SK]

Okay.

BMO, what is yours?

[Jennifer Douglas]

Sorry, I already answered.

[Jeremy Patzer, Conservative, Cypress Hills—Grasslands, SK]

I meant CIBC, sorry.

[Diane Ferri]

Our rate is 13.99%.