Evidence of meeting #143 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 cards.
A recording is available from Parliament.
Senior Director, Agri-Food Analytics Lab and Professor, Dalhousie University, Agri-Food Analytics Lab
That's right. Climate change, or El Niño and La Niña, the two cycles, tend to suggest in our models that we're going to be seeing a new wave of higher commodity prices in 2027-2028.
Liberal
The Chair Liberal Joël Lightbound
Then it's mostly based on climate change more so than on geopolitical tensions or currency debasement around the world, or....
Senior Director, Agri-Food Analytics Lab and Professor, Dalhousie University, Agri-Food Analytics Lab
Geopolitics are a big issue, of course, but when it comes to—and we were just talking about Halloween—sugar and cocoa. Cocoa in the Ivory Coast and Ghana was impacted by flooding, and sugar cane was impacted by droughts. Beef right now is also impacted by droughts.
Liberal
The Chair Liberal Joël Lightbound
It's very interesting because you're saying that we are going to anticipate another wave of shrinkflation because of the impacts of climate change, while I hear colleagues arguing that the price on pollution is the cause of this inflation, which is a bit of a circular argument because one is aimed to address climate change. It's just an interesting set of circumstances, I would guess, or opinions.
However, I'll leave it at that and turn it over to Mr. Van Bynen.
Liberal
Tony Van Bynen Liberal Newmarket—Aurora, ON
Thank you, Chair.
I'm happy to have ceded a portion of my time to your questions.
One of the things that I find that is happening and that is very popular in both Newmarket and Aurora are the farmers' markets. People go to these farmers' markets on an ongoing basis, and I very seldom see cash.
You're recommending that cash not be for food purchases. What would that do to the farmers' markets if your recommendation is to discontinue the use of a credit card or a debit card?
Senior Director, Agri-Food Analytics Lab and Professor, Dalhousie University, Agri-Food Analytics Lab
Is your question about encouraging the use of cash at farmers' markets, or...?
Liberal
Tony Van Bynen Liberal Newmarket—Aurora, ON
No, discontinuing the use of credit cards. What effect would that have on these farmers' markets?
Senior Director, Agri-Food Analytics Lab and Professor, Dalhousie University, Agri-Food Analytics Lab
We're not suggesting to discontinue the use of credit cards. We just need to make sure that people are aware of the risks of using credit cards and make sure that how they're spending their money is more visible and tangible. It's similar to the problems of “tipflation” these days. People are tipping, and there are lots of fuzzy regulations around tipping right now. People are tipping on taxes, and people don't know that.
Liberal
Tony Van Bynen Liberal Newmarket—Aurora, ON
I'd like to come back to the issue of debit and credit cards, which I think is the purpose of this study—their effectiveness and the cost of putting the networks together.
It seems to me that the bankers association and the bankers' representation say that in the range of 80% of the cards or card balances are paid in full during the grace periods. To me, it says that a lot of Canadian consumers, or a lot of consumers generally, are using debit and credit cards as routine payment mechanisms, as opposed to being the source of bankruptcy, etc.
How do you square that with the likes of farmers' markets and merchants or retail or agricultural food merchants who find their sales are influenced by the availability of these payment instruments?
Senior Director, Agri-Food Analytics Lab and Professor, Dalhousie University, Agri-Food Analytics Lab
First of all, credit is an important component of our food economy. It's when things get out of control and people aren't aware of their balances that things go wrong. As I said in my opening remarks, financial literacy is key. I was happy actually to learn from Ms. Lang that there is a lot of education out there, which is great, but more needs to be done, as far as I'm concerned.
Liberal
Tony Van Bynen Liberal Newmarket—Aurora, ON
Okay.
It's a good opportunity then to switch and ask the superintendent of bankruptcy.
Can you explain the primary function of the OSB and how it relates to consumer protection in the context of credit cards?
Superintendent, Office of the Superintendent of Bankruptcy
The primary purpose of the OSB and my office is to ensure a well-functioning insolvency system in Canada. We help to set the rules. We help to ensure that people are following the rules, and we ensure that there are consequences when people are not following the rules.
As it relates to credit cards, we touch on that in our insolvency counselling, which is mandatory, and we help people to have that fresh financial start when they come out of insolvency, knowing how to better use credit. Credit is a fact of life in Canada, I think, so it's about using it responsibly.
The second aspect would be creditor compliance. If creditors aren't following the rules of insolvency—for example, ignoring the stay and hounding debtors, even though they're supposed to stop collection behaviour, that's something that we would look into as well.
Liberal
Tony Van Bynen Liberal Newmarket—Aurora, ON
How do you evaluate the effectiveness of the current regulatory frameworks overseeing creditors, and what recommendations would you make?
Superintendent, Office of the Superintendent of Bankruptcy
Generally, I think most creditors comply with their responsibilities. The biggest recommendation I would have, the biggest area of worry for most stakeholders in the insolvency system, is those who ignore the stay. In some cases, those are subprime lenders. Sometimes they are not even based in Canada. I think we need better regulation over that group, which is very aggressive.
Conservative
The Vice-Chair Conservative Rick Perkins
Thank you.
Mr. Garon, you have two and a half minutes, plus or minus.
Bloc
Jean-Denis Garon Bloc Mirabel, QC
Thank you, Mr. Chair.
I will continue with you, Superintendent, because you spoke earlier about examples from abroad. You talked about what is happening in Australia.
There’s another country that interests me a great deal, and that is Quebec, where legislative changes are still ongoing and will soon be implemented. Under these changes, the Consumer Protection Act will impose a duty of assessment on banks and financial services co‑operatives. When a person signs a new credit contract, the bank produces a report on the financial capacity to repay it. It includes fixed charges for people applying for credit, rent and so on, as well as all the interest and payments on existing loans.
When it comes to what we call high-cost credit contracts, or when dealing with alternative lenders, the lender must provide this report to the person making the request. That’s the case in Quebec. It seems to me that this legislative change must have been made in response to a real problem with the quality of the information provided to credit applicants when they sign a contract.
How is it that the federal government still doesn’t have a policy like this? In your opinion, when it comes to consumer protection—particularly when it comes to credit contracts—how is it that Quebec is always one step ahead? Finally, do you think that such a policy over in Quebec is likely to mean that fewer personal insolvency cases will end up on your desk?
Superintendent, Office of the Superintendent of Bankruptcy
Thank you very much for your question.
I can't speak to why we wouldn't have policies like that federally. Would they help most consumers? Perhaps. I do worry about the lower end of the spectrum with consumers who only have access to the most risky lending products and may not be protected by those kinds of regulations in any event.
Bloc
Jean-Denis Garon Bloc Mirabel, QC
To conclude, I have a concern to submit to you. We all agree that there may come a time when a person has financial problems and, unfortunately, has to use a credit card to buy food. In certain circumstances, we would prefer them to use it rather than not eat.
Having said that, there remains a reality, that of information. Why would it be a bad thing if someone applying for new credit had more information? How could it hinder a person’s decision-making when applying for new credit?
Superintendent, Office of the Superintendent of Bankruptcy
I don't see how information is ever a bad thing.
Liberal
Brian Masse NDP Windsor West, ON
Thank you, Mr. Chair.
To our other witnesses here—and then I'll get a quick one in for Ms. Lang another time—from just looking at Statistics Canada data, 90% of Canadians do have a credit card, so it's kind of consistent even to consumer insolvency.
Looking at their debt, a vehicle lease or loan is a significant part of average debt, but that loan can be anywhere from 0% to 6% or 7% financing, depending on the vehicle they have. Outstanding credit balance is anywhere from 5% minimum—I think I've seen the lowest at 5.5% on a credit card—to 20% or 30%.
Personal lines of credit are often used to help consolidate credit card debt for people. That's usually a couple points above prime, depending on your relationship with your bank.
Student loan is the other one, where that's in the smaller range of digits. I actually believe we shouldn't have any interest on student loans, but that's just a personal opinion.
Mortgage on secondary residence is often usually lower than the interest rate range as well. Even though it went up most recently, it's still been historically low. Last is personal loan or other debt liability, which usually is, again, consolidation of debt to a smaller interest rate than the credit card.
I guess my question to you is, if we don't get the buy now, pay late under some type of change, as you've noted, with the increases of GST, shrinkage and so forth, wouldn't it seem that we're maybe setting Canadians up for failure?
If you don't pay with cash, you're going to pay some of the highest interest rates on food and other services from the only payment process you get because you can't use your car loan or your mortgage to get your groceries. We're only giving them the one option, which is the credit card or buy now, pay later.
Senior Director, Agri-Food Analytics Lab and Professor, Dalhousie University, Agri-Food Analytics Lab
I can answer first and then let Ms. Taylor answer.
We have a debt culture problem in Canada. I think it's abundantly clear if you compare Canada with the U.S. To your point, that's really what we're facing right now.
Senior Instructor of Accountancy and Information Science, Dalhousie University, Agri-Food Analytics Lab
I'll just add that we are seeing the BNPL being almost like a complement or a gateway to credit cards. Many BNPL installments are paid with the credit card.
The unregulated fintech market with BNPL could be 0% interest and interest-free installments. There could be a fee baked into the installments. There could be NSF fees. There could be interest rates. There could be interest rates that go back at relatively punitive rates to the date that the purchase was made, even in the event of default. Also, if you buy something, like a purse, and then you return it, if they don't receive the returned good, then the BNPL could still come into effect.
All that is about understanding that the BNPL could be a gateway to increase credit card debt and then it starts to snowball. Therefore, education matters...would be great, not seeing it as free money and really ensuring the public is aware.