Industry Committee on Oct. 31st, 2024

[Chandra Arya, Liberal, Nepean, ON]

I agree with what you started saying, that you are coming with ideas. That is exactly what we need. What I am concerned about is that you started with, “You have to bring in regulation.” It's something new. It's making it invisible. Everything is invisible now. I am spending more because it is very easy to spend online. Anyway....

[Dr. Sylvain Charlebois]

You're implying that we're asking for more regulations.

[Chandra Arya, Liberal, Nepean, ON]

You stated that you want regulation.

[Dr. Sylvain Charlebois]

That doesn't necessarily mean that's the outcome we're actually going to be looking for. There are probably other options that we actually could entertain as well.

[Chandra Arya, Liberal, Nepean, ON]

Yes. As and when the evidence comes, please do come. We need to know. It is also our responsibility to look into this and to instigate reports like this. The committee can do a study on understanding this particular problem more and gathering more evidence. The committee can suggest that the government bring in necessary legislation or regulations or whatever it is. I was concerned. Organizations and people like you coming in and asking directly to bring in new regulations is a problem for me.

Ms. Lang, you did mention that the bankruptcies and insolvencies have not gone back to prepandemic levels. I did hear you also mention this compared to the level of bankruptcies in 2009 during the financial collapse. How do the current numbers compare with the numbers then?

[Elisabeth Lang]

We haven't yet reached the numbers then, either on the consumer insolvency side or on the business insolvency side, in spite of the fact that the population is continuing to grow.

[Chandra Arya, Liberal, Nepean, ON]

The rhetoric we've heard, even from other witnesses today—“Oh my God, people are getting too much debt, they're getting into problems, we'll have to protect them, we'll have to bring in new regulations”, etc.—I think is somewhat misplaced, in my view. What do you think?

[Elisabeth Lang]

I think that insolvency numbers do not suggest the need for that.

Do we have consumer spending issues? Do we need better financial literacy? I would say probably yes.

One worry I have is whether there is a proportion of the population that is, as I say, too poor to go bankrupt, given the costs to file an insolvency. That's a worry for me.

[Chandra Arya, Liberal, Nepean, ON]

I agree with you that literacy is the best tool. Education is the best tool.

Thank you.

[The Chair, Liberal, Joël Lightbound]

I have a quick question, Madam Lang.

You've just mentioned being too poor to go bankrupt. What's the average cost to file bankruptcy?

[Elisabeth Lang]

The average cost that we hear about for a straight bankruptcy—this is for the lowest-income Canadians—would be about $1,800.

[The Chair, Liberal, Joël Lightbound]

Thank you.

Mr. Garon, you have the floor.

[Jean-Denis Garon, Bloc, Mirabel, QC]

Thank you, Mr. Chair.

I'd like to thank all our guests for being here, both in person and remotely. We are grateful to them, despite the technical problems.

I'm going to follow up on my Liberal colleague's question about buying now and paying later.

The purpose of our study is to examine the behaviour of credit card companies, to assess whether consumers fully understand the ins and outs of the financial products they use, and so on. The committee has, of course, heard from representatives of the banks and a number of companies. Clearly, there are vulnerable consumers in this market. Personally, I don't doubt that. However, I admit being surprised to hear the testimony about the “buy now, pay later” model.

I sometimes see that on offer when I go to a furniture store—the possibility of paying in 36 instalments. The same holds true for ceramic tiles and a central vacuum cleaner, but let's stick to your area of expertise. Let's talk about the possibility of eating now and paying later.

When I do my groceries at the IGA in Saint-Janvier, on Curé-Labelle Boulevard in my riding, I use the automated checkout. The system has never offered me the option of paying later. You have to choose between about 42 options—you're asked whether you have premium cards, whether you have this or that, or whether you want to make a donation.

However, I've never been offered the option of paying for my can of beans in 36 instalments.

Can you tell us what grocery chains do offer that option in Canada?

[Dr. Sylvain Charlebois]

It's all the grocery stores. Ultimately, it's an app that's used.

I'll turn it over to Ms. Taylor to add more.

[Jean-Denis Garon, Bloc, Mirabel, QC]

I'm going to clarify the question, since you answered it.

You're saying it's an app. The committee heard from a representative of Fintechs Canada, who clearly told us that they absolutely opposed any regulation, or at least wanted almost none.

Does this mean that fintech apps can make consumers even more vulnerable by offering options that credit cards don't offer? That could become the important issue.

[Dr. Sylvain Charlebois]

Yes. It has become extremely easy to spend, with all the technologies out there. All the chains accept all kinds of payments. With new technologies on the market, there's obviously the option of eating or buying now and paying later—

[Jean-Denis Garon, Bloc, Mirabel, QC]

You're saying we don't have enough data to do research on the subject.

[Dr. Sylvain Charlebois]

Absolutely.

I'll ask Ms. Taylor to comment on that.

[Samantha Taylor]

To clarify, there are emerging deals.

For example, Klarna announced that they will be joining with Apple Pay. When I talk about considering “direct” or “indirect”, whether or not it's directly that you click Klarna or another Afterpay.... I know for myself that when booking the flight to come here, I saw Uplift, which was a new feature that I never noticed before. It was to pay in four installments, except that this wasn't four installments of my bill divided by four. It was grossed-up and then a bill to be paid.

[Jean-Denis Garon, Bloc, Mirabel, QC]

The answer is interesting, because we heard from a Fintechs Canada representative, who told us that the problem stems from credit card issuers. He was basically saying that they themselves were simply customer service manufacturers. When we draft the committee's report, I think we'll have to look at the issue of fintechs offering these payment options, particularly for food.

I will now turn to Superintendent Lang, from the Office of the Superintendent of Bankruptcy, since time is short.

When credit cards are used as a financial tool to borrow over the longer term, they strike me as toxic credit tools.

The Office de la protection du consommateur au Québec, or OPC, considers a 35% interest rate to be usurious. As a result, to exceed the 23% or 24% rates on some credit cards, you almost have to do business with organized crime. That means that we really find ourselves at the top of the rate range.

For my part, I note that banks advertise credit cards far more than all the other products that could better suit clients, including personal loans at a preferential rate, plus 1%, lines of credit at lower interest rates, and so on. That's not a scientific observation; it's just an observation.

Here is my question.

For certain toxic substances, such as alcohol, lotteries and cigarettes, there are mandatory education programs to accompany these products.

Shouldn't we have strong warnings about credit card offers? Shouldn't we also, in a way, require banks and issuers to offer other less expensive products to their customers, if these are tools used to borrow over the longer term?

[Elisabeth Lang]

Thank you for your question.

If I may, I will answer you in English, to ensure that I provide an accurate, complete and comprehensive answer with all the necessary nuances.

That's a bit outside of my wheelhouse, to speak to what banks should offer.

What I can tell you from our experience and the complaints we receive, high-interest creditors can be very aggressive, both in their marketing and collection behaviour, including ignoring the stay of proceedings that happens when you file an insolvency. In some cases, they are so aggressive that people have been fired from their jobs, because they've received calls every minute from these collectors. In some cases, these people are outside of Canada, mind you.

However, my opinion, personally, going outside of my wheelhouse, would be that there is a need for access to low-cost borrowing for some of these Canadians. If people need to buy now and pay later for food, that might tell you something about their ability to buy food, right? To me, that's a bigger policy question.

[Jean-Denis Garon, Bloc, Mirabel, QC]

Obviously, you're saying that the question I asked goes somewhat beyond your mandate. I agree, but the fact remains that if people had better literacy or financial awareness, it would make your job easier, because you would have less work to do. In all honesty—not that we don't like you—but we would like you to have less work. I suspect you agree.

Take cigarettes, for example. Tobacco companies are required to take part in raising awareness. Cigarette packages are marked with a statement explaining that there are significant health hazards.

In your opinion, to what extent should banks and credit card issuers themselves be part of the consumer education effort?

[Elisabeth Lang]

Speaking to some of my international colleagues in Australia, for example, I believe the option that might be worth considering is an interest test, where lenders have to consider whether a product is in the best interests of the borrowers.

[The Chair, Liberal, Joël Lightbound]

Thank you, Mr. Garon.

I would like to ask Ms. Lang a brief question about what she just said.

How does this tool work in Australia? Is it something that has been implemented?

I will continue along the same lines. Should we consider what other countries are doing, the ones with the same ideas as what Mr. Garon is proposing; in other words, relatively clear advertisements about the risks these financial products entail?

[Elisabeth Lang]

Certainly, speaking with my colleagues, Australia stands out to me. There was a Hayne royal commission. It's a version of what you're doing here at this committee, but much more extensive. It has had a lasting effect on creditor behaviour in Australia, from what I understand.