Evidence of meeting #144 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 savings.
A recording is available from Parliament.
Liberal
NDP
Brian Masse NDP Windsor West, ON
Thank you, Mr. Chair.
Before I start my questioning, I just want to leave it to your opinion, Chair. There have been recent developments on the file on which we're going to have the Rogers CEO come, and I'm wondering whether there's the ability for you to ask without a new motion whether we can also get from Bell, BCE, Mirko Bibic, as well as executive director Darren Entwistle from TELUS to appear at the same time, since they're in the same position.
Liberal
The Chair Liberal Joël Lightbound
Just so I understand and to be clear, colleagues, we passed a motion to invite the CEO of Rogers before November 1. We passed a motion on October 31, if I'm not mistaken. He was confirmed for the 28th.
Mr. Masse is proposing that, without going through the formal process of a motion, we add Bell and Telus to the witnesses we want to hear from, ideally on the same date, because that would be for just one meeting. That would be for the clerk to work through.
That's what Mr. Masse is proposing. If I have unanimous consent, I can expand...but I'm looking around the table and I don't have unanimous consent.
Mr. Masse, can you come back with a motion next meeting?
NDP
Brian Masse NDP Windsor West, ON
Sure, I'll do that.
I'm surprised that the parliamentary secretary would deny having Telus and BCE come here. I don't know what their motives are anyway.
That's okay. I'll move to my questioning of Mr. Stanford.
With regard to the testimony, the reason I raised the point of order in terms of relevancy is not that climate change, carbon tax and all those different things can't impact the cost of groceries. That's obvious in many respects, but it distracts from the real problem that we have here.
What I've advocated for, Mr. Stanford, is a review of the borrowing practices of Canadians and the cost of those borrowing practices. Specifically, credit cards are now being used for essentials. They have high rates of interest on them, whereas, for example, at least a mortgage has a lower interest rate. Your concerns are well vetted in terms of the debt that's now on people.
My concern and question for you is, have we seen a shift in borrowing practices that Canadians have to do just to get by?
If we're leaving them in the situation—
Bloc
Jean-Denis Garon Bloc Mirabel, QC
Mr. Chair, I have a point of order. We don't have any French interpretation.
Liberal
The Chair Liberal Joël Lightbound
Mr. Masse, sorry, but we have a point of order.
I'm told that the situation has been resolved, Mr. Garon.
Mr. Masse, you may continue. I apologize for the interruption.
NDP
Brian Masse NDP Windsor West, ON
Thank you, Mr. Chair. Thank you, Mr. Garon.
Quickly, Mr. Stanford, is there a change in borrowing practices for Canadians and their purchasing?
If they are having to move to the highest rates of borrowing—not lines of credit, mortgages or even car loans, which are lower, but moving those issues to credit cards—isn't there an obligation for government to regulate some of those rates or at least consider the consequences for consumers as they move those payments to methods that might have higher rates for them to borrow at?
Economist and Director, Centre for Future Work
Yes, sir, you're quite right. There has been a shift in overall non-mortgage borrowing toward credit cards.
As I noted in my opening remarks, outstanding credit card debt, even just on the chartered banks' cards, has grown by about a third since the Bank of Canada started increasing interest rates in early 2022. That's much faster than mortgage debt itself. Obviously, with mortgage debt becoming so expensive, the number of new mortgages issued has slowed down, so mortgage debt is not growing rapidly, but hard-pressed households are clearly relying more on credit cards to finance their purchases.
Now, which purchases are using the credit cards and which are still paid in cash? Ultimately, that doesn't matter. I'm sure that some of the credit companies, like Equifax and so on, can break down where the actual credit is being used—if it's at the grocery store, the appliance store or for entertainment purposes and restaurants. Ultimately, that doesn't matter, because money is fungible. The fact that they're going into credit card debt at an increasing rate is the key problem. The interest burden on that credit card debt, as you correctly point out, is much higher than for other forms of debt.
I do think that these trends over the last three years certainly reinforce the necessity of your committee's inquiry to consider the full range of regulatory options, including setting maximums on the interest that can be charged, as I suggested, and also more transparency and regulation on the fees that are built into those interest costs.
Brian Masse NDP Windsor West, ON
You mentioned financial literacy playing a role. What we've seen in some of the testimony is that there's also a way to stream, especially young Canadians, toward using credit cards and higher interest payments. This could be marketing done on apps and phones.
We've also seen grocery stores move, in purchasing companies, to getting people to buy groceries and so forth using these high-interest-rate programs. For example, DoorDash, Uber Eats and all those different things are all paid on those systems.
Is there any concern that you might have with regard to young people? Is there any data or information that you have that suggests we're allowing a structural change to take place in the market toward using those high-interest options versus low-interest options?
Later on, people can get themselves into circumstances they never foresaw.
Economist and Director, Centre for Future Work
I think you're quite right to highlight the risk of a generational shift and a cultural shift, particularly around some of these app-based systems. Young people, of course, are the early adopters of many of these new apps and new services, and many of them are tied to credit cards, but many of them are not even tied to credit cards. Frankly, I'm alarmed at the growth of the “buy now pay later” types of schemes that have become very popular. Again, here's where financial literacy can play a role. They're often advertised as having no interest charged on them in the same way that there's no interest charged on a credit card if you pay the full balance every month, but that doesn't tell the whole story. It also doesn't protect consumers who think that this is a great way to buy all kinds of stuff without any kind of oversight regarding their ability to repay that.
Therefore, we are seeing people—more among young people, who have fewer financial resources and perhaps less access to other forms of credit—overusing these types of facilities that don't exercise the same sort of due diligence over the borrower's ability to repay, capacity and stress tests that are applied to conventional forms of lending.
I think that this is a gaping hole in our financial regulations, and I think it's going to end badly. However, I think it's symptomatic of a broader concern that you quite rightly highlighted.
NDP
Brian Masse NDP Windsor West, ON
Last, and very quickly, we heard from the banks that they don't offer any breakdown of their profit margins on credit cards.
Do you think it's a fair expectation for Canadians to at least know the profit margin? It's a policy, so it's not actually a legislated requirement for them to hide it. It's just a policy, and miraculously, they all have the same policy.
Economist and Director, Centre for Future Work
Certainly, we don't expect companies to divulge more information about their proprietary business than they're absolutely required to, so I'm not surprised that none of them disclose it. However, I do think that they should. I think we should have more financial transparency on the sources and uses of funds through the chartered banks. They're given unique powers but also unique responsibilities by virtue of their business, and informing Canadians over the distribution of their revenues, costs and net profits is absolutely reasonable to expect, I think.
Liberal
Conservative
Rick Perkins Conservative South Shore—St. Margarets, NS
Thank you, Mr. Chair.
Thank you, witnesses.
I have a quick question to follow up on MP Masse's question for Mr. Stanford.
Mr. Stanford, I have sought from the banks through this hearing to ask for their return on equity percentage, which would not betray revenue, cost structures or any of that. We'd just know how profitable they are.
Do you see that as being proprietary, just having a return on equity percentage disclosed?
Economist and Director, Centre for Future Work
I believe that we should be able to see that from their overall corporate financial statements—the return on equity in the overall operation. However, to have it broken down according to the different divisions of it is a reasonable ask. They obviously don't want to share any more information with their competitors than they have to. If they're making a very strong return in one line of business, that's going to attract the attention of their competitors.
I understand why they don't want to release it, but again, my point would be that chartered banks are given a very special privilege: literally, the power to create money through new lending. In return for that, they should have special responsibilities to disclose to Canadians how that power is being used.
Conservative
Rick Perkins Conservative South Shore—St. Margarets, NS
That's a great point. They're a government-protected oligopoly, and with that protection come responsibilities. Perhaps it would be different if it were a free and open market in financial services.
Mr. Chair, I would like to resume the debate, if I could, with apologies to the witnesses, on my production order motion for Mastercard.
Members will recall that I moved a motion earlier in this study:
That the committee order the production of all documents, emails, memos and any materials related to the Liberal government's $50-million handout...to Mastercard, including all communications between ISED, PCO or PMO and Mastercard regarding the grant; and that the committee report to the House to express its concern regarding the value for money for taxpayers on the nearly $50 million taxpayer dollars given to Mastercard by the Trudeau Liberal government.
The reason for that is that we learned in this study that they had about $25 billion or $26 billion of global revenue and $11 billion of gross operating income, yet they were willing to take $50 million from Canadian taxpayers to set up a cybersecurity centre, which is sort of the ante at a poker game. If you're going to be in the credit card business, you'd better be very careful on security and cybersecurity. They seemed shocked at the time, at the beginning of this study, that somebody would actually question them. I asked them if they would pay it back, since they don't seem to really need the money, and they baffled, skated and did all the things that a global company like that would do.
I would propose again that we could expedite this if we voted on it quickly. We could move on.
Liberal
The Chair Liberal Joël Lightbound
Mr. Perkins, you are moving it, because there is no such thing as resuming debate when a meeting has been adjourned, if I'm not mistaken. Are you moving the motion?
Liberal
The Chair Liberal Joël Lightbound
It's been duly moved, and the members were given notice of the motion on Monday, October 7. Are there any comments on the motion?
You have the time, Mr. Turnbull.
Liberal
Ryan Turnbull Liberal Whitby, ON
Maybe I could just ask Mr. Perkins to clarify what the purpose of this is. Was it to recoup funding or something like that? Is that what you were...? What's the purpose of it?
Conservative
Rick Perkins Conservative South Shore—St. Margarets, NS
Yes, absolutely. It's trying to find out the rationale and paper trail behind the government's giving this company $50 million of taxpayers' money, and what special arrangements were made for something that seems to be pretty basic to their operating business. If they don't have protection, security and cybersecurity, they don't have a credit card business. I don't know why they needed taxpayers' money for that, any more than Loblaws needed money for fridges.
Liberal
Ryan Turnbull Liberal Whitby, ON
My understanding of this particular cybersecurity initiative is that the Global Payments network giant invested $510 million in this to, essentially, prevent cybersecurity fraud, and it's providing 270 jobs to people. There were a significant number of student co-operatives created. Essentially, it's enhancing our security for consumers. My understanding is that the intention of the initiative is to ensure that the security required to protect consumers is being increased over time, and there's innovation happening, with the company having invested quite a significant amount in the process.
What I'm trying to glean is this: Is it the opposition's intention here that, somehow, there's a contribution agreement that has been violated, that the terms of that agreement have been violated? What would be the rationale for what is proposed here? It reads, “and that the committee report to the House to express its concern regarding the value for money for taxpayers on the nearly $50 million....”
I guess this is what I'm trying to determine here: Is the intention to recoup those funds in some way? I mean, the government grants all kinds of dollars out for various purposes, and this one is to enhance cybersecurity for payment processors. Obviously, there is some benefit in that to Canadian consumers, and a sizable number of jobs. Is that the intention?
Liberal
The Chair Liberal Joël Lightbound
I understand the questions, but that's not how it works, Mr. Turnbull. You can ask your questions, but then I have a speaking order.
Are you on your...?