Industry Committee on Nov. 7th, 2024

[Judith Hamel]

Just to clarify, the consultation is being led by another division. They've updated me on the process. I know that they're in the process of reviewing the documents that have been received, and many stakeholders have also asked for discussions, so these discussions are ongoing.

My concern is not as much about sharing the results of the consultation as about the timing in terms of doing it. We can take that question back and come back to you with what's possible and in what time frame.

[Tony Van Bynen, Liberal, Newmarket—Aurora, ON]

The answer is yes. Okay. Thank you very much.

There are two issues that I think we're trying to deal with here. The study was focused on the interchange fees that were being created, but it also highlighted—I believe Mr. Masse raised the concern—the high interest rates that are being imposed by credit cards and how they're taking advantage of the most vulnerable communities that we have.

Has Statistics Canada observed the changes in average interest rates on credit cards over the last five years, especially in relation to the key Bank of Canada interest rates?

[Matthew Hoffarth]

We don't directly release or publish information on interest rates related to products, but we do have a debt service ratio that measures the debt servicing costs of household debt relative to their income.

We do look at a lot of regulatory data from chartered banks to make sure that we have the correct inputs into this debt service ratio model. When we look at that information—again, coming from regulatory data that's publicly available through CDOR and through the Bank of Canada's website—we can see that rates were around 18% in mid-2016. They've risen slowly over time, and they reached 20.5% in 2024.

In terms of the debt service ratio, the idea is that we generally have persistently.... Eighteen per cent or 20% is relatively high. HELOCs are a much larger component of non-mortgage debt for households, and those usually have a variable rate.

That's just to say that we don't see as much pressure on servicing costs as we do on other variable rate products like HELOCs. That said, we have seen credit card balances increase substantially since the start of the pandemic.

[Tony Van Bynen, Liberal, Newmarket—Aurora, ON]

Is there any data that shows how credit card use and debt levels differ across different income brackets?

[Jennifer Withington]

We do have the distributions of household economic accounts. They measure income consumption, savings and wealth by income quintile. We have seen some pressures on some of the lower-income quintiles, as a larger percentage of their household disposable income is going towards food, shelter and transportation.

[Tony Van Bynen, Liberal, Newmarket—Aurora, ON]

Can you forward that over to the committee?

[Jennifer Withington]

We can, absolutely.

[Tony Van Bynen, Liberal, Newmarket—Aurora, ON]

Thank you.

The other part of the issue is that many of the credit cards companies are saying that the balances are paid off within the normal 21 days and that this is simply a payment instrument as opposed to a debt instrument.

Is there any indication of how much of the credit card debt is in relation to lines of credit, auto loans and personal loans?

[Matthew Hoffarth]

With credit cards, that is actually one of the challenges: understanding how much of that balance is subject to interest costs, knowing that there is this 21-day grace period and that you're not assessed interest if you pay off your balance. We don't have specific statistics on that rollover rate, on how much of that balance gets rolled over into the next period and is then subject to interest.

[Tony Van Bynen, Liberal, Newmarket—Aurora, ON]

What would preclude you from getting that? I heard earlier that all of the debit and credit transactions that go through grocery stores automatically show up within your database. Don't you have access to that data on the utilization of credit cards as the sole payment instrument, as opposed to high-cost consumer debt?

[Matthew MacDonald, Director, Consumer Prices Division, Statistics Canada]

I think you're referencing the content of our point-of-sale scanner files from our retailers. The contents and variables we get are specific to prices and the characteristics of those prices, but they don't include the payment type.

[Tony Van Bynen, Liberal, Newmarket—Aurora, ON]

Thank you.

Are there any regions or demographics for which debt levels have increased or decreased significantly?

[Jennifer Withington]

Yes. We see that the largest levels of indebtedness are, not surprisingly, in the largest provinces. In terms of demographics, we see that the youngest households—less than 35 years old—had 18% of outstanding non-mortgage debt in the form of credit card debt.

[Tony Van Bynen, Liberal, Newmarket—Aurora, ON]

Our government is currently in the process of implementing a national framework for consumer-driven banking. Could you speak to the benefits of that and what kind of progress we're making?

The intent here, and I believe it was raised earlier, is that this industry seems to be dominated by a few small players. What kind of progress are we making toward increasing the level of competition in that industry?

[Judith Hamel]

As it was announced by the government in the last fall economic statement and budget, the department is working toward the development and implementation of the consumer-driven banking framework.

A first set of legislation was tabled with the first budget implementation act, and work is ongoing for the second set of legislation, to be tabled at the earliest opportunity, I guess.

[Tony Van Bynen, Liberal, Newmarket—Aurora, ON]

Is the legislative framework in place to make sure that these new organizations are...?

[Judith Hamel]

There are many objectives with the consumer-driven banking framework, and there could be many advantages to it, including the ability for consumers to securely share their data between financial institutions. It will enhance the safety of the financial system. It will also make it easier for consumers to seek advice on products and services from various institutions, hence having a positive impact on competition.

[Tony Van Bynen, Liberal, Newmarket—Aurora, ON]

The key is to make sure that the backbone that delivers those payment instruments has enough competition but at the same time has the same stability we need to ensure that the consumers' interests are protected.

[Judith Hamel]

These are the objectives that we are trying to balance, yes.

[Tony Van Bynen, Liberal, Newmarket—Aurora, ON]

Thank you.

[The Chair, Liberal, Joël Lightbound]

Thank you, MP Van Bynen.

Mr. Garon, the floor is yours.

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

Thank you, Mr. Chair.

Mr. Marion, I have a follow‑up question about agreements. I don't like that word when it comes to credit card companies because they aren't really agreements. That said, I have a question about the process.

I believe that you spoke earlier about American Express when responding to a question from Mr. Masse. We know that this company isn't the biggest player on the Canadian market. However, we can see that it hasn't signed any agreements. To some extent, it was established earlier that the government had hardly negotiated at all. At least, your responses suggest as much.

What happened when you called the people from American Express? Did they fail to respond? Did the matter end there?

[Nicolas Marion]

Thank you for the question.

We're still working on an agreement with American Express.

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

I will be brief so that the public understands what this is about and make sure that this information is conveyed.

The department showed up in 2022 and told companies that if they did not quickly negotiate an agreement, the government would table the proposed legislation and give those companies a rap on the knuckles. Visa Corporation tabled an agreement that impacted very few merchants, certainly not in the food sector or the accommodations sector, at least. MasterCard Corporation tabled something else. We don’t know how it happened, since you do not want to give us the details. Therefore, that means the agreements impact very few merchants and, clearly, American Express is failing to respond.

Two years later, you’re still negotiating and no bill has been tabled. If I represented a credit card company, I would not take you seriously. Explain to me how these companies could take the Canadian government seriously when they were told they would get a rap over the knuckles if they failed to table an agreement, and you’re still at the stage of chatting with the folks at American Express.

[Nicolas Marion]

Thank you for the question.

I just want to clarify something. The agreements with Visa and MasterCard impact 90% of businesses. Among all those businesses, 90% benefit from reductions. Just to—