Thank you very much, Mr. Chair.
Thank you, committee, for inviting us to present our views, in our specific sense, on credit cards and consumers.
You'll notice that my presentation is somewhat different, perhaps, from those of some of the providers or potential providers who are coming to talk to the committee. We're going to focus more on current problems with credit cards and the challenges consumers are facing with them. A lot of this is really more economic than technological, so forgive me if our focus is somewhat different.
The Consumers Council of Canada is a not-for-profit organization that's been in existence for well over 20 years. It's English Canada's primary consumer advocacy organization. It deals with a wide range of consumer issues from financial services through to energy markets, marketplace redress and rules governing the sale, warranties and so forth of goods and services, both federally and provincially.
I want to say just one thing in advance of getting into the details of the presentation. Credit cards, which have been the focus of our attention in the last while, are very unusual financial instruments. They're both a payment mechanism and a credit mechanism simultaneously. They conflate the issue of how you pay for something with the issue of whether you can afford it. A consequence of this is that the issues involved are interactive between the issues of affordability—which are particularly important today, because consumers are under significant financial stress—and the issues of convenience, safety and probity in the use of the payment mechanism itself.
It's a very complicated bundle of issues, and we believe it needs a lot more attention than it's been getting from policy-makers, regulators and, indeed, you, as parliamentarians.
Credit cards are becoming a very popular way of paying. Right now, the growth rate is increasing. About two-thirds of all purchase transactions over $50 by consumers are now conducted using credit cards. They're the predominant way for consumers to pay, rather than debit or cash.
According to the Bank of Canada, we like our credit cards, with nine out of 10 consumers having at least one. The average, according to the bank, is about 2.5 cards per consumer, so this is a well-distributed and very well-engaged payment mechanism. About six billion transactions a year, representing close to $600 billion in purchases, are conducted using credit cards. It's estimated that the average consumer spends about $2,200 a month on their credit cards through transactions.
They're an important payment mechanism for consumers and they're growing in importance. Clearly, for consumers, the consumer protections they have with respect to these payment mechanisms are very important and they need updating. There are some good protections, but they're not unified. They're dispersed over a number of pieces of legislation and practices, and we think it's high time they become centralized and well developed. One of our recommendations relates directly to that.
Of course, the other half of this equation is the important source of retail credit that credit cards perform and, importantly, by implication, the debt burden they represent for consumers. Credit cards are one of the most substantial categories of debt after mortgages and car payments. This is an important issue.
It was estimated in 2023 that total consumer credit card debt was approximately $97 billion and that 43% of cardholders had some amount of credit card debt. Of those with that debt, 40% estimated that it would take six months or more to liquidate it. An amazing 11% had no firm idea of when they would pay off their debt. Debt management issues here are becoming an important issue.
In the autumn, the Governor of the Bank of Canada noted that of the consumers who don't have mortgages, the number of people who had used 90% or greater of their line of credit limit—in other words, getting pretty close to the maximum—was growing and had reached historically unprecedented levels. We can see here this issue of the management of debt and the payment instrument coming together.
We've identified in our presentation that we gave to the committee on November 14, four particular issues that we think are important.
One is the obvious expensive character of the credit that's being given. Balances that are carried typically go for 19% to 21% interest rates on balances. In some cases, it's more, as in the case of ATM withdrawals. This is very expensive credit, particularly when you consider that unsecured consumer credit from the same financial institutions selling these payment mechanisms can be half as much for an unsecured consumer line of credit, for example. This is a very significant issue.
In addition to that, there are a lot of not obvious fees and costs in using a credit card that can be imposed, everything from annual fees for the use of the card, which can be $150 or more, depending on what features it has, to the high fees and interest charges laid on ATM cash withdrawals, what exact foreign exchange rate was used when you were purchasing items abroad and interest charges on a carried balance, which, as I've mentioned, are high. Also, once that balance has been paid off, there is often a period of one or two months when your financial institution will still charge you interest on the cost of the credit transactions that you accumulated that month, even though you might pay them off. There are a lot of outstanding issues here that need examination.
Cardholders, of course, are exposed to fraud and identity theft merely by being subscribers to a card. This is a popular and very profitable area for criminal activity. While we recognize that banks do their best and don't hold consumers liable for fraudulent transactions; nonetheless, the risk of having your financial information fall into the hands of criminal organizations is a very significant concern to people, and it's a growing concern because it's so profitable.
Consumers also face—
