Madam Speaker, I want to congratulate my hon. colleague for Simcoe North for bringing forward this bill which has now become a motion and giving me the opportunity to second it. It has been needed for much too long.
In response to the previous speaker it is quite obvious to me that allowing the market out there to set interest rates just has not worked. The financial institutions have been shown for years to have been gouging the public in terms of interest rates on credit cards.
I believe it is the responsibility of the government to ensure that the Canadian consumer is protected against unfair and at times out of control profiteering by large financial institutions. I know from business experience how heavy those interest costs can be and how great a burden they can be and how quickly they can get out of control and cause extreme financial difficulty.
Of course there will be criticism from the affected financial institutions but the government should not be interfering with setting interest rates for the banks. That is to be expected. In fact, that makes for healthy debate.
The facts and terms of this debate are on this side of the argument that interest rates should be restricted.
We as members of Parliament do have a right and a responsibility to ensure that the people of Canada are protected from unfair banking practices, and excessive credit card interest rates are in fact unfair.
This bill, or this motion now, should not be seen as an attack on the banks. I think it is an attempt to have fair play on the part of the relationship between the banks and the consumer. We know it is the government's responsibility to make sure there is stability in the financial market for the banking and lending institutions to flourish.
We do this under the Canadian bank act and through the use of the Bank of Canada. The same financial institutions charging Canadians an exorbitant amount of interest as well as calculating interest charges in very creative ways have the ability to borrow money from the federal government's Bank of Canada's discount rate at very low rates for the banks when they are borrowing.
Yet these same institutions do not pass on that advantage to the Canadian consumer. They instead use the difference between their borrowing rate and the rate they charged credit card users for huge profits.
Those who carry this burden of excessive bank profits in the end are the Canadian consumers. They pay the bills. It is they that we as a government hope through consumer spending will spur economic growth. That, my colleagues, is what the hon. member for Simcoe North is putting forward today. It is a bill to
help economic growth by creating greater spending at the consumer level through fair credit card interest rate practices.
What this proposed legislation does is create fair and reasonable regulations for those lending and credit institutions to follow while at the same time making reasonable profits from those services.
I should also point out the positive effects this legislation will have on our economy. It will create a more positive atmosphere for the general public who use credit for purchasing merchandise and services to increase spending since they wil not be allocating a large part of their cash flow to the bank's interest charges.
No hon. member should argue against more capital being injected into our retail sector. It has been mentioned that the credit card institutions have shown stability in that they have not raised their rates with the fluctuation of the Bank of Canada rate over the past few months.
No wonder. This country has been enjoying its lowest interest rates in 30 years and the financial institutions have not reacted to the massive drop at any point by lowering the interest rates charged to these clients in recent days. That is the reality in times of nationally high interest rates. Banks keep credit rates higher and in times of low interest rates they keep the same rates in order to reap from users even more cash.
This is no small potato. In today's retail market credit cards account for some $50 billion in purchases in Canada. There is little wonder why banks and other financial institutions are so reluctant to control and lower their interest rates for the Canadian consumer.
When the average interest rate is anywhere between 11.5 per cent and 19 per cent, there is a lot of profit to be gained from interest rates by the banks.
I know some will argue: "What's wrong with profits". However, we must ask ourselves what is reasonable in terms of profit. If the credit card suppliers, the banks, are not carrying on their responsibilities in a reasonable way then Parliament has a responsibility to act in the people's interest. That is what I believe we are trying to do with this bill today.
I have watched previous governments and previous administrations show concern over credit card interest rates, indeed at times even on lending rates themselves in the past, but when the pressure came to bear and push came to shove those previous administrations failed to act.
This bill gives us as a government the opportunity to act. Action speaks louder than words. We were elected as a government of action. Let us show we are true to form and act on the intent of this bill when it gets to the industry committee.
That is why I am asking all my fellow members of Parliament to consider the intent of the member's bill, to put in place fair regulations to control banks and other financial institutions, to prevent massive profiteering at the expense of the average Canadian consumer. After all, it is the consumer that is very much affected by recessions which stats show is then passed on to the retail sector.
The banking industry has not felt the same impact in hard times. It is time that legislation was passed to protect the average Canadian from the excessive interest rate charges by the big financial institutions.
As I stated earlier, we do everything we can to ensure stability and security for the lending institutions under the Canadian Bank Act and special measures through the Bank of Canada in terms of borrowing rates for those lending institutions.
We can do no less for Canadian consumers than ensure that there is fair play and a reasonable spread in interest rates. I encourage the industry committee to ensure that the intent of this bill is acted upon and that we as a government show that we mean action and we mean business.