Mr. Chair, I believe this is an important debate, especially as Canadians begin thinking about Christmas, about Chanukah, and about buying gifts for loved ones.
It is important for us to acknowledge that people use credit cards on a regular basis and often find themselves in difficulties because they exceed the amounts they are able to handle on a regular basis and because they sometimes get trapped into situations through no fault of their own. There is no question that many tactics and strategies are used by financial institutions to entrap Canadians into a vicious cycle of paying interest over a lifetime. As legislators it is our responsibility to address this public policy issue.
Therefore, tonight is a chance to review current policy, assess where the gaps are and make recommendations to the government. Tonight is not a time to give advice to Canadians about where to put their credit card, how to keep it safe and how to worry about their pin number. That is something Canadians can get on a regular basis through many different services, including the Financial Consumer Agency of Canada. It provides a valuable service in terms of educational information and it deals with consumer complaints dealing with problems that arise under the law as it exists now.
We are talking about what is wrong with the law, with current regulations and legislation, vis-à-vis the area of credit cards.
It is absolutely irresponsible for members of the Conservative Party to stand up and say that there is no place for government in this, that it is up to people and that we have to educate them. It is as if there are no circumstances in which big financial institutions take advantage of ordinary consumers today.
The parliamentary secretary likes to drag out this number of 60%. He suggests that if banks and other financial institutions are not charging this criminal usury rate of 60%, what is the problem. The problem is that between the prime lending rate and 60% interest rate, there is a huge range of possibilities that place an enormous burden on consumers.
It is our job as parliamentarians to convince the government to define a reasonable interest rate on credit card usage. At the same time, it is our job to look at the question of whether the 60% interest rate is a sufficient parameter in terms of criminal activity and in terms of criminally established usuries interest rates.
I might note for the benefit of members of the House that at the present moment there is a bill before the Senate that tries to change the definition of criminal rate and interest in section 347 of the Criminal Code. That bill recommends the 60% be changed to 35%. That is a useful and positive addition to the debate. There are important ramifications for people who are now caught up in the fringe financial services because the banks have either abandoned them or they are unable to access credit on an established normal basis and, yes, who do end up paying extraordinarily high interest rates in the neighbourhood of 60% or just under and for which there are then no criminal penalties.
Therefore, it is important that we actually look at the criminal interest rate that now exists on the books. It is important that we look at what the role of government should be in establishing a reasonable rate of interest on credit card uses, not to simply say let the market prevail, as the parliamentary secretary seems to be suggesting tonight.
We know from statistics, and the parliamentary secretary has this right, that the average credit card interest rate is 19%. That is 14.75 points above what the banks charge their best customers. This is what we are talking about. We are not talking about the 60%, as the Liberal member likes to suggest from his seat. We are talking about the fact that the interest rate on credit cards now is so much higher than the prime lending and for which there are no government regulations.
We are not just talking about the interest charges on credit cards. We are talking about retail credit cards as well, where interest rate charges go as high as 24% and higher. We are talking about an extremely high interest rate for the use of a credit card that has become the norm in our cashless society. We are saying to the government that it must look at this issue. It must put in place some proposal that puts a cap on what banks and financial institutions can charge in terms of credit card interest rates.
The NDP has made a suggestion. The member from the Bloc addressed that and said it might not be the right answer, but at least it is in the spirit of what is needed to be done today. We have called for regulating credit card interest rates to five points above the prime lending rate, as opposed to the 10 to 20 point gap that many credit cards have now. We would require that a floating interest rate cap be imposed either through self-regulation or through legislation on credit card interest rates. Lower interest rates on credit cards would return some of that windfall to consumers, thereby reducing consumer debt and freeing up money to spend on goods and services.
That is a reasonable suggestion to deal with the fact that many people find themselves in very difficult situations paying down their credit cards over their lifetime. Think about the possibilities for growth in the economy if we could avoid saddling people with a lifetime of debt because our government refused to show any kind of initiative and propose any kind of regulations.
Let us look at it from the point of view of students. The parliamentary secretary said he has a son, a youthful person who he referred to in this debate. Let us look at the fact that many students live on a credit card because their loans do not cover their requirements of paying tuition and all that goes with it. Many do not just have loan debt, they also have credit card debt.
Let us look at some of the statistics. The 2001 survey sponsored by the Canada Millennium Scholarship Foundation found that 20% of students under the age of 20 possess and use a credit card. The survey found that 39% of students had accumulated debt on their credit cards; 24% had a debt of less than $500 and 19% had a debt of more than $2,500. The more credit cards that students had, the greater their amount of debt. The average debt of students with one credit card is $90 but rises to $1,600 for students with two cards, and $2,500 for students with three or more credit cards.
It is possible to make the suggestion and tell these students to throw away their credit cards, but that does not address their reality of trying to go to school when tuition costs are out of reach, and when all of the books and services that are required to be paid for are way beyond the loans available for students. That requires them to turn to credit cards just to get a basic education.
Banks know how to play the system. They know that they set limits and when we reach that limit, when we pay off our card on a regular basis, they jack up the limit before we know it. We suddenly go to a higher limit and find ourselves in a huge debt situation.
Let us look at the fact that fringe financial services have jumped in to fill a tremendous void when people find themselves in such terrible debt vis-à-vis credit cards. There are all kinds of vultures out there who are prepared to eliminate credit card debt. Just go to a computer on the Internet and look at the number of organizations like worldcash.net, instant quotes, 1,2,3. There is fringe banking on the Internet because the government refuses to put limits on credit card rates and in many instances, the big banks have abandoned ordinary consumers. It is time to act.