Debates of Dec. 7th, 2004

Credit Cards

[Réal Lapierre, Bloc, Lévis—Bellechasse, QC]

Mr. Chair, I am pleased to have the opportunity to address this important issue.

Every credit card user has probably already felt the negative impact of this form of financing when one is late in his payments. Just imagine the consequences of excessive rates like those mentioned here for people who live constantly with such a threat over their heads.

It is well known that the indebtedness of Canadians, and that includes all forms of loans, is at a less than enviable high. Indeed, in 2003, the indebtedness ratio of Canadians represented 115% of the total annual income. This means that a large proportion of users are getting poorer by using credit that, in fact, they do not have.

Moreover, again in 2003, there were 74.3 million credit cards in circulation. It is easy to conclude that the vulnerability of users is, unfortunately, too great. Since about 35% of credit card holders cannot make regular monthly payments, they become the victims of excessive rates on the part lending institutions.

If interest rates for credit cards were somewhat similar to the central bank rate, the damage would be more limited. However, since these rates have evolved at a rate that is diametrically opposed to this basic rate, the consequences are catastrophic.

Indeed, since 1995, interest rates for credit cards have reached unprecedented levels. Over the past 20 years, that is from 1984 to 2004, the spread between the rates increased by 11%, from 15% in 1984 to 26% in 2004.

Such a spread is totally unjustified. Again, it is the same people who are the victims of these excessive rates. Regardless of the reasons that may be invoked to justify these rates, these reasons are based on strictly economic criteria, and it is well known that these criteria are far removed from the social values advocated in North America.

Consequently, since interest rates come under federal jurisdiction through the Interest Act, the situation should be corrected. It is in this perspective that Bill S-19, an act to amend the Criminal Code, was proposed to change the criminal interest rate in effect. Since the effective annual interest rate applied on the credit advanced is currently considered excessive if it exceeds 60% of the target rate of financing, Bill S-19 would have the effect of criminalizing any rate that exceeds by 35% or more the target used.

In actual fact, if Bill S-19 were in force, interest rates higher than 37% would be considered criminal, which would have the effect of keeping the annual interest rate in step with the Bank of Canada rate, while putting downward pressure on the financing structure as a whole.

With net profits of $13.3 billion, a 20.5% increase this year over last, there is no cause for panic for the six leading Canadian banks.

Since half of all revenues of banks come from the difference between the interest earned on loans and the interest paid on savings , there is certainly a way to minimize the damage. To suggest otherwise would be in bad faith.

I did say minimize, because we have to recognize that the $9.5 billion paid in taxes by the banks is not to be sniffed at, especially since some people are bound to benefit, because most Canadians are shareholders of banks directly or indirectly, through their pension plan or the Canada Pension Plan.

In this context, given how sizeable the debt is in Canada, what attitude should be promoted? On this issue as on many others, it is possible that awareness and information on credit are deficient. As a result, when the federal government cut transfers to the provinces, Quebec had to constrain spending on home economics organizations, which were masters in the art of raising awareness of debt.

First, the federal government has to give back to these social organizations the means to finance such initiatives to raise awareness of unchecked credit. At the same time, the government could require credit card rates to be in line with that of the Bank of Canada.

Finally, the federal government has to take steps to ensure that any future reform of the banking sector will be done with respect for consumers, and not on their backs.

[Libby Davies, NDP, Vancouver East, BC]

Mr. Chair, I appreciated listening to my hon. colleague across the way. He made some very excellent points about the problems that we have with extremely high credit card interest rates.

One of the things that really concerns me, and I wonder if he shares this concern, is that this is an issue affecting young people in our society. When students go to university, they are loaded up with student loans and student debt. They are often working in part time jobs. They are trying to cover their bills. They might be living away from home. They are often very short of cash even for the immediate needs of food, shelter and clothing.

Some of the credit card companies and banks offer a special student credit card. In fact, these are marketed on campuses to students. Students go for them because they are economically very desperate. Often, the limit on the credit card is initially very low. They may be allowed $500 or $1,000.

I know from speaking with students and my son, when he was a student, they get a credit card and if they are reasonably well managed, before they know it the amount is increased. The $1,000 goes up to $2,500 or $3,000. Then it becomes more of a routine.

I wonder if the member would comment on this. This is a particular aspect of the whole credit card phenomenon that is now really hitting young people in our society. They do not have the financial capacity and resources to deal with the potential of a credit card.

[Réal Lapierre, Bloc, Lévis—Bellechasse, QC]

Mr. Speaker, I want to respond to my colleague opposite to the best of my abilities.

What, in my opinion, is problematic is that possibly the criteria used to approve people for credit cards are too permissive.

As a parent, I can admit when my children, at a particular time in their lives, were of age to obtain credit cards, they did so easily. Often, having them really encourages people to spend money.

Here is how I can see things. Since I was a teacher, I do not need to tell anyone that we constantly need to push the envelope to help students learn how to deals with various problems.

I continue to believe that, in each of the provinces—as there are doubtless an extraordinary number in Quebec—there are organizations responsible for providing information and raising awareness in various areas and, consequently, teaching people how to use credit cards wisely.

[John McKay, Liberal, Parliamentary Secretary to the Minister of Finance]

Mr. Chair, essentially, this debate boils down to a choice between a superimposed bureaucracy with caps on rates, an education program that is paid for by industry or government, an entire elaborate setup of a bureaucracy to prevent people doing bad things to themselves, and 600 credit cards on the market where we have some choices.

I have a document prepared by the Financial Consumer Agency of Canada and it talks about low rate cards. The National Bank has a menu of features. First, there is no personal income required. It is not specified in order to get a card. Is that a good thing or is that a bad thing?

The credit limit is $500. Is that a good thing or is that a bad thing? The interest on purchases is 13.9%, on cash advances it is 8.9%, on balance of transfers it is 8.9%, and the number of days in which a customer has to pay it off is 21 days. The first card costs $15 and everything else is free. On that menu of features, are those good things or are those bad things?

Compare that with, for instance, the Toronto-Dominion Emerald Visa account where customers must have a minimum income of $12,000 and their credit limit is slightly higher. The card rates fluctuate between 1.9% and 6.9% over prime, so that is a pretty cheap card.

I would have thought that the hon. member would be in favour of giving consumers the choices among all of these menus of options and then letting consumers decide what is most advantageous to them, rather than getting some super-layered bureaucracy on top of it and presuming that government knows best.

[Réal Lapierre, Bloc, Lévis—Bellechasse, QC]

Mr. Chair, in answer to my colleague, I am the first to admit that adding more layers of government may not be the way we will eliminate the problems encountered in this issue.

Personally, myself, I made a payment on the weekend. I do not remember exactly which credit card it was for, but they told me that an interest rate of 28% would apply if I missed the due date. I continue to believe that more work is needed on raising awareness. There will never be policies so coercive that they could sensitize the individual consumer better than if he does it himself.

The problem is not with the existence and purpose of credit cards. Nowadays, we cannot hide the fact that they are part of our daily existence. They provide a way to operate smoothly in our society. Consequently, the real problem, in my opinion, is not that these credit cards exist. And in fact, as the hon. member mentioned, there is a wide variety of cards that give many options to all users.

The problem comes from the fact that certain people have not had the training or information, and certainly not the knowledge needed to use credit cards intelligently. We cannot hide from this fact. In today's society, people say they should have the lifestyle they can afford. It is a well-known fact that those who exceed the lifestyle they can afford run into trouble. It is exactly the same thing with the use of credit cards.

Moreover, I do not believe that adding more rules through legislation would be a realistic way to limit the damage, in the same way that even if we were to close all the casinos in one province, the real gamblers would find a way to play in a different province or a different country.

[Art Hanger, Conservative, Calgary Northeast, AB]

Mr. Chair, I am pleased to take part in this debate on credit cards. This debate is quite timely given that this is the Christmas season, a time when Canadians tend to spend more and when some of the bad guys in our society are out in full force looking for ways to defraud individuals and businesses.

For many Canadians the payment of choice, be it at Christmas or any other time of the year, is a credit card. Some people love them because they offer a convenient way to buy things and defer payment. Others hate them because of the high interest charges on unpaid balances and the fact that with these cards people tend to spend more than they can afford because credit is so readily available.

It is estimated that in 2003 over 50 million Visa cards and MasterCards were in circulation, in addition to credit cards issued by department stores, such as Zellers, The Bay and Sears. Cards are also issued by American Express, Diners Club, and even gas stations, such as Petro-Canada. The credit card business is big business in Canada. In fact, Canadians carry an average of 2.6 cards. One would be hard-pressed to find a working adult in this country who does not have or has never had a credit card. Credit cards have become a way of life for Canadians in terms of the way they manage their financial affairs.

For those who are able to use these cards responsibly, they are a good thing to have. Unfortunately, there are many people in our society who, dare I say, should not be using credit cards at all. They are the ones who use their credit cards as though it was free money. They are the ones who gladly apply for a different credit card every time an unsolicited application is received in the mail. They are the ones who have a hard time repaying these debts.

Unfortunately, the ones who can least afford to pay are often targeted by stores and financial institutions because that is where the institutions make their money, in interest payments. Surely, the onus is on the individual to say no, cut up the credit card or manage it well, but not all of us have that discipline.

That being said, I would like to address an issue which is also related to credit cards and their use, and that is the issue of identity theft. There has been some discussion in the House on that particular point, although some of the questions have never really been answered on the government side regarding this issue. It is a very important topic associated with credit cards, interest rates and everyone's identity.

Last October I attended the second International Conference on Identity Theft sponsored by the anti-rackets section of the Ontario Provincial Police. This conference brought together a number of speakers from Canada and the United States with expertise in the areas of identity theft, telemarketing, biometrics and terrorism. This conference allowed for the exchange of information among those who are involved in a fight against identity thieves.

Identity theft has been around a very long time but has now become a rapidly growing problem. It is the fastest growing crime in North America today. Identity theft helps facilitate a number of other serious criminal offences, such as fraud and fraudulent activities, organized crime and terrorist organizations. In fact, terrorists hide their true identity through the use of other people's identities that they have stolen.

It is estimated that identity theft costs Canadian consumers, banks, credit card firms, stores and other businesses $2.5 billion a year. There are a number of factors that have contributed to the increase of identity theft. We are probably approaching a period of time where this problem, which is a huge problem right now, will become unmanageable in the very near future.

Easy credit is a contributing factor. Canadians are continually being bombarded with unsolicited credit card offers from financial institutions. Not only are these offers open to theft, but they also make it easier for others to obtain credit in other people's names.

Let us face it, identity thieves will rummage through the trash in order to find incoming mail, such as pre-approved credit card offers and send them back to the issuing financial institutions and request that the card be sent to a new address. Credit card fraud is perhaps one of the most pervasive identity theft crimes in Canada. It is estimated that card fraud rose by some 19% in the year 2002.

Another contributing factor is the fact that very well versed technology oriented individuals can take information from the magnetic strip of a credit card. They obtain the information through what they call skimming or swiping the credit card. It is stolen. It is skimmed, in other words, all the information is taken off the back. They use an electronic device that is called a skimmer. They will take the customer's credit card and swipe off all the information.

This will occur in places like shops, restaurants or wherever anyone may pay with a credit card. Once that information is taken from the magnetic strip, out come the cards and they will use them to the maximum. With these counterfeit cards in hand, the identity thief can use the card to purchase very expensive merchandise that can be sold for cash, and this money in turn is used for other criminal activity.

Another contributor is hacking of company databases. With the advancements of technology and increased Internet use, it has become easier for thieves to obtain personal information and have far more ways in which to use that information fraudulently.

How many times have we heard on the news or read in some newspaper that a company's computer database has been hacked? Computer hackers have been known to break into computer databases and obtain personal information, such as an individual's credit card data which can be used to their own advantage.

However, while theft is perhaps the most obvious form of credit card fraud, it is certainly not the only way fraud occurs. I suppose this is the beginning of the crime of identity theft. I recall, in my former life as a police officer, how thieves would take the discarded carbons that were used on credit card slips. They were inadvertently thrown into the garbage can, but that information was very valuable in transferring it over to someone else. That identity would be taken and another card made up with the information on it.

It has now become more sophisticated. It is now tapping into computers. It is now obtaining information from the mail and transferring all that information over or even creating that information and applying for a credit card.

Of course there is always the age old problem where dishonest employees will make an extra imprint of one's credit card and take it for their own personal use. That is going to happen, but that is not the serious part of this crime.

I think many Canadians would be surprised to learn that in this country we do not have a separate offence for identity theft. Granted there are provisions in the Criminal Code that relate to identity theft, such as fraud, obtaining credit by false pretense, fraud and forgery, but in many instances the Criminal Code requires proof that the accused intended to gain advantage by means of fraud.

It is high time we looked at the offence seriously and that we cut off the supply for those organized criminals who use identity theft as a means of making a living and perpetuating further crime. We should have charges like our neighbours to the south have, aggravated identity theft, that will bring two to five years depending on who commits the crime or what the crime is added consecutively to all other sentences served, especially when it comes to hiding one's identity as a terrorist.

I appeal to the House to seriously look at those issues that will prevent financial ruin, damage reputations and certainly ruin credit ratings for those who do possess cards and use them legitimately.

[Libby Davies, NDP, Vancouver East, BC]

Mr. Chair, I want to pick up on a couple of things the hon. member said. He talked a lot about identity theft and I think that is a very serious problem.

I think people are a lot more guarded today than they were a few years ago about what they do with information they get in the mail and just throwing it in the garbage. We know how easily it can be picked up and used by someone for criminal activities.

The member also said something that I think is very true. He said that we would be hard-pressed to find a working adult in Canada who does not have a credit card. I would certainly agree. In fact, we can barely get by these days without a credit card if we want to rent a car. There are all kinds of services that we need where we need to have a credit card. This takes us into the other part of the debate that we have been having here tonight, which is the issue of privacy and security.

I wonder if the hon. member would comment on what I know has been expressed by members in the NDP and particularly the member for Windsor West who has been raising issues of credit cards as it impacts on our right to privacy.

We know that under Canada's privacy laws and particularly under the Personal Information Protection and Electronic Documents Act that a bank cannot collect, use or disclose personal information about customers without their consent. I think we all agree with that.

We are now very aware and very concerned about how information, when it is subcontracted to a company that may be doing its business in the U.S., is now subject to the U.S. patriot act. We have had a couple of very high profile examples in the last few weeks and even months. I think a lot of people are very concerned about whether or not Canadian laws are actually protecting our information when information is going through other routes into other processing centres, particularly in the U.S., and would then be subject to the patriot act.

I wonder if the member would comment on that and identify whether or not he also has concerns about that.

[Art Hanger, Conservative, Calgary Northeast, AB]

Mr. Chair, I certainly do have concerns about how personal information is managed. I think this is one huge problem that industry has overall. It will not just be the banks but the banks will be looking for data centres to manage all the information of their clients. How efficient that will be and how protective they will be with our information remains in question.

It used to be that much of this was housed in house literally. It has only been of late that these data centres now have cropped up and they pose another problem as far as privacy is concerned.

I would have to suggest that we will be looking for legislation that will protect that information. There is no question that this must happen. If we as parliamentarians and lawmakers cannot address those issues, just as we are talking about identity theft itself by protecting the average user that has no intent of abusing the privilege of using a card, there are those out there who could not care less about that person's reputation or his financial situation. By stealing that information and using it for his own gain, if we cannot address all of these issues, and I think we must address all these issues, we will run into some very serious problems in the future, more so than what we even see right now.

I am trusting that over the next year or two this House will specifically address the privacy matters and the protection of personal information. As the member pointed out, there are too many breaches already. No one has been able to address them because there are no laws in place that really deal specifically with that.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

Mr. Chair, I wonder if we could move away from the identity theft issue and the notion of the patriot act and step back to personal management.

My hon. colleague raised the issue earlier about young people having access to credit cards and our colleague from another party described it as a good offer and a good deal. The member mentioned gambling and other sorts of addictions and that spending for some people could be placed in the same category as an addiction.

I wonder if there is not some responsibility either on the part of the government or on the part of companies offering these things, which are to their benefit and only a perceived benefit to the young person, to offer education seminars.

I was only recently in university and I remember these same offers and deals being pushed at us. We had special credit card days when companies arrived to show us all the wonderful things we could access and yet there was nothing on the other side, the responsibility side. To young people, 17, 18 or 19 years of age, who perhaps had no access or experience with credit before and not realizing the slippery slope that they could get into with limited income, this could potentially apply to the rest of their lives and develops into a pattern whereby their indebtedness keeps growing. Indebtedness in this country is growing increasingly. We are more in debt in any given year without the ability to pay it back.

Is it not the role of government and the industry providing the service to do some sort of education about the dangers that exist?

[Art Hanger, Conservative, Calgary Northeast, AB]

Mr. Chair, when I grew up as a farm boy in Alberta I was taught to owe nothing to no one and that if I did owe something I was to make sure I paid it off because my reputation was at stake. I had a moral obligation to pay it off. I was taught that credit was not something one looked for unless it was absolutely necessary, such as a land payment or something of that nature, but we always paid our bills.

Today credit cards flourish in every household. I know that in some households even the children have their own credit cards which are sponsored of course by their parents. However no instruction books come with credit cards. The kids know that when they reach the limit mom and dad will pay it off. I have a problem with that personally. I certainly never opened the door to my children using my credit cards. I believe there has to be some level of responsibility shown. There should be an instruction book because debt is a terrible burden to bear for a youngster.

When students graduate from university they not only have tuition debts but they have racked up debt on a credit card. They get caught up in the moment. They want to go out with their friends and suddenly have a debt on their hands. Some 16, 17 and 18 year olds have to seek bankruptcy protection, as do some students just graduating out of university. Yes, there needs to be an instruction booklet and there needs to be accountability with every card that is issued.

It is good to have choice but for young people it could be unfortunate. It sort of leads them down the path toward a credit card with a higher limit and a higher interest rate. I know it is a sign of the times and that everyone has a card but there needs to be some control, especially for youngsters.

[John McKay, Liberal, Parliamentary Secretary to the Minister of Finance]

Mr. Chair, I want to ask the hon. member how big he wants big government to be. I think that is pretty well what it gets down to here.

For instance, some people should simply not gamble. If there is a casino across the river, the doors should be locked to them because they cannot handle gambling. Of course, not in your riding, Mr. Chair. That was a very poor choice on my part. Some people cannot handle drinking. We do not have government programs that take the bottle of wine away from the individual. We certainly have government programs and Criminal Code sanctions with respect to behaviour that endangers the lives of others, rightly and properly so, but we do not actually conduct Alcoholics Anonymous programs. That is largely a voluntary sector. Similarly, some people should simply take the scissors to their credit cards because they cannot handle credit.

The hon. member comes from kind of the same background that I do. My father told me that he owed money to no one at any time or at any place. He paid cash for whatever product or service he purchased. Things have changed. I agree with the hon. member that there is some failure here in education in terms of how people handle it, but I do not know if the Government of Canada should be stepping in and replacing in loco parentis .

My general question, which is almost a point of philosophy, is how big does he want government to be? If we step in here, the member can be sure that there will be bureaucracies and more bureaucracies, and we will have full employment once again.

[Art Hanger, Conservative, Calgary Northeast, AB]

Mr. Chair, I am pleased to hear that the member grew up in a household where responsibility was taught about debt, and obviously responsibility on other issues as well, because debt is a burden.

My parents never took me into a gambling hall, and I do not think it would have done me any good if they had at 16 or whatever. They never gave me a credit card and I did not suffer as a result of that, I can assure members. I know it was not part of the environment when I grew up but we are living in a different era.

I am not asking government to do anything when it comes to this type of presentation to our youngsters. I do not know, when we talk about young people, at what age they would have access to instruments like a credit card to charge up a bunch of debt, but I think there is a limit. Should high school children have credit cards from grade nine on up, and handle those cards? I do not want to bring my kids into a gambling hall at 16. The member says that there should be no restrictions. I am not that much of a libertarian. I can see the need for some freedom but there is a responsibility that goes with everything.

I will refer back to the responsibility of a parent, a teacher or a financial adviser. The more we instruct our children on the use of debt, the better off we will all be. I think there are limits but I do not think they have anything to do with big government. I would like to see small government, because governments constantly intrude into the affairs of the average person, at a cost. No, I do not want to see big government and I do not see any need for it to be intruding here. However I do see a need to limit some things for some people.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Mr. Chair, I would be remiss if I did not start by responding to comments that were made in the House just before I rose to speak.

The hon. Parliamentary Secretary to the Minister of Finance talked about running a tight ship and not wanting to have big government. We know that if we take the 20 year period from 1981 to 2001 and compare political parties across the country, both provincially and federally, we find that the Liberal Party actually has the worst record of deficit financing. Eighty-five per cent of Liberal budgets were in deficit. They went into debt financing and into debt in a very big way.

There were also comments from the Conservative member opposite who represents a party that in the 1980s ran up the largest deficits in Canadian history.

Here we have Liberal and Conservative members pontificating on debt and responsibility when together those two parties have the worst possible records. It is appalling hypocrisy for those parties to talk about appropriate debt management when they have such appalling records.

Let us talk about the reality. The reality is that over the last 10 years the average Canadian family has seen their debt load rise by about one-third. The average Canadian worker has lost about 60¢ an hour in real terms. What we are seeing across the country is less and less resources for Canadian families, a social safety net that has been gutted and ripped apart by Liberal cutbacks while a surplus has been accumulated. At the same time Canadian families are trying to borrow money to make ends meet.

In my riding of Burnaby—New Westminster I knocked on over 6,000 doors during the last election campaign. What surprised me were the number of families that are just holding on, just keeping a roof over their heads. In my riding, which is not in any way exceptional compared to other ridings across the country, about one family in seven is spending 70% of their income on keeping a roof over their heads.

The reality after 10 years of Liberal government is we are seeing higher and higher debt loads for Canadians. We are seeing lower and lower salaries. We are seeing a loss of real wages. We are seeing higher debt. That is why this issue and this important debate is something that all members should take into consideration. We know that at the same time as Canadians are hurting, the banks are not hurting at all.

This year, the six largest banks in Canada recorded profits in excess of $13.3 billion. This is a record high, $2 billion more than last year's record of $11.11 billion.

While those record profits are being recorded, these same Canadian banks continue to increase their tax evasion tactics. The money involved ought to be going to improve the quality of life of Canadians, which we have seen deteriorate over the past 10 years.

For the past four years, $5.7 billion has escaped taxes by going into branches located in tax havens. Whereas the banks ought to have been paying some $12.1 billion in taxes, they paid $6 billion and another $5.7 billion went tax-free.

At the same time, Canadians credit card indebtedness continues to rise alarmingly. Since 2003, Canadians have owed their banks close to $50 billion in credit card balances.

This is a crisis, a crisis of debt load. The committee on credit card costs reported in March 1990. It recommended that interest charges on cards issued by financial institutions not be allowed to go higher than eight percentage points above the bank rate.

I will quote a Liberal member of Parliament, the member for Glengarry—Prescott—Russell. He said that an argument against an interest rate cap was “gibberish”. The minister “says on the one hand that competitive forces will work to keep interest down but if you impose a limit, the companies will all climb to that limit. That is highly contradictory”. He described the proposed cap “as the most important recommendation of this report. Without it the work of the committee is diminished significantly”. He also said that the government “has seen fit not to act on the cap and that is consistent in that this government has consistently defended the interests of big business”. That came not from a New Democrat MP but from a member of the Liberal caucus, quoted in the Toronto Star on March 29, 1990.

We have seen that both the Conservatives and the Liberals have refused in any way to bring interest rates under control. I will come back to what the NDP proposes.

During the last election campaign, the NDP promoted a consumers' bill of rights that would protect Canadian families by regulating credit card interest rates to five points above the prime lending rate as opposed to the 10 to 20 point gap that so many credit cards have.

The pocketbook protector also spoke of requiring chartered banks to maintain, rather than abandon, branches in Canada's rural and small towns as well as in poor inner city neighbourhoods.

We know that the banking industry that is reaping record profits beyond what anyone could imagine, more than $13 billion, at the same time has closed more than 700 branches across the country. This means that not only are Canadians having to go to higher interest rate credit cards to try to make ends meet, but they also going to many of the cheque cashing companies. The cheque cashing companies, which are moving into poor neighbourhoods, sometimes include exorbitant fees, insurance charges, et cetera, that are more than 60%. In other words, the cheque cashing companies in many cases are exceeding the Criminal Code limit.

That is what we spoke about in the election campaign. It had a resonance certainly in my riding. I knocked on 6,000 doors. People were very concerned about credit card debt, about paying too much in interest, about having to make tough choices at the same time as they see these record bank profits.

I am happy to see that Senator Plamondon has introduced in the Senate, and hopefully we will see similar legislation coming to the House, an act to amend the Criminal Code to reduce those usurious rates of interest that are still legal in the country.

There are reactions. As I mentioned, there is Bill S-19 from Senator Madeleine Plamondon. There are also Canadians who have undertaken class actions on behalf of individuals who have been charged interest when they should not have been.

One of the latest class action lawsuits concerns the charging of interest on an unpaid bill. In other words the banks are charging interest on credit cards the moment the purchase is made, even if they have not reimbursed the merchant for a period after that. The lawsuit alleges that by charging interest on an unpaid bill from the transaction date, the banks are violating a number of laws, including the Consumer Protection Act, the Trade Practices Act and the Interest Act. All of these are important. It indicates that consumers across the country are now fighting back. They are fighting back because they are concerned about the impact of high interest rates, the impact of these horrible practices which mean that Canadian consumers get gouged while the banks make record profits.

In the few seconds remaining I would like to mention two things. I would like to underline the work of my colleague from Windsor West who has done a wonderful job in raising the issue and the impact of the U.S. patriot act on Canadian credit cards and Canadian credit card data. He has raised the issue a number of times and continues to work very hard on that issue. I congratulate him on his good work.

I would also like to underline the work of the Credit Counselling Society of British Columbia which is in my riding. It is a New Westminster based non-profit organization that teaches money management skills and helps people solve financial problems through counselling and debt restructuring.

The issue of credit cards, excessive interest rates, usurious practices in the cheque cashing industry and improper practices that gouge Canadian consumers are all ones which members of my party certainly take to heart. We will continue the fight on these issues in Parliament.

[John McKay, Liberal, Parliamentary Secretary to the Minister of Finance]

Mr. Chair, I guess what can we expect out of the NDP is a typical bank bashing speech. Here we have, “Let's have fun and games with the banks”. It is a terrible thing that they made somewhere in the order of about $13 billion profit.

Members might be interested in knowing that banks paid about $9 billion worth of taxes last year. That $9 billion basically covers the Canada child tax benefit, which is a program that alleviates poverty for young people. It is close to what we paid for the military. It is a fairly significant contribution to the revenues of the Government of Canada. Yet the NDP has decided that we should take 5% of our GDP, which is what the financial services are, and take some free bashing at them because that is easy to do and it is cheap politics.

I come from a community in the greater Toronto area. Financial services represent 21% of the gross domestic product of that area. The members can take their free shots. They are welcome to do so. However, if it is not the most, it is one of the most significant industries in the GTA.

The hon. member seems to be locked in some sort of mindset about bank closures and things of that nature. He has not noticed that over the last five to ten years Canadians have gone electronic.

I do not know about other members, but I cannot think of the last time I actually went into a bank and used the services of a bank. I do all my banking electronically, as I am sure most people do. Who needs lineups? If they enjoy standing in lines, they are welcome to them. However, the banks recognized that a long time ago.

As to the point on the living standards, the poor old NDP cannot take yes for an answer. It does not seem to recognize that for children, there has been a general improvement in the family income situation. The number of families in poverty situations has declined from 15.8% in 1996 down to 11.4%. In 1996 14% of all people lived below the LICO line, the low income cutoff line. In 2001 it was 10.4%. That is a decline somewhere in the order of 25%. Similarly with children, 31% of children now have achieved a level above the poverty line where they were below it prior to 1996.

A lot of it has to do with the fact that the Canadian government has a sensible balance approach to the management of the nation's financial affairs. There have been tax cuts in which my hon. members are not interested. There has been debt reduction in which my hon. colleagues are not interested. There has been a significant increase in program spending in which apparently they are interested. On a three-legged stool, they want one leg and they want to cut the other two off. If we cut off two of the three legs of a the stool, it would be on the floor by now. That is exactly what the NDP program is. It wants to cut two of the three legs off so we can fall flat on our faces.

I put it to the hon. member that in the area of seniors, we have the lowest rate of senior poverty in the OECD. In the area of children, significant progress has been made in taking children out poverty. In the area of the general welfare of Canadians, his entire speech is misapplied to this subject matter.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Mr. Chair, there is no question there at all, but I am certainly reminded of the words of Marie Antoinette when she was told that the peasants could not eat bread just prior to the French revolution. She said, “Well, let them eat cake”, because her reality was just as disconnected as the hon. member's reality.

To talk about child poverty as if somehow the Liberal government has done something about it? The hon. member should have been at the breakfast that was held two weeks ago with the announcement that child poverty is increasing. Well over a million children now live in poverty in this country. I am sorry that the hon. member like so many of his other Liberal colleagues was not present at that breakfast--

[An hon. member]

Not one Liberal.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

--and they were not present at the breakfast because no member of the Liberal caucus bothered to show up.

The poverty rate among aboriginal children is now 40%. The poverty rate among children with disabilities is now 30%.

Fifteen years ago, this Parliament voted to eliminate child poverty in this country by the year 2000. We now have growing child poverty. We have growing food lines. If the hon. member really wants to be connected to reality, he would be welcome to come to my community where over 1,000 people are maintained every week in a growing food bank situation. There are homeless in our area of the lower mainland. We have a B.C. Liberal government and homelessness has now tripled in our community.

I would be very pleased to inform the hon. member that he should remove a little of that disconnect between the parties and the pleasure here and what is really happening in main streets and communities across the country, because the reality is far different from what the hon. member believes. I think it would be an important wake-up call for him to understand what is really happening.

Another important point was the question of the bank profits and what is paid in terms of revenue. The actual figure for the years 2000 to 2003 should have been $12.1 billion. The actual figure of what was paid was $5.7 billion. I mentioned this in French so I will mention it again in English. It was part of the tax shelters where the banks did not have to pay income tax. According to a study done by Léo-Paul Lauzon at the University of Quebec in Montreal and released last week, 47% of what should have been paid in taxes actually was not.

That is the fundamental disconnect and problem that Canadians have on main streets right across this country. They see hospitals closing. They see a lack of child care. They see increasing homelessness. They see food banks that are growing. They see their personal and family debt loads growing, as I mentioned earlier, by one-third. They see their wages falling by 60¢ an hour. They see all of this and wonder why members of the Liberal government just do not get it. I think we have our answer; they do not get it because they do not understand.

[Libby Davies, NDP, Vancouver East, BC]

Mr. Chair, I would like to thank my colleague from Burnaby—New Westminster for speaking about the reality that most Canadians actually experience as opposed to the reality that we have heard from the parliamentary secretary tonight.

I had to chuckle when I heard the parliamentary secretary crow about this sensible, balanced approach that we have for the Liberal government. I was thinking to myself, what is so balanced about the fact that banks are allowed to go almost 15 points above the prime rate? That is very balanced, is it not? It is certainly helping a lot of Canadians, is it not?

This is why we are having this take note debate tonight. It is because there is a serious situation out there and it has to do with the serious imbalance that has taken place.

I represent a community where there are very low income neighbourhoods and where banks have packed up and gone. Poor people in particular are preyed upon by cheque-cashing companies, where, as the member for Burnaby—New Westminster has pointed out, the interest rates go far beyond the 19%. We are talking about 60% interest rates.

If people are living below the poverty line and do not have access to Internet banking--and I should advise the parliamentary secretary that not everybody has access to Internet banking--and if a bank closes down in a neighbourhood because it is now a neighbourhood that has fewer and fewer resources, people end up at those cheque-cashing companies because they have no other options and nowhere else to go. That is the reality of what we are talking about in the House tonight.

I would like to ask the member for Burnaby—New Westminster if he believes it is important that we bring in regulation to ensure there is not this massive gap between what a prime rate is and what these credit card or cheque-cashing companies can charge, so that Canadians actually do get a fair shake and an opportunity to take their hard-earned income and actually buy the things they need rather than putting it back into the banks that have already made a huge profit.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Mr. Chair, I would like to praise the member for Vancouver East for her work on poverty issues and housing issues. She has been a fearless advocate for these issues. She has brought to the House an important perspective and once again is raising important issues here in the House which we hope will echo in all four corners of the House.

The reality is that she is absolutely right. We need to take action. I mentioned the consumers' bill of rights, regulating credit card interest rates to five points above the prime lending rate as opposed to that 10 point to 20 point gap that many credit cards have.

The difference for somebody who has a credit card debt of just under $1,000 is the difference between having to pay just as much as the principal in interest payments. If someone is making the minimum payment per month, it will take up to 10 years to pay down that $1,000 balance, as opposed to somebody with a lower interest charge who would be able to actually pay much less in interest and, even with paying a minimum each month, would pay off that debt three years sooner.

Those issues are important ones, both for regulating that interest rate and also, as I mentioned, the Senate bill regulating the usury rate in the Criminal Code.

[The Deputy Chair]

There being no further members rising, pursuant to Standing Order 53(1) the committee will rise and I will leave the chair.

[The Acting Speaker (Mr. Marcel Proulx)]

It being 9:55 p.m., this House stands adjourned until tomorrow at 2 p.m., pursuant to Standing Order 24(1).

(The House adjourned at 9:55 p.m.)