Debates of Dec. 7th, 2004

Credit Cards

[John McKay, Liberal, Scarborough—Guildwood, ON]

Mr. Chair, I would be interested if the hon. member could demonstrate any credit card issued by a bank that charges a 60% interest rate. That would be an interesting analysis in and of itself.

What the member may be referring to are institutions such as payday companies, which I think basically bet that a person is going to get paid that month and will then lend money based upon the anticipated cheque to be received. There he may be right that the rates are in fact fairly significant.

However, first, this is not an area within the federal jurisdiction, and I know my hon. colleague from the Bloc Québécois loves to jealously guard any intrusions, real or imagined, by the federal government into those kinds of areas of “provincial jurisdiction”. Also, having said that, that area is not credit cards. Those are other forms of lending and presumably other forms of lending that are usurious can in fact be pursued pursuant to the Criminal Code.

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

Mr. Chair, it is a real honour to approach a subject tonight which is very much in the practical sense, not to imply that anything and everything else we do here is not practical.

This is a very relevant question, particularly around Christmastime, as many consumers will take out their plastic, take out their cards, make purchases and perhaps come to regret them later. It may be the amount of the purchase they will regret and not necessarily the purchase or the giving of the gift itself.

This is a topic that has a very practical and direct relevance and which we as parliamentarians should address and interact on, even if we do not put forward or bring out legislation from this debate.

This is very important, because the educational aspect, the empowering of consumers, is one of the most mighty things that we can do when it comes to credit cards and purchasing by credit. When I was looking through some data today in preparation for an outline of this speech, I noted that approximately $156 billion, according to the numbers that I read, is spent every year through credit cards in this country. That is an immense sum.

One of the other things I noted in going through the data, looking at its relevance and trying to see how this actually does apply to people in their day to day lives, was the amount of credit card fraud. While it is somewhat small when compared to the $156 billion, in the neighbourhood of $200 million it is significant. It is one of the reasons that the banks often give for their higher interest rates.

I have to admit, though, I tend to be skeptical of all lawyers and all bankers.

[An hon. member]

And all politicians?

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

Since I have attained this honourable position, I have lessened my skepticism of politicians. I have now come to believe everything I hear from the other side of the House regardless of what party.

[An hon. member]

Oh, oh!

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

Let me say that I speak in jest, Mr. Chair, just in case someone reading Hansard may take that in all seriousness.

In a more practical manner, what can we do to address credit card fraud? Looking at that $200 million, I think if we put more resources into combating and fighting credit card fraud we could actually deal with it to the point that we could get an economic return which would trickle down and help consumers to a certain degree.

I find it particularly interesting that all members of the House want to call it helping consumers, or helping to bring down the charges and the costs and making it more affordable and accessible for all consumers everywhere, yet in the justice committee of Parliament we had a vote the other day on whether or not to reallocate $20 million from the gun registry to the RCMP. That is $20 million. Instead of wasting this money on the gun registry by putting little stickers onto guns and losing paper files, on absolutely throwing money down the drain, and we all know that is what the gun registry is, we could have spent this money combating credit card fraud.

We could have given the police more resources, more ammunition and more tools to get out there and deal with the organized criminals that go after the poor people, the grandmothers, the students and the hard-working people who use credit cards as a means of payment, as a means to get through month to month.

Instead, the government chose to continue, with the support, if I may say so, of the Bloc Québécois and the NDP--

[An hon. member]

Oh, oh!

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

Mr. Chair, I am being slightly heckled so I will remind the hon. members across the way that my emphasis in this party is on the noun of the old party's name, not on the adjective, and that is why I am a part of this party.

Again, as we point out, all that wasted money that went into the gun registry should have gone to legitimate law enforcement. It should have gone legitimately to the RCMP to fight various things such as credit card fraud.

There we had a practical measure that we could have dealt with to help Canadian consumers and help tackle the high cost of credit cards, yet three parties in this House, the Liberals, the NDP and the Bloc Québécois, failed on that opportunity. It was a disgrace. It was an absolute shame that instead of attacking the gun registry and dealing with the problem, just as this member here has done and members in this party and on this side of the House have done in all their various incarnations over the years, they chose instead to funnel it right back. It was a wasted opportunity to deal with all sorts of crimes.

We also must be practical. I was speaking earlier on the purpose of education and what we can do even without legislation. One thing we can do as parliamentarians, members of the public and distinguished public servants is reach out and discuss with our constituents what they can do.

I am a Conservative. I believe that government is not all powerful and all knowing. It cannot solve all problems. Problems are often solved by giving them directly into the hands of the people. I believe that the people themselves can take charge and make decisions and that society is shaped as people themselves take on their own responsibilities; that balance of freedom with responsibility forms freedom. What we can do to enhance and encourage that is increase their knowledge and their background in order to deal with issues.

In that light, with the full knowledge that there are people watching and people who will read Hansard , let me give to hon. members some suggestions of information they could put in their householders, things they could discuss when they conduct town hall meetings, as I am sure all hon. members do in their constituencies. These are practical applied purposes and points that members can get out there, regardless of partisan persuasion.

I am sure that no one in the House supports credit card fraud. One, it is the taking of unlawful assets. Two, as the old joke goes: do not steal; the government hates competition.

With those words in mind, let me give a few points for people to consider to protect themselves from credit card fraud. There are a considerable number of resources. The RCMP has a website. There are articles from the Regina Sun . There are consumer websites. There are a considerable number of websites to use, but let me give a few practical ideas that members can pass on to their constituents during their town hall meetings.

Number one is to protect that PIN, personal identification number. Do not tell anyone. That is very important.

Number two is something I always forget to do. Never leave credit cards unattended at work or school. The workplace is the number one place for thefts. Again, working in an atmosphere where the government continuously taxes, one should be reminded not to leave one's money lying around. Someone will pick it up.

Number three, people should not leave their credit cards in their cars. Cars are the second most likely place where credit cards will be stolen.

Number four, people should always check their credit cards when they are returned after a purchase.

Number five, when travelling people should make sure that their credit cards are with them, or in a safe location.

Number six, people should sign the backs of new credit cards immediately, as soon as they arrive. The reason is if there is a discrepancy, that signature will be compared with the one on any receipt given in the future. That is very important. I know of friends and family members who have forgotten to do this. It is good to remind everyone of this.

Number seven, people should make a list of all credit cards and their numbers, and keep the list at home. They should not keep the list with the credit cards, because if someone else gets hold of the credit cards, he or she will have all the information needed to use them.

Number eight, people should check their monthly statements. Mistakes can happen. No one wants to pay for a criminal's fraud. Most parents are unhappy enough when they see that their child has used the credit card without telling mom and dad about it. We definitely do not want to give criminals that opportunity

Number nine, people should never give out a credit card number over the phone unless they are dealing with a well-known company, or if they called the company first.

Those are just some practical suggestions I wanted to put on the record to help members. They are ideas for their householders, town hall meetings, et cetera, so they do not just have the theoretical, but they also have the practical.

I will sum up my points. Number one, we should more aggressively combat credit card fraud instead of wasting money on unnecessary things like the gun registry. Number two, people themselves have the greatest power to deal with it through information to fight back. My final point is that we as public servants should go out there and educate, spread the word, and give information. We are in the public eye many times in our constituencies. Let us do some good. We all know we do good through our legislation. Let us do it in some practical aspects, interacting with people on what is essentially a non-partisan issue.

[Judy Wasylycia-Leis, NDP, Winnipeg North, MB]

Mr. Chair, we are having a debate on public policy. It is wonderful that the Conservative member from Saskatchewan has chosen to do a show and tell exercise, but I want to remind him that we are here to debate and discuss solutions to some very serious problems in society today.

I understand that the member thinks the most important issue right now is to share information. However, that information is readily available through such agencies as the Financial Consumer Agency of Canada, which is headed by Mr. Bill Knight, who is a well-known expert in the area and just happens to be a former New Democrat MP, a credible, experienced individual who heads up an organization that provides very valuable advice. I would suggest that the member simply refer his constituents to that agency. The website address is readily available from the brochures.

Tonight we are supposed to be having a serious debate about what direction to go in with respect to credit cards. We are talking about Canadians using credit cards because of our cashless society and being stuck with incredibly high interest rates. We are talking about people who end up losing everything because they get caught up in a system for which there are no checks and balances and where the government has thrown up its hands and said that it cannot do anything because the banks would get mad at it. We are talking about trying to come together to put some proposals to the government so that people do not get ripped off.

One of the questions we have to talk about tonight is, what is an appropriate interest rate? It is not good enough to say that the Criminal Code sets the usury rate at 60% and anything above that means a person could be charged under the Criminal Code. We are talking about rates that are five times more than the prime lending rate. We are talking about charges of 19%-plus on credit cards which cause Canadians to go into debt and to be indebted to the banks forever.

I hope the member has some policy to give us from his party. What is his position with respect to the appropriate cap on credit card interest rates, or is he saying there should be none? Is the Conservative Party still saying, as it said in 1990 under the Mulroney government, that there should be no cap, that we should just let the banks charge what they want up to 60%?

Does the member have any suggestions? The fact is that Christmas is upon us, people are relying on their credit cards because they have to and because we do not have a proper system in place, they end up paying exorbitant charges over a lifetime. It is time we as a House actually gave the government some advice on that issue.

I look forward to some policy from the member.

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

Mr. Chair, I appreciate my hon. friend's comments. I am dealing with this in a very serious manner. Let me be clear. I am a Conservative. I do not believe that government is the all powerful, almighty, all way to do it.

The hon. member suggested that if we put a cap on it, that would solve the problem. The banks know how to make a billion dollars a year. I think they are smart enough to figure out a way around it. They will do it with fees, with extra monthly charges, with extra charges on merchants who have to deal with it.

The underlying most powerful thing in any economy, in any society is not the government. That is where we have a very clear difference in philosophy. We can make laws here but those laws have to conform with reality. They have to actually deal with what goes on out there. We cannot repeal the law of gravity no more than we can repeal the law of supply and demand, no more than we can repeal the bankers' ability to make money. They are very talented at it.

While I appreciate the suggestion that they are trying to help and so forth, ultimately the solution is futile. It is a band-aid. It is a propaganda tool. It is nothing more than a charade. It does not help people. It helps electioneering. It helps with slogans. It helps on the campaign trail, but it does not actually solve the problem.

The problem rests more with the people. That is why I concentrated on education. I used a device to catch members' attention, to wake them up to the fact that ultimately we need to give people the tools. People themselves would be more powerful in dealing with the banks, in dealing with corporations, by using the tools that we gave them than we as the government would be.

There is a very clear ideological and philosophical divide between me and the hon. member on that point. That is where I come from on this matter. Legislation is not the answer to everything. If we push down on one, inevitably another will spring up. If we continue to regulate and continue to put pressures here and there, how does it help Canadians if we cannot at the end of the day put more money in their pockets? We do that by growing the economy, by cutting taxes, by cutting payroll taxes, areas that actually put more money in people's pockets.

The hon. member's party supports higher taxes but less money given to the credit card companies in interest rates. At the end of the day, the money is still out of Canadians' pockets. That the NDP members want to take with their left hand and give back with their even farther left hand does not help. Canadians need money in their pockets. They need it because of a productive economy. They need it to grow.

The solution, while it is great for propaganda, does absolutely nothing to help Canadians over the long term because ultimately the banks will get around it, so what is the point?

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

Mr. Chair, I heard a couple of members talk about usurious rates of 60% and things of that nature. I have in my hand information from the Financial Consumer Agency of Canada. The question I will direct to the hon. member is on standard credit card rates. I am looking at the low credit card rates and the lowest is about 7.9% and goes up to about 10.5% and then it gets into regular credit cards. The highest rate that I see on regular credit cards appears to be about 19.5%.

I would be interested in the hon. member's comments as to whether he is aware of any credit card that charges upward of 60%. I can think possibly of some of the retail credit cards where the rates are in fact quite high on outstanding balances, but they are certainly nowhere close to 60%.

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

Mr. Chair, I may have misheard the member and I apologize. I thought I heard him say McKnight in the previous exchange and we naturally think of Conservative members as distinguished members so we hear their names more readily.

In doing my research I also did some comparing. I found one credit card that charged prime plus 2%, which I believe was the hon. member's reference. In looking through my research, I am not aware of any credit card that charges a 60% interest rate. I would be very surprised to know that anyone would actually use such a credit card.

The highest rate I found, after recently looking through all the store credit cards and so forth, was approaching 30%. That was a charge card with more of a penalty for not paying it. I think the underlying view was that the stores did not want this as a borrowing mechanism. They wanted it merely as a convenience for paying. The high penalty was there to discourage people from even considering it as a borrowing fee.

I appreciate that parliamentary secretaries do more research. My staff is looking into this and will continue to do so, as I am sure his staff will. I think it is imperative that the public bring forward any stories or tales of this so we can deal with the problem and expose it. It was brought to light that if some people did not understand their options financially and so forth, they may end up using some of these usurious instruments of finance. As we educate people and let them have full knowledge, at that point they will find what the market defines as lower rates and move to what is more naturally better for them.

[Paul Crête, Bloc, Rivière-Du-Loup—Montmagny, QC]

Mr. Chair, at the beginning of my speech in this take-note debate on credit cards and interest charges, I would like to thank the people who work for organizations like Option consommateurs, who are dedicated to advocating for consumers and defending those most in need, to teach them a thing or two about how credit works. They may be more sensitive to the situation people are facing, to the constant pull of consumerism that is an integral part of our society.

I tip my hat to those in that line of work. They deserve our support. They are the ones who know about the reality. They know that financial institutions charge high interest rates on their credit cards. For example, department stores charge up to 28% interest on their cards, while the Bank of Canada rate has gone down very significantly since the early 1980s.

In fact, this may be one of the first recommendations that could be made: to tie the maximum rate to the Bank of Canada rate. In that respect, the obligations of lenders have been out of step with the economic reality. Interest rates have remained much higher than they should have in the past.

These people at Option consommateurs regularly meet consumers who are having a little difficulty. They can see that credit card companies engage in massive and aggressive solicitation campaigns to increase their business. They do so through the mail, or with stands in cegeps, colleges or at the door of cinemas. Their latest offensive, in recent years, has targeted young people.

I have children barely out of adolescence who are systematically being offered credit cards. Some restrictions could be put on this type of behaviour without the sacrosanct market being affected, while still ensuring appropriate behaviours.

This organization also made a very practical recommendation to us. At present, the detachable part of credit card bills only shows the minimum payment required, not the total amount due. For a total amount of $1,500, for instance, the stub you are returning to the company may show a minimum payment of $70, $75 or $80. This gives people the impression that, as long as they pay this minimum, they do not have to make the monthly payment. But the interest continues to accrue.

This kind of recommendation deserves the government's attention, to ensure that corrective action is taken. We are indeed living in a buy now, pay later society.

The total cost of a good is not necessarily indicated. We purchase cars. We buy them for $199 per month instead buying them for $15,000. This whole practice of pushing consumerism to its limits is part of our society today. As a result, many people need better protection. I am talking about individuals who are most susceptible to the appeal of credit and who, unfortunately, cannot take proper responsibility for it.

For example, credit card interest rates are 18.9%—sometimes even higher—for cards issued by financial institutions, and from 24% to 28% for cards issued by major chain stores and oil and gas companies. That is huge, especially since the Bank of Canada interest rate, as I mentioned earlier, has never been lower.

It would be preferable for the maximum interest rate to be tied to the Bank of Canada rate, as it was prior to 1983. This would, ultimately, decrease debt loads, especially for the most disadvantaged in our society.

People with significant credit card debt are not necessarily those who shamelessly abuse their credit. One example is people who lose their job in the fall. Christmas comes. They need to meet the needs of their families on a regular basis. They have no money. They can use their line of credit and, in the months that follow, January, February and March, they have to meet the payments. This is not for unnecessary expenditures. Often, the money is not used for luxury items.

When people are low-income earners, for example, those on social assistance or those who have lost their job and who do not have a very high income, they accumulate debts they would not accumulate under normal circumstances. Of course, we must educate people. People need to be able to assume their responsibilities.

However, we also have a responsibility, in an organized plan that ensures results in the medium term, to adopt a systematic approach in this sector. We could, in addition to education, limit usurious lending rates.

The speakers recently have been asking whether what we want is credit cards with 60% interest. Not in the least, but if the rate were dropped, for example, down to 37% or 38%—that is the Bank of Canada rate plus 35%—this would tend to bring all the other rates down as well.

If the bank and store credit card interest rate were cut from 28% to 26%, 25% or 24%, this would at least be a small saving for the consumers needing that kind of credit.

It would be important for the federal government to regulate the spread between the central bank rate and the credit card rate, to lower the maximum legal interest rate from its current 60% level, and to adopt regulations similar that those in place in the Quebec consumer protection legislation as far as the unilateral increase in credit card limits is concerned.

Quebec has long had regulations that are ahead of the federal ones in this connection. The federal government would be well advised to follow its example as far as its responsibilities are concerned. Last of all, the financial institutions need to start acting more like good corporate citizens.

I remember seeing bank representatives visit our schools to give the students information sessions on credit and budgeting. There should be more of those. This practice, be it on the part of banks or credit unions, should be increasingly promoted. This way, the public could understand better the impact when they borrow money, what rates they have to pay and what implications their actions ultimately have.

On the one hand, this area should definitely not be regulated to death. But on the other hand, the status quo is not acceptable either. There is a step to take, which the federal government ought to take to ensure that people who have debts have an appropriate behaviour, so that as few as possible get into difficult or unacceptable situations. Ultimately, these situations have all sorts of other social implications. Often, because of the stress of heavy debt, people engage in social behaviours, in their family or elsewhere, which are unacceptable or even aggressive.

We must ensure that people do not fall into this trap and that we improve the situation. On this aspect, the federal government is now adopting a much too neo-liberal attitude, letting the market forces rule, despite opportunities to improve the situation.

Why is it that the federal government, with its amazing $9 billion surplus in the past year, will not take one step toward fixing the fiscal imbalance? It would enable Quebec and the provinces to help the agencies that look after consumer education. Then these agencies could get the money they need to have a real impact on people who have to change their behaviour. We must give the most general information to the population as a whole and in addition target the groups that need this kind of information.

It should not be necessary to repeat the kind of debate we are having tonight every year. We should be able to see progress, the same way we have with tobacco use. If the federal government had taken the same approach toward tobacco use—saying that people themselves can decide whether or not to smoke, and letting them do it even though it was dangerous to their health—we would not be seeing a decline in the number of tobacco users today.

Why not draw from this, choose a systematic approach, and, down the line, have fewer and fewer people falling into the trap of credit debts beyond their means? Our society is able to provide this kind of education. The federal government has some responsibility for this. A debate like tonight's should not be futile; it should help to improve the situation.

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

Mr. Chair, first, the hon. member keeps repeating this business about 60%. I would be interested if he could name for me one credit card that charges 60%. I have gone through the material of the Financial Consumer Agency of Canada on its website and I cannot find anybody who has been charged remotely close to that. I do not know what he is talking about, to be perfectly honest. If he could name one, I would be interested to know, as would probably everyone watching this.

The second thing has to do with the delinquency rate. The delinquency rate is just a touch over 2%. It seems to me we could look at this half full, half empty, but this is 98% full and 2% empty. To be perfectly honest, 98% of Canadians seem to be managing quite nicely their credit as it relates to credit cards. I do not see what the issue is.

Third, the proposal is really even more bureaucracy. I agree with him on the point of more education. However, I cannot quite fathom how anybody who gets a $1,500 bill on a VISA card and makes a $70 payment for that month would not understand that there is still $1,400-odd that has to be paid back. If people do not understand that, probably they should withdraw entirely from the financial system.

While I agree with him on one point that we can always have more education, and that is what the Financial Consumer Agency of Canada is designed to do, he seems to want to either layer on bureaucracy in the form of the federal government, for which all taxpayers then have to pay, or layer on bureaucracy on the credit granting institutions for which in one way or another all credit users will have to pay.

When there is a delinquency rate of somewhere around 2% and 98% are managing quite nicely, why would we create a whole big bureaucracy, be it government or be it a private sector bureaucracy?

[Paul Crête, Bloc, Rivière-Du-Loup—Montmagny, QC]

Mr. Chair, let me say again that there is none so deaf as those who will not hear. As I pointed out a few times, I was saying that credit cards had a 60% rate. Like Mrs. Madeleine Plamondon, the independent senator who sponsored Bill S-19, I argue that if we were to reduce the criminal interest rate from 60% to 37% or 38%, it would have a general impact on the overall loan structure and would eventually lead to much more reasonable interest rates.

Indeed, the maximum amount of the criminal interest rate does have an impact on the overall loan structure. If we could reduce the rate, the interest rates on credit cards, currently at 28% or 30%, could drop to 2%, 3% or 5%, because the maximum would have been reduced. This is the message we need to convey. Why is the government having a take-note debate if it does not want to change anything? It is beyond comprehension.

There is another remark that I do not appreciate. When someone has a debt of $1,500, but it is indicated on his or her credit account that the maximum is $50, and that he or she should not have the right to be part of the economic system, I find this deplorable. However, these are citizens, people with qualities and faults and whom we have to deal with. We must also allow them to improve their knowledge. Our recommendation is that the maximum amount of the debt be indicated on the part of the payment that is returned. This would allow people to know exactly how much they owe.

This type of behaviour is unacceptable on the part of a member who represents a government that wasted $100 million of the $250 million that went into the sponsorship program.

When we have a problem such as this in our sector, it would be better, before blaming someone else, to take a look at the unacceptable behaviour there has been. In fact, when people who are in a difficult situation regarding their credit look at what the federal government has done with their money, they have a lot of trouble accepting this.

I think that the government representative should apologize for his condescending attitude, because, in a take note debate, this type of behaviour seems totally unacceptable to me. We have a responsibility in society, and it is not only to deal with people who are independent, who have money and who are able to fend for themselves. We must allow others also to fend for themselves. This is the heart of the issue. We must educate these people and allow them to borrow at reasonable terms. The government's attitude in this regard is totally irresponsible.

[Judy Wasylycia-Leis, NDP, Winnipeg North, MB]

Mr. Speaker, I would first like to congratulate the member for the Bloc Québécois on his remarks on this important subject. I support his call for regulating credit card interest rates.

I believe he has identified a very serious problem felt throughout Canada. It is the do-nothing approach of the federal government, which does not want to deal with this serious problem affecting our society.

I would therefore like to ask the member a question.

NDP policy is to cap interest rates at five percentage points above prime. I think this is a constructive idea, and I would like to know whether the Bloc would accept this policy or whether it has another suggestion to make in this regard?

[Paul Crête, Bloc, Rivière-Du-Loup—Montmagny, QC]

Mr. Chair, I thank my colleague for her question and I especially want to congratulate her for the quality of her French. She deserves credit for expressing herself here in the language used by most Quebeckers and many people in Canada.

Her question is very pertinent. Personally, I believe that the range of interest rates should be much lower than the one that exists right now. Usurious rates should not be allowed to get as high as 60%. Credit card interest rates should be lowered, and people in difficult financial situations should be able to find solutions.

I do not believe that the NDP position is the ideal solution for right now. It would take us from one extreme to another. We would go from an irresponsible situation created by the federal government to a situation where the margin in relation to the prime rate is, in my view, not quite enough. The margin has to be higher than that.

However, we are on the same wavelength in that we have to make sure that the people in our society who are having the most difficulty with credit are given opportunities to get out of their difficult situation. The goal is not to put them further in debt. On the contrary, we want to help them manage their credit so that they have enough. After a few years, with support from agencies such as Option consommateurs and many other similar agencies—as long as they have the financial means to give consumers good advice—people will be able to manage their credit properly.

I hope we will achieve such conditions and that this take note debate will help the government set up interesting projects. If not, then we as MPs—any member of the House of Commons who feels like it—will have to take care of this ourselves.

I can imagine better education, the possibility of restricting the spread between the minimum rate and the maximum rate, and making credit card rates much more reasonable in relation to the Bank of Canada rate. All of this should help us create a situation whereby fewer people would fall into a credit trap they cannot control.

[Judy Wasylycia-Leis, NDP, Winnipeg North, MB]

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.

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

Mr. Chair, I am having difficulty believing that the NDP is serious about putting a cap on five points over prime. In physics, there is a law that for every action there is an equal and opposite reaction. It applies somewhat in financial circles as well.

If in fact we put that cap on and I were a financial institution, which I am not, I would immediately readjust my strategy. I would adjust my strategy to simply pick up the most creditworthy customers because I could no longer afford delinquency and all of the difficulties that come with collecting from less creditworthy customers. I would probably have to scale back the services that I provide because presently there is a 24/7 worldwide system and whether I would be able to continue to provide that would be problematic. Canada has probably the most sophisticated financial system in the world. I would have to scale back some measure of that.

If I were a financial institution, I would have to look very seriously at where I would be getting my revenues. Presumably, I would still get my revenue from the merchants. I would presumably still get some of my fees, although I would not get nearly as many fees as I was getting before, and I would not be able to count on revenues that might be generated from interest.

The equal and opposite reaction would be exactly the opposite of what the hon. member wants. There would be a restriction of credit. There would be fewer reputable institutions in the business. She would effectively create a new pool of people who have to deal with fringe financial institutions and their cost of operating is quite a bit higher. She would have the unintended consequence of actually creating a larger pool of people dealing with fringe financial institutions, paying higher rates of interest, and in fact not doing what she proposes doing. I put it to the hon. member that she cannot possibly be serious about a 5% cap.

[Judy Wasylycia-Leis, NDP, Winnipeg North, MB]

Mr. Chair, if there is any contradiction in this place, it is within Liberal ranks. The idea of a cap on credit card interest rates is not an idea of the New Democratic Party; it has been a longstanding policy of the Liberal Party.

I would refer the member back to a debate that happened in 1990, when there was a standing committee on credit card costs. 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.

In that debate there were speeches made by Conservatives suggesting that this would cause everything that the parliamentary secretary is now saying. Suggestions were made that if we were to put a limit, then the banks would just rise to the limit or they would not be able to pay for all their costs, and therefore they could not be able to lend generously to Canadians when they need it and all this kind of stuff.

At the time, the member for Glengarry—Prescott—Russell, a Liberal member, said that the argument was gibberish. I assume that he would call the parliamentary secretary's argument gibberish as well.

He went on to say that the government on the one hand argues that competitive forces will work to keep interest rates down, but if we impose a limit, the companies will all climb to that limit. Now we have the Liberals in this House doing exactly what they criticized the Conservatives for a number of years ago, wanting it both ways.

The generally accepted public policy in this country is for a positive role by government, especially in the area where credit card interest rates can fluctuate so wildly and place such a tremendous burden on Canadians. It seems to me that we should actually work together to find the right cap that should be placed on credit card interest rates, not dismiss the idea at all.

I never thought I would do this in the context of this debate, but maybe it would be useful to quote the Bible since the Old Testament is pretty clear on usury. The Old Testament forbade lending for any interest. Deuteronomy 23:19 states:

Thou shalt not lend upon usury to thy brother; usury of money, usury of victuals, usury of any thing that is lent upon usury--

If the Bible is not good enough, we could quote the Muslim Quran, which states:

Those who devour usury will not stand except as stands one whom the Evil One by his touch hath driven to madness. That is because they say: “Trade is like usury,” but Allah hath permitted trade and forbidden usury.

The idea here is not just a cap on credit card interest rates. It is not just some crazy idea of the NDP. It is found in religious texts. It is found in Liberal policy books. It is found in consumer advocacy organizations. People everywhere are talking about the impact of unregulated credit card interest rates on consumers. We place people in difficult situations and huge debt loads that can only hurt them and their families and, hence, our society.

If the goal is to have economic growth and ensure people are contributing to their full capacity, then surely the member can see that it would be important for the government to find some way to cap interest rates and to work to ensure that the banks and other financial institutions are not taking advantage of consumers and are ensuring that everyone who enters into a credit arrangement has full knowledge and information and is not burdened with a debt beyond their means.

[John Cannis, Liberal, Scarborough Centre, ON]

Mr. Chair, I would like to pick up from where my colleague spoke so passionately. I am glad she referred to the Bible and other examples. However, in quoting what the member for Glengarry—Prescott—Russell said 14 years ago about capping it off at 5%, I will not deny that was said, and if we were to look back, that probably was said. However, fast-forwarding 14 years down the road, I say to my colleague from the NDP, capping off and controlling has not worked, as we have seen.

Members keep referring to 16%. The proposal is 5% over prime. Almost a decade ago when I came to this honourable House I remember that we talked about the horrendous interest rates, and the banks listened, which is why the Financial Consumer Agency of Canada, known as FCAC, was formed.

I want to pass on to my colleague and all members that there are credit cards today, which people can have without the so-called bells and whistles, that are at prime rate and maybe two percentage points over.

What is best, 2%, 3% or 5% over prime, as the hon. member says? In capping we may also be going in a different direction, but I believe that financial institutions and the credit card providers heard us a decade or so ago. They started to adjust over the course of the years and today they are offering credit cards or charge cards with a variety of flexibility in terms of rates, programs and what have you.

[Judy Wasylycia-Leis, NDP, Winnipeg North, MB]

Mr. Chair, perhaps the member can point to some examples where a bank will offer some credit arrangements at a very low interest rate, but that is not the norm. For the average Canadian with a credit card, the interest rate is 19%. If that person has a retail credit card, we are looking at 24% to 28%.

We must keep in mind that we are looking at more than 50 million Visa cards and MasterCards. We are looking at the fact that Canadians have charged almost $50 billion to them. We have 24 million more retail credit cards from issuers as diverse as Petro-Canada to the Hudson Bay Company to Canadian Tire. That is quoting from a CBC documentary on September 20, 2004.

That documentary and other experts in the field have raised concerns that Canadians have about the system and how they feel that their lives have been made more difficult by the fact that they are trapped sometimes in paying off their credit cards over a lifetime.

I want to refer to one study completed last month which shows that almost seven in ten Canadians say that they are worried about their ability to manage their debt loads if interest rates keep rising.

The member knows that banks and financial institutions will charge what they can get away with. It is not about competition because we know that there are very few credit cards that have a 19% interest rate--

[The Chair]

The time for questions and comments has expired.

[John Cannis, Liberal, Scarborough Centre, ON]

Mr. Chair, I appreciate the opportunity to participate in this debate on an issue that probably takes place in every household between students and families. There can be no question that credit cards today are an integral part of our lives. Every household from coast to coast to coast uses credit cards or charge cards.

The Canadian credit card market is one of the most competitive in the world, with more than 600 varieties of cards. Banks, credit unions and retailers, as was mentioned earlier, are the principal users offering a variety of products to meet the credit and transaction needs of its customers. Convenient payment options and low borrowing rates are offered. Point programs, insurance coverage and retail discounts are also among the various services that are offered. Year end bonuses accumulated based on usage over the year are given back to customers.

Credit cards are a flexible and convenient tool today as our society has changed. Visa cards and MasterCards are accepted at an estimated 650,000 outlets in Canada and more than 30 million locations worldwide. In 2003 it was estimated there were 74.3 million credit cards circulating in Canada, 50.4 million Visa or MasterCards and 23.9 million American Express cards, Diner Club cards and merchant issued credit cards from places like The Bay, Canadian Tire, and the list goes on.

These statistics leave no doubt that Canadians are active users of credit cards and will continue to do so in the foreseeable future. As I said to my colleague earlier and have mentioned in years past, this is an option somebody could take on. Nobody has forced me or you, Mr. Speaker, or anyone else to take the card and use it. It is our choice. If I wish to respond to the marketing of a certain credit card company, I will take on that responsibility.

When we were facing this issue 10 years ago we felt that the consumer was not being informed. We felt that there should have been more options to the consumer and I was pleased. I recall that you and I, Mr. Speaker, were on Parliament Hill together after the 1993 election and there were issues that were very important to us. It was not the party affiliation that brought us together. On the contrary, it was issues like this because we cared for the average Canadian.

I remember that there was no party separation on these issues. We worked together on this issue to make sure that the providers of charge cards pointed out the information, that there were flexible terms available and that there was not just one card that was offering all the bells and whistles, insurance, points, et cetera. There were the pared down charge cards that offered literally nothing except the opportunity to use the card if people did not have cash in their pockets or they were short one week. They would pay the service charge on whatever was purchased the following week or at the end of the month.

I am pleased to fast forward to 12 years or so down the road and say that the providers of these charge cards have indeed put out information telling consumers that they can have option A, option B or option C. I have said repeatedly that I believe we are a pretty smart and informed society but that it is incumbent upon us to pick up the information and read it. With the access we have today to the Internet, we have information at the snap of our fingers.

When other members talk about capping interest rates on credit cards at 5% above prime, I wonder why I should pay 5% above prime if I have an option of paying 2% over prime. It does not make sense, does it?

Nevertheless, as I mentioned earlier in my questions and comments, with all this in mind, the government's financial sector decided to create the Financial Consumer Agency of Canada, an agency that was established to consolidate and strengthen the oversight of consumer protection measures in the federally regulated financial sector and to expand consumer education, which is what I have been talking about.

The FCAC's creation was one in a series of initiatives resulting from an extensive period of study and public consultation on the financial sector reform initiative. As I said, we consulted with Canadians. We went out and talked to Canadians. We asked for their input. As a result, we formed the FCAC.

As a government, our vision is to establish and maintain a fair and competitive financial marketplace in which Canadians can easily obtain reliable, objective information to help them make informed financial decisions.

We also believe in the marketplace where financial institutions meet their obligations to consumers, where transparency is the rule rather than the exception and where non-compliance is dealt with swiftly and effectively. This is where the FCAC does come in, and of course there are stats to prove, in terms of the consumer who now has an outlet, that they can go to this body and make their complaint. It is incumbent upon the FCAC to move forward to make sure that these institutions, these card providers or whoever, are complying with the legislation, maintaining the code of conduct and respecting the public commitment it made to protect the interests of consumers.

The FCAC opened 1,437 compliance cases in the past which resulted in 22 cases of non-compliance to voluntary code of conduct and public commitments. There were 39 violations of the consumer provisions leading to 20 cases where compliance measures were taken. Some of the measures taken were three notices of violations and monetary penalties of $10,000, $5,000 and $50,000 were applied. If an organization such as this was not there who would the consumer have been able to go to in order to make a complaint about not being fairly treated? All of a sudden the FCAC is there. That is really what I want to talk about.

Yes, we can get into the interest rates, the charges and the percentages which I think is part of the debate as well. The agency also does something that we talked about back in 1994-95. The agency distributed well over 300,000 copies of publications and brochures just in 2003 and in 2004.

Part of its mandate is to inform the consumer and to make sure the consumer is aware of what is happening. Consumers need to know that it is there if they have a problem, a question or if they feel they have been mistreated or cheated. The organization was established by the government to make sure that consumers are not abused.

The agency has also been mandated to expand consumer awareness on financial issues such as credit cards, but more so, it gives me great pleasure to know that the FCAC publishes a semi-annual report entitled, “Credit Cards and You”. I visited high schools, because we talked about our youth, with the Canadian Bankers' Association to talk about a program called, “Managing Your Money”. I am pleased that the banks and the institutions have taken the initiative to go out to the community, to go right into the high schools and talk to students.

With respect to the interest rates charged, certainly today some of these figures are exuberant percentages. I first want to say that I do not agree with these exuberant overcharges. However I am also mature and well educated enough to know that if I do not want to use a credit card I simply will not use it. Why would I create debt? Yes, I might go and use it knowing very well that I could make my monthly payment and knowing very well there is an 18%, 17%, 16%, 2% or 4% charge, whatever type of card I have. I have the option at the end of the month to pay the $200 that I used the previous month and with no interest charge. I look forward to any questions.

[Gurmant Grewal, Conservative, Newton—North Delta, BC]

Mr. Chair, this is the Christmas season and people are very busy shopping for Christmas. I think the main payment source people in Canada use is the credit card. We know that there are 50 million credit cards in circulation for only Visa and MasterCard and 600 institutions issue Visa and MasterCard. There are also many other kinds of credit cards.

When looking into the credit card issue, two issues come to mind. One is the high interest rate and the other is credit card fraud.

I will focus my question on credit card fraud. It was reported, and admitted by the RCMP, that financial losses due to credit card fraud came to the tune of about $200 million last year in Canada. According to another report on consumers and businesses, overall losses due to digital fraud amount to about $14 billion U.S.

We also know that it is the organized criminals who are behind this credit card fraud. I know that because I was a member of the justice subcommittee on organized crime. I heard an eye-opening presentation from the RCMP. The RCMP was pleading with the lawmakers, the members of Parliament, to do something to provide the RCMP with enough resources so that it could compete with the state of the art technology used by the organized criminals.

On the one hand, the government is wasting billions of dollars on the gun registry and using the gun registry to chase the duck hunters. On the other hand, people are getting away with serious crimes like organized crime, particularly digital crime or credit card fraud.

My first question for the hon. member would be this. Would he not chase the criminals who are committing fraud deliberately and knowingly and in an organized manner duping the Canadian economy? Or would his first priority be chasing the peaceful duck hunters by using the gun registry?

My second issue is this. This issue has not been brought forward. It is about identity theft fraud. There are companies in Canada boasting that they are selling high quality products, those products being fake IDs. There is a company called Digital Products, formerly called Photo-ID. It boasts on its website that it is selling fake driving licences for 7 provinces of Canada, 34 U.S. states, and 6 Australian states and territories. It also boasts that it is selling high quality products with hologram and magnetic strips. Looking at the card, it is hard to distinguish if the card is fake or an original identity card sold or provided by a province of a state.

Law enforcement officials cannot do anything about it because they cannot charge anyone until the fake ID card is actually used. To produce and sell fake ID cards is okay according to our law.

We also know that fake ID cards, particularly a driver's licence, can be used for buying airline tickets and boarding a plane.

What is the magnitude of the gravity of the situation? It is serious.

Would the member not urge his government to do something about identity theft? Even possessing or making a fake ID card should be a crime in this country, because there is no good intention behind making a high quality fake ID card with holograms and magnetic strips. I would ask the member to urge the government to change that law.