House of Commons Hansard #68 of the 39th Parliament, 1st Session. (The original version is on Parliament's site.) The word of the day was opposition.
The Speaker Liberal Peter Milliken
I would like to draw to the attention of hon. members the presence in the gallery of Her Excellency Gunilla Carlsson, Minister for International Development and Cooperation and Acting Minister of Trade for Sweden.
The Speaker Liberal Peter Milliken
I would also like to draw to the attention of hon. members the presence in the gallery of the Honourable Joan Burke, Minister of Education for the Government of Newfoundland and Labrador.
Sue Barnes Liberal London West, ON
Mr. Speaker, I rise on a point of order to ensure the record is corrected. I am sure the Minister of Justice did not intend to mislead the House when, in answer to a question in question period, he said that he believed his party had promised to get rid of house arrest.
I will let him answer to this, but Bill C-9 did not get rid of house arrest as presented by the other government. It did try to put a wide net around house arrest but, in the wisdom of all the opposition parties listening to evidence, we narrowed that down to appropriate areas.
The Speaker Liberal Peter Milliken
I will hear briefly from the Minister of Justice but it does not sound to me like a point of order. It does sound like an argument. However, the Minister of Justice may have something to say.
Vic Toews ConservativeMinister of Justice and Attorney General of Canada
Mr. Speaker, I was simply expressing my concern that the Liberals support house arrest for break and enters, robberies, arsons and other serious offences like auto theft. I think the people of Canada are very concerned about that.
The Speaker Liberal Peter Milliken
I am sure that matter is now well clarified.
The hon. member for Eglinton--Lawrence on a point of order.
Joe Volpe Liberal Eglinton—Lawrence, ON
Mr. Speaker, during question period, the President of the Treasury Board made mention of me in one of his answers. I have noted over the course of the last several months that he has used the tactic of bluster to hide his ignorance. He uses innuendo and allegation to mask his classlessness.
I wonder if he will add the fact that he is a coward and not willing to make accusations outside the House. Will that be his modus operandi from here on in?
The Speaker Liberal Peter Milliken
The hon. member for Wascana is rising on a point of order as well.
Ralph Goodale Liberal Wascana, SK
Mr. Speaker, during question period, the Parliamentary Secretary to the Minister of Public Works and Government Services made the accusation that the previous government was “racking up debt”.
I would point out that during our years in office we reduced debt in both percentage and absolute dollar terms. We restored Canada's triple A credit rating and we recorded the best fiscal record in all the G-7 and of any Canadian government since 1867.
The Speaker Liberal Peter Milliken
Again, I think we are getting into a lot of debate arising out of question period. I know the chief government whip enjoys hearing these points of order in case he has to respond but I think we will move on to other matters.
Tony Martin NDP Sault Ste. Marie, ON
Mr. Speaker, during question period, the Minister of Justice referred to house arrest as a joke. I want him to know that Kimberly Rogers from Sudbury and her unborn child died while under house arrest.
I am wondering if he might want to apologize to Kimberly Rogers' family for that insensitive comment.
Vic Toews ConservativeMinister of Justice and Attorney General of Canada
Mr. Speaker, I will not comment on any specific cases but I can say that Canadians do not in fact view house arrest as appropriate for arson, for break and enter and for auto theft. If that is another situation of someone being under house arrest and dying, maybe that illustrates my point. I am not familiar with the case but if she had been in an appropriate place where she would have received proper medical care that perhaps would not have happened.
The House resumed consideration of the motion that Bill C-25, An Act to amend the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and the Income Tax Act and to make a consequential amendment to another Act, be read the second time and referred to a committee.
Proceeds of Crime (Money Laundering) and Terrorist Financing ActGovernment Orders
Some hon. members
Question.
The Speaker Liberal Peter Milliken
The question is on the motion. Is it the pleasure of the House to adopt the motion?
Proceeds of Crime (Money Laundering) and Terrorist Financing ActGovernment Orders
Some hon. members
Agreed.
Proceeds of Crime (Money Laundering) and Terrorist Financing ActGovernment Orders
An hon. member
On division.
The Speaker Liberal Peter Milliken
I declare the motion carried. Accordingly, the bill stands referred to the Standing Committee on Finance.
(Motion agreed to, bill read the second time and referred to a committee)
Vic Toews ConservativeMinister of Justice and Attorney General of Canada
moved that Bill C-26, An Act to amend the Criminal Code (criminal interest rate), be read the second time and referred to a committee.
Mr. Speaker, it is with pleasure that I speak today in strong support of Bill C-26, An Act to amend the Criminal Code, dealing with the criminal interest rate.
In its essence, the bill is about providing greater protection to Canadians. It is about enabling the regulation of an industry which, for better or for worse, has come to occupy a very real place in Canadian cities and towns.
Payday lending and the payday lending industry has, in the span of approximately 12 years, mushroomed in Canada to become an industry which is estimated to provide short term loan services to about two million people in Canada each year. It has a volume loan of approximately $1.7 billion annually. I was pleased to table this bill on October 6, 2006, as I believe it would enable more effective protection of Canadians everywhere.
Before discussing the substance of Bill C-26, I wish to point out that these amendments are the result of a collaborative dialogue between the territorial, provincial and federal governments. In this respect, I wish to acknowledge with thanks my colleague, the Minister of Industry, for it was the discussions among federal and provincial ministers responsible for consumer affairs who helped to ensure that these proposed amendments would meet the needs of those provincial jurisdictions which choose to regulate the industry.
It is important to situate this bill within its proper context. Doing so will enable us all to better appreciate its significance and the very important and practical consequences it would have in ensuring that everyday Canadians who use the services of the payday lending industry have enhanced protection against questionable business practices.
As I said moments ago, the payday lending industry is a relatively new one in Canada. Despite this, payday lending has, nevertheless, become a familiar fixture throughout Canada occupying prominent places on our streets in our communities. Indeed, just a few blocks away from this place, if one were to take a stroll in either direction, east down Rideau Street or south down Bank Street, the prevalence of payday lending outlets are readily noticeable. This is no different for communities throughout Canada.
The payday lending industry is believed to have first appeared in Canada around 1994. Beginning in the western provinces, the industry has since spread across the country from west to east. Whether we are talking about Prince Albert, Saskatchewan; Pembroke, Ontario; or Charlottetown, P.E.I.; the payday lending industry is there. In fact, the industry is currently operating in every province and territory in Canada except in the province of Quebec. In the case of Quebec, the inability of the payday lending industry to operate is a result of that province's decision not to issue licences to businesses that would charge more than 35% annual interest. This has effectively prevented the operation of the payday lending industry in that province.
Despite the absence in Quebec, it is estimated that there are approximately 1,350 outlets in the rest of Canada. It is clear, therefore, that the industry is well established. It is equally clear that it is time for effective government regulation of this rapidly growing industry.
We believe it is important to ensure that those Canadians who do use the services of a payday lender are provided the necessary protection from exploitative business practices, particularly so among the most vulnerable members of our community. The amendments proposed by Bill C-26 would allow for this.
It is important to be clear about what we are talking about when we speak of payday lending and the payday lending industry. The concept of a payday loan has really become shorthand for what is essentially a short term loan for a small amount. Generally, loans of this nature are in the range of $300 and extend for a period of about 10 days. The reasons that individuals choose to use the service of a payday lending industry are varied. Some use it for convenience while others use it out of necessity.
To date, loans of this nature have been provided by alternative retail lenders in Canada. Associated with this service, these alternative lenders will generally charge a range of administrative and processing fees as well as the interest associated with the borrowing of the moneys.
Qualification for these loans is generally straightforward. The borrower must first demonstrate proof of a steady income. Most obviously this is established through proof of employment, although employment is not necessarily required. Other sources of income can suffice in certain circumstances, including, for example, pension income. The borrower must have a bank account and must also provide a post-dated cheque or pre-authorized debit to the lender for the amount of the loan plus the associated fees and interest. Repayment of the loan is often due on the date of the borrower's next payday.
So in some respects, applying for and paying back a payday loan generally resembles other types of consumer lending. While the service provided is of a similar nature to other lending instruments, the specific form it takes is quite different.
For quite some time now, the payday lending industry has been the source of significant concern. Most notably, concerns have focused on the very high cost of borrowing, which in some cases can range in the thousands of per cent on an annual basis. Other concerns include the insufficient disclosure of contractual terms, aggressive and unfair debt collection practices, and the fact that these loans can quickly spiral out of control as a result of rolling over loans.
In light of these very real concerns, it is time for action.
This government has made a commitment to improve the lives of Canadian families. Bill C-26 reflects this commitment. Bill C-26 would amend the Criminal Code to enable provincial and territorial regulation of the payday lending industry. Currently, section 347 of the Criminal Code provides for an offence of entering into an agreement or arrangement to receive interest at an annual rate of more than 60%. Effectively, this creates the offence of charging interest at a criminal rate.
Section 347 was added to our Criminal Code in 1980. The principal policy rationale driving the inclusion of this provision was to address the practice of loansharking and that activity's role in relation to organized criminal behaviour. This was and remains a laudable goal. Organized crime poses a real threat to the safety and security of our communities. It did in 1980 and it continues to do so today.
Our government continues to take steps to better respond to the threats posed to our citizens and communities by organized crime. These include key legislative reforms in the area of gun crime as well as committing $200 million to strengthening the ability of the RCMP to combat organized crime. We will continue to strengthen our responses in this area, ensuring safer streets and communities for Canadians.
While section 347 may have been meant to address organized crime, the reality is that the provision has been interpreted as applying to most lending arrangements in Canada, including payday lending. Despite this fact, it is important to point out that section 347 is not a consumer protection tool.
The amendments proposed by Bill C-26 would clear the way for the provinces and the territories to create the tools they need to regulate the payday lending industry. In essence, the amendments would provide an exemption from section 347 of the Criminal Code for payday lenders under very specific and circumscribed instances. This exemption would be set out under proposed new section 347.1 of the Criminal Code.
How would this exemption scheme operate in practice? I am glad you asked that question, Mr. Speaker. First, the proposed amendments would define payday loan for the purpose of the exemption. A payday loan would be defined to mean:
an advancement of money in exchange for a post-dated cheque, a pre-authorized debit or a future payment of a similar nature but not for any guarantee, suretyship, overdraft protection or security on property and not through a margin loan, pawnbroking, a line of credit or a credit card.
While this definition may seem like a mouthful, it is an extremely important aspect of the proposed amendments. Laws and legal systems are meant to provide a certain degree of precision, clearly defining the limits of the behaviour which they purport to regulate.
By defining a payday loan in this fashion, the proposed amendments provide the precision necessary to ensure that the exemption will not capture other types of lending arrangements where the policy considerations at play are very different. These amendments are targeted in scope.
We have heard the concerns expressed by our provincial and territorial colleagues in relation to the regulation of the payday lending industry and we have demonstrated our commitment through Bill C-26 to working with them to ensure that Canadians are provided increased consumer protection measures.
The amendments would further prescribe the types of payday loan arrangements that would be subject to an exemption by providing two additional requirements. First, the amount of money advanced under the agreement cannot be more than $1,500. Second, the loan agreement cannot be for more than 62 days. These are measured and well-considered limitations. They appropriately reflect what we know to be the typical payday lending situation, that is, a short term loan for a relatively small amount.
The proposed amendments specify additional requirements before providing for the exemption from section 347 of the Criminal Code. First, the payday lender must be licensed or otherwise specifically authorized under the laws of the province or territory in which the lender is operating. This presupposes the existence of a provincial or territorial consumer protection scheme. Importantly, the provincial scheme will have to include, for the exemption to apply, a limit on the total cost of borrowing under the payday lending agreement.
Should a province or territory wish to develop such consumer protection measures to address the payday lending industry within their jurisdiction, they will further need to seek a designation from the governor in council in order to provide an exemption from the application of section 347.
In practical terms this would mean that a province or territory which seeks an exemption under section 347 would write the federal minister of justice requesting that a designation for the exemption be issued. The request would need to detail how the province complies with the requirements proposed by these amendments, namely, that the province has legislative measures providing for a consumer protection scheme in place, which includes limits on the total cost of payday borrowing.
Assuming this is the case and acting on the recommendation of the federal Minister of Industry, the Minister of Justice would then ask the governor in council to grant or not grant the exemption. At any time, the province, through its lieutenant governor in council, can request that the designation be revoked. Similarly, the governor in council can revoke the designation if the legislation which establishes the consumer protection scheme established by the province is no longer in force.
This is a sensible and effective solution to a pressing concern in Canada. Bill C-26 facilitates the development of a consumer protection scheme in what has been a largely unregulated area. In so doing, the amendments recognize the constitutional authority over business practices possessed by the provinces and territories through their responsibility over property and civil rights. These amendments acknowledge that the provinces and territories are the most suitably placed level of government to implement a protection regime for consumers which responds to the needs and local circumstances that may exist in different jurisdictions across the country.
Let me pause to point out that the proposed amendments would not apply to federally regulated financial institutions such as banks. Banks and other financial institutions in Canada are already subject to federal legislation. The amendments are specifically targeted at a currently unregulated industry. We know that there is provincial and territorial support for these changes to the Criminal Code to occur. This is because many jurisdictions have indicated that the application of section 347 has been a barrier to their being able to move forward and effectively regulate the payday lending industry.
These amendments would address provincial concerns. For example, in my home province, the government has already tabled legislation to regulate the payday lending industry. Other provinces have expressed an interest in taking similar steps. In the case where provinces choose not to regulate the payday lending industry, the Criminal Code will continue to apply.
Some may argue that the payday lending industry has no place in Canadian society. They may argue that the payday lending industry exploits the situation of already vulnerable Canadians and that facilitating the regulation of this industry will only exacerbate the situation of vulnerable Canadians.
The fact remains, however, that the payday lending industry is a part of our society, and a growing one at that, and we must take the necessary steps to bring it within the purview of regulation. Doing so will ensure that Canadian consumers have more effective protection against questionable business practices.
The amendments contained in Bill C-26 provide the provinces and territories the tools they need to respond to the problem in a manner that is appropriate to the realities facing their respective jurisdictions. I am confident that this is a sound approach to a pressing issue and one which I urge hon. members on both sides of the House to support.
Joy Smith Conservative Kildonan—St. Paul, MB
Mr. Speaker, I want to thank the hon. Minister of Justice for his very forward move in addressing the payday lending industry.
A very recent article in the local paper talked about this industry, about how it was growing and how it affects people. We know that payday lending happens not only with people who are very short of money but also with people who are supposedly very affluent but who find that keeping up with the mortgage and car payments is a real challenge.
My question for the minister is this. Can he tell the House how much interest is made on these loans and how frequently? I know he spoke to it briefly in his speech, but the rate of lending now is quite high for the payday loan industry. What kinds of people actually frequent this? Is it something that people do on a monthly basis or just once in a while to get the money they need to live on?
Vic Toews Conservative Provencher, MB
Mr. Speaker, those are very good questions.
As I indicated, given that it is for a relatively short period of time and for smaller amounts of moneys, generally speaking, we can see the effective rate of interest sometimes exceeding 1,000%. When one is talking about 10 days for $200 and being charged administrative and other fees on top of the interest rate, and when the interest rate per se cannot exceed 60%, the effective rate of course is much greater than that. That is what we are addressing.
Recognizing that in this context of short term loans the effective interest rate may be well over 60%, there needs to be some regulation to ensure that there are guidelines and regulations in place to ensure exactly what can be charged. That is where the provinces will step in. They will set those regulations. There is no specific requirement that any province set those regulations in a specific way.
In respect of what kinds of people use this, obviously all kinds of people at all kinds of income levels use it, both the middle class and those who are not as economically fortunate. One of the things a study indicated is that many of the payday loan companies recognize that their clientele comes a very short distance from where the actual offices are set up. Often we see these offices in impoverished neighbourhoods.
Judging by that, it is safe to assume that many of the clients who are utilizing these payday lenders are in fact vulnerable and impoverished people who need this kind of consumer protection legislation.
Sue Barnes Liberal London West, ON
Mr. Speaker, before the Minister of Justice attends committee, I will let him know that my party will be very happy to support this legislation in large part because when we were in government, the consultations started in 2000 with respect to this type of legislation. In fact, we were very close to bringing in legislation when the government was defeated last year.
Good consultation creates good legislation. Broad-based consultation creates good legislation. I think that is a lesson we can learn. If we do wide consultation, not only inside the minister's department but with stakeholders and people affected, we come up with a proper piece of legislation that is capable of moving through this House rapidly.
This is important and a lesson to be learned. Well defined and well consulted legislation makes efficient use of parliamentary time.
I will briefly go over some of the history. The payday loan industry, as we have heard, is a growing industry in this country. Over the last decade it has been estimated that there are more than 1,300 outlets and every year nearly 2 million Canadians utilize some aspect of the industry.
Unfortunately, along with this growth, a smaller portion of people did some practices that included some very costly practices to people who needed these services. In fact, they created things that would have been in contravention of the criminal interest rate, section 347 of the Criminal Code.
Over the course of the dialogue between the Department of Justice, Industry Canada and the Department of Finance, people came to understand that section 347 of the Criminal Code had really been instituted for the criminal organization loansharking type of activity.
The Canadian Payday Loan Association and payday loan groupings try to have a code of ethics and conduct. Even though they are not yet regulated, and hopefully will soon be regulated, in those provinces and territories, they will have to go through the scheme that is in this proposed piece of legislation, Bill C-26. We have some that are working to provide a service in a more ethical manner. Then we have some that obviously work outside the law to create as much money for themselves at the expense of people who are badly needing interim financing.
As the minister pointed out, this is not an attempt to in any way deal with the financial sector. We have the Bank Act and financial services, even though sometimes they would be dealing with less than $1,500 loan situations. We are talking about the payday loan which tends to be an unsecured loan situation for a very short period of time. As the minister has said, it is less than 62 days and the monetary limit is $1,500 or less.
We have here a sensible, working, viable scheme that will exempt those provinces that decide that it is beneficial in their jurisdiction to work with the industry to regulate and come up with some protections and regulations. Those who wish to operate in that area can do so in a manner that will be better protective of the public. That usually is a consumer protection jurisdiction of the provincial or territorial governments and not usually at this level.
That is why we had to move out of that jurisdiction and carve out an exemption in this bill to allow the provinces to do that. Some of the provinces, notably Manitoba, British Columbia, Nova Scotia and Alberta have indicated interest in doing this. Some other provinces may not be as interested. They will still be living under the Criminal Code jurisdiction and will have to enforce that situation in those jurisdictions.
It has taken a few years to get the bill ready. We are in a situation, at least in my party, to say that we do not see impediments, that this does not force any jurisdictions into making a change. It is actually more permissive. It allows them to step in and put legislation forward where they believe it is in the best interests of the people residing in their jurisdictions.
Some provinces, notably Quebec, have already operated in a different manner and the flexibility under the act is there. As noted, the designation of the province will be required under subsection 3 of the bill. In subsection 2 we have the monetary and statutory dates limitation and the licensing authorizations under the laws of the provinces. There has to be an agreement and then the province moves into the designation that is seen in subsection 3.
There is also a provision for revocation under subsection 4 that should not have to be used, but could be used if necessary and that shows some foresight. Again, interest has been defined, payday loan has been defined, and criminal interest rate is already in section 347, which has a maximum rate already.
This is progressive in that it allows jurisdictions that wish it to regulate the industry and to place limits on the costs to consumers of payday borrowing. I believe it would even have been a better ministerial speech had the minister acknowledged the work that predated his government's ascension into power as a minority government. Be that as it may, I listened to the speech by the Minister of Justice and he covered all the bases that needed to be covered in a way with which I would agree.
Having said that, this is legislation that can move forward quickly in the House. I want to reiterate that where my party sees that we can advance pieces of legislation that have been brought forward and we can support, we will do so, but where there are hastily put together, non-consultative pieces of legislation, we have to do different things in different circumstances.
With that I will end my brief comments here today and allow other parties who wish to comment in the House.