House of Commons Hansard #103 of the 39th Parliament, 1st Session. (The original version is on Parliament's site.) The word of the day was loan.

Topics

Canada Elections ActGovernment Orders

12:40 p.m.

NDP

Peggy Nash NDP Parkdale—High Park, ON

Mr. Speaker, yes, of course, I share the goal, as I said at the outset of my remarks, of minimizing or, ultimately, eliminating election fraud. We work too hard, all of us, to persuade people to support us during an election to see any kind of underhanded advantage that someone might gain through fraud.

However, in this report that come from the committee, our party, the NDP made a number of amendments. Some were adopted but many were not adopted, and we just think that the legislation will not be workable.

Again, speaking for my riding with regard to the requirement for two pieces of photo ID, some people just do not have it, and I think that is a problem that they are not going to be able to overcome.

I am also concerned that we are making a change possibly right before an election. Would people even be aware of this change? What kind of voter outreach and education is going to take place?

Also, I would argue that if we are talking about a minimum intrusion, I do not think that sharing personal information with political parties, as is proposed in this bill, is a minimal intrusion and I think that is going to be challenged.

Canada Elections ActGovernment Orders

12:40 p.m.

NDP

The Deputy Speaker NDP Bill Blaikie

Is the House ready for the question?

Canada Elections ActGovernment Orders

12:40 p.m.

Some hon. members

Question.

Canada Elections ActGovernment Orders

12:40 p.m.

NDP

The Deputy Speaker NDP Bill Blaikie

The question is on the motions in Group No. 1, beginning with Motion No. 1. Is it the pleasure of the House to adopt the motion?

Canada Elections ActGovernment Orders

12:40 p.m.

Some hon. members

Agreed.

No.

Canada Elections ActGovernment Orders

12:40 p.m.

NDP

The Deputy Speaker NDP Bill Blaikie

All those in favour of the motion will please say yea.

Canada Elections ActGovernment Orders

12:40 p.m.

Some hon. members

Yea.

Canada Elections ActGovernment Orders

12:40 p.m.

NDP

The Deputy Speaker NDP Bill Blaikie

All those opposed will please say nay.

Canada Elections ActGovernment Orders

12:40 p.m.

Some hon. members

Nay.

Canada Elections ActGovernment Orders

12:40 p.m.

NDP

The Deputy Speaker NDP Bill Blaikie

In my opinion the nays have it.

And five or more members having risen:

The recorded division on the motion stands deferred.

The next question is on Motion No. 2.

Is it the pleasure of the House to adopt the motion?

Canada Elections ActGovernment Orders

12:40 p.m.

Some hon. members

Agreed.

No.

Canada Elections ActGovernment Orders

12:40 p.m.

NDP

The Deputy Speaker NDP Bill Blaikie

All those in favour of the motion will please say yea.

Canada Elections ActGovernment Orders

12:40 p.m.

Some hon. members

Yea.

Canada Elections ActGovernment Orders

12:40 p.m.

NDP

The Deputy Speaker NDP Bill Blaikie

All those opposed will please say nay.

Canada Elections ActGovernment Orders

12:40 p.m.

Some hon. members

Nay.

Canada Elections ActGovernment Orders

12:40 p.m.

NDP

The Deputy Speaker NDP Bill Blaikie

In my opinion the nays have it.

And five or more members having risen:

The recorded division on the motion stands deferred. The recorded division will also apply to Motions Nos. 4 to 9. The vote will be deferred until the end of government orders tomorrow.

Criminal CodeGovernment Orders

12:45 p.m.

Niagara Falls Ontario

Conservative

Rob Nicholson 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 third time and passed.

Criminal CodeGovernment Orders

12:45 p.m.

Fundy Royal New Brunswick

Conservative

Rob Moore ConservativeParliamentary Secretary to the Minister of Justice and Attorney General of Canada

Mr. Speaker, today it is my pleasure to rise in support of Bill C-26, An Act to amend the Criminal Code (criminal interest rate). The bill has come to be described as the payday lending bill because the amendments that it proposes are targeted at the payday lending industry, an industry which has quickly established itself in Canada but which to date has operated in an essentially unregulated environment.

Bill C-26 proposes amendments to the Criminal Code which will assist in remedying this. The bill is about greater consumer protection for the estimated two million Canadians and their families who use the services of payday lenders on an annual basis. The bill reflects the government's continuing commitment and dedication to improving the lives of all Canadians.

I am proud to speak in strong support of Bill C-26 and I urge all hon. members to join with me to ensure its quick passage into law.

The payday lending industry is flourishing in Canada. The industry first originated in the United States before moving north to Canada in the mid-nineties. Since that time the industry has grown rapidly with an estimated 1,300 payday lending outlets operating across Canada. The industry's principal lobby group, the Canadian Payday Loan Association, notes that there are approximately two million payday loan transactions annually in Canada.

A report prepared by the Public Interest Advocacy Centre in 2002 estimated that between 1 million and 1.4 million Canadians used the service of payday lenders, so the numbers appear to be going up. We also know that nearly $2 billion is borrowed through payday loan centres on an annual basis. These numbers frankly are astounding. Yet, what is most surprising is that the rapid growth of this industry has occurred in the absence of any industry specific regulatory framework. The absence of this framework has left consumers vulnerable to questionable business practices.

Some might ask why would any person choose to use the services of a payday loan centre if doing so puts the individual at risk of some unscrupulous lenders. The reasons are many. Some consumers use the services of the industry because it is a relatively easy, fast and anonymous way to borrow money. Others have suggested that the reason is that payday lenders offer convenience, including the extended hours of operation and the prevalence of such centres in communities across Canada.

This, combined with the fact that many small towns and cities across Canada are losing their local banking branches, makes the payday loan store an attractive way to access one's money. However, it is those consumers who have come to rely upon payday loans in order to pay their bills, to have enough money to put food on the table, and get by from paycheque to paycheque, who are the most vulnerable to abuse.

It is precisely these facts which place already vulnerable consumers into an even more vulnerable position as they may be willing to accept the terms of a loan without question or out of sheer necessity. That is why it is imperative that we move quickly and ensure that Bill C-26 becomes law.

A payday loan has really become a catchy moniker for what is otherwise a short term loan, often for a small amount, secured against proof of one's income. Most often it is demonstrated through proof of employment and hence the term payday loan. This need not be the case however. Other examples include pension income.

A typical payday loan is usually in the range of $300 and lasts for about 10 days. To qualify, in addition to demonstrating an income source, the consumer must have a bank account and provide a post-dated cheque for the amount of money borrowed, plus the associated fees and interest owed on the loan. These fees can include application fees, brokerage fees, administration fees or processing fees and so on.

We all know that payday lending is a very expensive way to borrow money. In some cases estimates for the interest rates charged when calculated on an annual basis reach into the thousands and even tens of thousands of per cent. With rates like that it is no wonder that the profits for payday lending companies continue to go up and the industry continues to thrive.

For better or for worse the reality for the payday lending industry in Canada appears to be right, but the reality for some of its consumers is less so. When consumers have difficulty paying back the loan, lenders may let one short term loan rollover into the next and so on. Debt load goes up, and the already struggling consumers find themselves in a position where the debt load is spiralling out of control.

When they are unable to pay back their loan, there have been concerns expressed with respect to the debt collection practices employed by certain segments of the industry. Oftentimes the borrower may have been unaware of the many terms and conditions associated with the lending agreement, those aspects of the loan that one could expect to find buried among the fine print.

This is confirmed by the Public Interest Advocacy Centre in a report entitled “Fringe Lending and Alternative Banking: the Consumer Experience”, which notes that most consumers of alternative financial services such as payday lending are unaware of the cost of the services they use.

This government believes that consumers should be afforded effective consumer protection from this industry. That is why Bill C-26 is so important.

Many, including the provinces and territories as well as consumer advocacy groups, have said that section 347 of the Criminal Code remains a barrier to the effective regulation of the payday lending industry in Canada. The provinces and territories have said that they will not take steps to regulate the payday lending industry when section 347 makes such activity technically illegal.

Section 347 is the usury provision. It creates two specific offences: one, to enter into an agreement or arrangement to receive interest at an annual rate exceeding 60%; and two, to receive payment or partial payment of interest exceeding 60%.

While these provisions were enacted to combat the practice of loansharking, the reality is that they also apply to most lending arrangements in Canada, including payday lending. Bill C-26 therefore proposes to amend section 347 of the Criminal Code and thereby clear the way for the provinces and territories and provide the flexibility they need to regulate the payday lending industry.

The amendments proposed by Bill C-26 are not long and they are not complicated. Essentially they carve out a limited exemption from the applicability of section 347 for payday lenders in prescribed circumstances. By proceeding in this fashion and crafting a narrow exception rather than repealing section 347 in its entirety, Bill C-26 ensures that all Canadians will be afforded protection from the exploitative practices of loansharking while at the same time responding to the needs of the provinces and territories in relation to the payday lending industry.

The proposed exemption scheme would be established under a new section, proposed section 347.1. This new section prescribes the exact circumstances that would need to exist in order for a payday loan to be exempt from section 347.

First, Bill C-26 proposes to define a payday loan for the purposes of the exemption. This definition is important because it ensures that only a clearly defined class of lending arrangements will be eligible for being exempt. As such, “payday loan” is defined to mean as follows:

--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.

In my opinion this definition is appropriate. It appropriately captures the typical payday loan scenario that I described earlier and provides the precision necessary to specify which loans will be captured by the exemption and which ones, where the policy considerations are different, will not be eligible.

Bill C-26 proposes three requirements that must be present before a payday loan will be exempt from section 347. First is that the loan amount not exceed $1,500 and be for a term that is less than 62 days. As such, not all payday loans will be eligible for exemption, only those that fall within these further restrictions. These limits appropriately reflect the fact that payday loans are generally for a small sum over a short period of time.

Second, the payday lender must be licensed or otherwise authorized by the province in which it operates to enter into a payday lending arrangement. This is the crucial component of the amendments proposed by Bill C-26, because this requirement will ensure that for an exemption to apply there must first be laws in place to govern payday lending in the province in question. Ultimately, it will be up to the provinces and territories to decide whether and, in virtually all respects, the extent to which they will legislate.

The only requirement that Bill C-26 requires in relation to the provincial legislative framework for the exemption to apply is that there be a prescribed limit on the total cost of borrowing. This makes sense. This requirement will ensure consumers know exactly how much they are paying for accessing a payday loan.

Finally, Bill C-26 provides that if a province or territory wishes to regulate the payday lending industry in a manner which would exempt payday lenders from section 347 of the Criminal Code, then they will also be required to be designated by the federal government.

Not all provinces will wish to or need to do this. For example, in Quebec lending at more than 35% is prohibited, so there is no need for an exemption in that province. In other cases, the designation will be required.

Seeking this designation is very straightforward. For such a designation, a province would write to the federal Minister of Justice and indicate that it has legislative means in place that provide consumer protection measures for those who seek payday loans, including, as noted already, a limit on the total cost to consumers for payday borrowing.

Upon the province's indication that requirements for an exemption have been met, and upon the recommendation of the federal Minister of Industry, the Minister of Justice would then recommend to the governor in council that the exemption be made.

Importantly, this designation can be rescinded at any point at the federal level in those instances where the province no longer meets the requirements for the designation or where the rescission has been requested by the province. This is a pragmatic and sensible approach in a country as vast and diverse as ours. The decision on how to regulate the payday lending industry will be entirely up to the provinces.

Indeed, consumer protection measures fall within the constitutional competence of the provinces and territories. The provinces already have consumer protection legislation designed to address the specific concerns and realities of their jurisdictions and they are the best place to identify the components that are necessary to ensure effective consumer protection within their own jurisdiction.

The approach provided for in Bill C-26 complements this existing provincial legislative framework. I support this approach. It makes sense and will facilitate greater regulation of the payday lending industry across Canada.

Contrary to what some might say, Bill C-26 is neither encroaching upon provincial jurisdiction in relation to consumer protection measures nor necessitating that provincial governments seek a federal blessing or stamp of approval for its consumer protection measures.

In fact, Bill C-26 does quite the opposite. Bill C-26 would amend the Criminal Code to provide the provinces and territories with the flexibility they need, and indeed, the flexibility they have requested, to enact consumer protection measures within their jurisdiction to better regulate the payday lending industry.

As I mentioned, many jurisdictions have indicated that section 347 of the Criminal Code hampers their ability to enact consumer protection legislation within their own jurisdiction. By removing this barrier, Bill C-26 will facilitate greater regulation at the provincial level and meet the needs of consumers and the groups who have advocated on their behalf.

These proposed amendments are long overdue. As I noted earlier, the payday lending industry originated in the United States before spreading north into western Canada in the mid-1990s. In the United States, many state legislatures have taken the necessary steps to regulate this industry in order to protect their consumers from unscrupulous business practices.

To name only a few, California, Vermont, Michigan, Mississippi, New York and Virginia all have legislation in place to regulate the payday lending industry. While the exact content of the legislation varies from place to place, common features of payday lending legislation in the United States include limits on the amount of money that can be borrowed as well as the cost associated with the loan.

We see the same thing happening right here in Canada. Already, Manitoba and Nova Scotia have enacted legislation in their provinces to provide greater consumer protection for those who use the services of payday lenders. In Manitoba, for example, the Consumer Protection Amendment Act received royal assent on December 7 of last year. In Nova Scotia, the Consumer Protection Act was amended and received royal assent on November 23 of last year.

Both of these pieces of legislation are specifically designed to regulate the payday lending industry in those provinces. They include requirements for lenders and set out rights for the borrower, and both provide that a maximum will be set on the amount that can be charged for a payday loan. Both of these pieces of legislation are not yet in force and are in fact awaiting the passage of Bill C-26 before taking effect.

The governments of Manitoba and Nova Scotia are watching the progress of Bill C-26 because its passage will ultimately mean greater protection and greater regulation for the industry, which of course will be of benefit to consumers in those provinces. Other provinces have indicated they will follow suit.

With the passage of Bill C-26, the provinces and territories will have greater flexibility in addressing the payday lending industry within their own jurisdictions. The approach we are taking is the right one.

In closing, the protection of Canadian consumers is something on which we can all agree, and I believe that Bill C-26 will provide for this. I urge all hon. members to join me in supporting its quick passage into law.

Criminal CodeGovernment Orders

1 p.m.

Liberal

Charles Hubbard Liberal Miramichi, NB

Mr. Speaker, the parliamentary secretary alluded to similar activities in Nova Scotia and Manitoba in terms of their legislation. I am wondering if he is able to give the House some direction in terms of administrative fees and other costs that go with payday loans.

Criminal CodeGovernment Orders

1 p.m.

Conservative

Rob Moore Conservative Fundy Royal, NB

Mr. Speaker, that is a good question. Earlier in my speech I mentioned the total annual cost of borrowing, including all fees, some of which I named, and the interest that is charged. Worked out annually it could be over 100%, 200%, 300% or even 1000%. It is in fact the fees that are adding to the overall cost of borrowing, as well as the interest.

What is important to note is that Nova Scotia and Manitoba have taken up the call to protect their consumers in their respective provinces. They have put in place a framework that will put a maximum in place in regard to protection for consumers so that there can be a better understanding of the relationship that the consumer is entering into with a payday lending institution.

But in order for them to feel comfortable in enacting that legislation, in making that legislation the law, they first require the passage of this bill, Bill C-26, which would amend the Criminal Code and in fact would pave the way for the provinces to bring in their own frameworks, frameworks that are appropriate for each province.

Criminal CodeGovernment Orders

1 p.m.

Bloc

Paul Crête Bloc Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC

Mr. Speaker, Bill C-26 is a blatant example of the Conservatives saying one thing, but doing something else. They claim to want to use a different approach with the provinces and to respect their jurisdictions, but in this case Quebec has had its own Consumer Protection Act for years, to deal with payday loans.

In fact, this industry barely exists in Quebec, because we have eliminated excessive rates. The annual interest rate must be indicated on loan contracts, and the courts have established that an annual interest rate above 35% is excessive. In other words, we already have the tools to legislate this area.

I realize that the other provinces want some legislation, but this is a matter of regulating commercial practices and comes under provincial jurisdiction.

Why did the federal government not simply say that, where relevant legislation exists, such legislation will apply?

The Consumer Protection Act has been in effect for over two decades and it is working very well in Quebec. In committee, we suggested that this be indicated in the legislation, but that proposal was rejected by the other three parties, which completely ignored the fact that Quebec's experience in this regard is conclusive.

Why does the federal government not accept that we simply indicate this in the act, instead of having the Prime Minister give his blessing and the governor in council decide whether or not the Quebec legislation is acceptable?

The government could simply have said that, if a province already has an act, that legislation will continue to apply, and where new legislation is passed, such legislation will have been determined by the provinces.

How do we explain this discrepancy between the Conservatives' rhetoric and the respect for provincial jurisdictions? In the case of payday loans, Quebec has long had in place a tool that is recognized as adequate and acceptable.

The Conservative government has decided to adopt the same attitude as its predecessor and as federal governments in general. This means that the federal government will impose the same measure across the country, without taking into consideration the initiatives implemented by various provinces.

Why does the Conservative government not show good faith for once and accept such an amendment, so that we have an act that will adequately serve Canada, while respecting the practice that has been in use for decades in Quebec?

Criminal CodeGovernment Orders

1:05 p.m.

Conservative

Rob Moore Conservative Fundy Royal, NB

Mr. Speaker, I listened with interest to the hon. member's question. My speech basically refutes everything the hon. member just said. I said very clearly that not all provinces would wish to or need to do this. For example, in Quebec lending at more than 35% is prohibited, so there is no need for an exemption in that province. In other cases the designation will be required.

As the hon. member correctly pointed out, this means that Quebec has essentially banned the practice of payday lending and payday lending institutions by implementing a 35% cap on the maximum amount of interest that can be meted out in a loan agreement. The other provinces are calling for us to pave the way by amending the Criminal Code, which prohibits an amount that would equal over 60% and makes it a criminal offence to charge interest at a rate over that amount. I mentioned that in my speech. The provinces do not feel comfortable bringing in their own legislative frameworks to accommodate their consumers until we at the federal level pull away from that area of jurisdiction.

Quite to the contrary, we are actually recognizing the competence and the jurisdiction of each province to put in place its own framework. Quebec has done so. Manitoba and Nova Scotia have also done so. The approach that Manitoba and Nova Scotia wish to take requires Bill C-26 to pass. This would allow provinces to legislate in this area to protect their own consumers.

Criminal CodeGovernment Orders

1:05 p.m.

NDP

Pat Martin NDP Winnipeg Centre, MB

Mr. Speaker, coming from the province of Manitoba, we are anxiously awaiting Bill C-26 to pass. We see it as the enabling legislation so we can start to rein in this burgeoning industry, the payday lenders that are sprouting up like mushrooms in the inner city riding that I represent. They are an absolute scourge on the poor.

It is not any wonder that they are burgeoning and popping up in virtually every vacancy and every strip mall one can imagine. They are not just charging 60%, or 100%, or 1000% interest, some are charging 10,000% interest, according to independent studies done by the University of Winnipeg. Even the old leg-breaking loan sharks could not make money like that. There is no single thing one could do in the country to make 10,000% interest. I am told that selling cocaine does not get one 10,000% interest.

We are anxiously awaiting the implementation of the bill.

However, why were they not prosecuting these people all along? Why did successive governments ignore the fact that these guys were charging usurious rates, clearly against the Criminal Code of Canada and clearly undermining the financial stability of the inner city of Winnipeg and other cities. What possible reason could they have for not busting these guys? Why were these underworld figures, who run these payday lending outfits, not locked up before we had to even take this measure to provide a regulatory framework?

Criminal CodeGovernment Orders

1:10 p.m.

Conservative

Rob Moore Conservative Fundy Royal, NB

Mr. Speaker, section 347 of the Criminal Code, which prohibits interest of over 60%, was originally brought forward to address the type of loansharking the hon. member has referenced, the serious cases that we perhaps have seen in the movies. People do not imagine, in many cases, the thousands and, indeed, millions of transactions that take place in Canada with some of the payday lending institutions.

As I mentioned, the payday lending branch is a relatively new phenomenon in Canada. It has developed since those provisions in the Criminal Code were made to combat loansharking.

We feel that section 347, while appropriate to deal with loansharking, those type of serious underworld activities, as the member references, is not the best tool to regulate the payday lending industry as it has developed. We feel the group in the best position to regulate this industry is the provinces. We have talked a bit about Manitoba. I mentioned Nova Scotia. We talked about Quebec.

It could be that each province will take a somewhat different approach to regulate payday lending within its jurisdiction. We recognize the different approaches that provinces wish to take. By passing Bill C-26, at their request, we are enabling them to take that approach. It should be mentioned that if a province chooses not to move in this direction and regulate that area of law, then section 347 of the Criminal Code continues to apply to all transactions.

Criminal CodeGovernment Orders

1:10 p.m.

Liberal

Ken Boshcoff Liberal Thunder Bay—Rainy River, ON

Mr. Speaker, I believe if you would seek it, you would find unanimous consent for me to split my time with the member for Malpeque.