House of Commons Hansard #44 of the 40th Parliament, 2nd Session. (The original version is on Parliament's site.) The word of the day was cards.
Yvon Godin NDP Acadie—Bathurst, NB
Madam Speaker, I rise on a point of order.
I would like to draw the attention of the House to the following motion:
That, at the conclusion of today's debate on the opposition motion in the name of the member for Sudbury, all questions necessary to dispose of the motion be deemed put and a recorded division deemed requested and deferred until Monday, April 27, 2009, at the end of government orders.
The Acting Speaker NDP Denise Savoie
Does the hon. member have the unanimous consent of the House to move the motion?
The Acting Speaker NDP Denise Savoie
The House has heard the terms of the motion. Is it the pleasure of the House to adopt the motion?
Opposition Motion--FinanceBusiness of SupplyGovernment Orders
Charlesbourg—Haute-Saint-Charles Québec
Conservative
Daniel Petit ConservativeParliamentary Secretary to the Minister of Justice
Madam Speaker, through you, I would like to ask a question of my colleague about the motion before us for which the vote is deferred.
In the province of Quebec, as my colleague was saying, all these matters are covered in its Consumer Protection Act and contracts come under the Civil Code of Quebec. With a motion of this type, do we not run the risk, every time we mention consumer cases, of weakening Quebec's rights and laws? That is the approach used on occasion by the Liberal Party and the NDP, who are centralists, to weaken the rights of provinces. My colleague is correct in stating that laws already exist to protect consumers. They are laws that we voted for. We have a civil code.
Is my colleague prepared to reconsider how she will vote in order to protect Quebec laws and prevent the federal government from meddling in these laws?
Carole Lavallée Bloc Saint-Bruno—Saint-Hubert, QC
Madam Speaker, that is music to my ears. Here we have a representative of the Conservative government rising in the House to ask that there be no intrusion in Quebec's areas of jurisdiction. I invite him to do likewise with all the other files of his government. I encourage him to protect the jurisdiction of Quebec and to support neither intrusion nor overlap. That is what I would ask of him.
That said, yes, the NDP motion infringes on Quebec's areas of jurisdiction. Of its ten or so items, there is only one that is correct. We know that the NDP is highly centralist, but the Bloc Québécois will vote in favour of this motion, particularly because of the first item, which calls for protection of consumers from “any time, any reason” interest rate increases and account changes.
This does indeed fall under the purview of this Parliament.
Paul Szabo Liberal Mississauga South, ON
Madam Speaker, the motion calls for legislation to be introduced within six months. The member knows the process that a bill would have to go through. It is quite unlikely that such a piece of legislation would ever be dealt with by this place, at all stages, in both chambers, and be available to assist Canadians in time. That is a concern.
I want to ask the member's opinion about an additional approach, and that is the preventative approach which should be part of a comprehensive solution, which basically says that credit cards should not be used for credit, and which basically says, as is authorized in the budget for the government, to inform the public about the facts about how many people have been hurt, about the real costs, and about the risks that they take when they use credit cards for financing, and that they understand where they can get help.
This, in my view, is a way in which we can address the problems that people are facing now rather than months, maybe even years from now. I wonder what the member thinks about that.
The Acting Speaker NDP Denise Savoie
The hon. member for Saint-Bruno—Saint-Hubert has less than a minute for a response.
Carole Lavallée Bloc Saint-Bruno—Saint-Hubert, QC
Madam Speaker, I thank the hon. member very much for his question.
I repeat, this is a Quebec responsibility and everything here is already covered fully by the Quebec Consumer Protection Act.
Is six months not long enough for such legislation? From my experience here in this Parliament, where there is a will, there is a way. When something is identified as a priority, it gets acted on. I have already seen bills passed within a matter of weeks.
Niki Ashton NDP Churchill, MB
Madam Speaker, I would like to share my time with my colleague from Windsor West.
I would like to begin by applauding my colleague from Sudbury and the work of the New Democrats in the House in bringing forward such an important proposition and calling for the introduction of a credit card accountability, responsibility and disclosure act. This is so important to us in our every day lives as Canadians in general, but even more important at this time of unprecedented economic downturn.
Basically, this act calls upon the government to protect consumers, protect Canadians who are going through a difficult and rough time, and ensure that their livelihoods are being protected. In many ways, it is modelled along the initiative that the Obama administration south of us took in introducing a credit card accountability, responsibility and disclosure act just some time ago. It was something that was heralded as very good news and very important in protecting American consumers. The question remains, why can we not see the same done here?
I would like to speak to this motion as the critic on youth issues. As a young person myself and the second-youngest person in the House of Commons, I speak in a place where not many people of my generation have the chance to speak. It is a tremendous honour to be here at my age and to represent the people of Churchill, one of the youngest regions in Canada. However, I also hold it very important to represent my generation and people of a similar age whose voices, in many cases, are not heard.
This bill seeks to protect all consumers. Particularly, it pays attention to the challenges and the need to look out for young people in our country. Among the many things this act would do, it would protect young consumers from aggressive credit card solicitations. This is in addition to dealing with interest rate increases and account changes, protecting card holders, and eliminating abusive fees and penalties. However, the particular attention to the situation facing young people is of utmost importance.
I want to paint a bit of a picture of the reality that many young people in Canada and around the world face today. We know that we live in the age of constant advertising and media, whether it is the Internet, television or whatever it might be. We are constantly faced with images of consumption and advertising encouraging all people, but especially young people, to spend their money. In many cases, these things might be useful. However, in many other cases, their usefulness is questionable.
The matter remains that consumption is very much an activity impressed upon young people. In recent years, we have seen the promotion that we need credit cards in order to fuel that consumption, that young people will be able to achieve what they want and be happy by buying, and that this will be easily accomplished through credit cards. Watch the music channels and listen to the radio. All of these messages are readily there and specifically promoting the use of credit cards. Having gone through a couple of universities myself, I am aware of walking down the hallways and seeing numerous credit card companies approach students to take out credit cards and enter into a proposition that for many students is difficult.
Given that encouragement of consumption and the use of credit cards, we also have to see how that interacts with some of the other realities young people face. For example, many young people who are going to university or achieving post-secondary education are facing increased tuition fees. In many cases, they have to take loans out in order to pay off these tuition fees. The average Canadian student debt among those who borrow and graduate from four-year programs is $22,700, an amount that for many students who either work part-time or may not be able to work at all is quite prohibitive.
We are dealing with increased tuition fees and an overall increase in the cost of living, which for many students is highly problematic. The New Democrats have called upon the Conservative government to deal with issues of access and support when it comes to post-secondary students.
I also believe it is important to protect our young people from credit card solicitation, but the abuse of credit card fees also interacts with the employment situation that many young people face.
We talk a great deal about the thousands of jobs that so many Canadians have lost from coast to coast to coast. We need to recognize that, in many cases, this means not only the loss of jobs for young people, but also there are no jobs for them. I see hiring freezes and layoffs in my area. In many cases companies are laying off young people, but they also are shutting down opportunities for them when they come out of our educational institutions and look for jobs.
Given the difficult employment situation that our young people face today, in addition to the constant encouragement of young people to take out credit cards and to be exposed to these difficult situations, is very unfair. We need the government to take leadership, not just looking at it in terms of protecting all consumers, but also the importance of looking ahead to the future and supporting young people in the challenges they are facing today, which in many ways differ from the challenges that other generations face.
I want to particularly point out that the employment situation will continue to be very difficult for young people in that we do not know when exactly we will come out of the economic recession. We recently heard the negative forecasts. The future appears quite grim for many young people. I hear it from peers of mine from university and from college. They say that they are getting an education, and they know that is right, but what kind of opportunities are they going to have?
The difficult situation faced by many of the children of members here and many young people who work in our offices, who make government and our country work, needs to be recognized. The Conservative government needs to take action. It needs to listen to the voices of the House, the leadership that New Democrats have taken. The role of government is to stand up for consumers and to protect them.
I also want to note that young people are not in isolation from the reality that many of us face. Many young people are members of families and depend on them, which are equally finding themselves in very difficult situations as a result of the lack of regulation and unfair credit card rules.
For example, the Canadian household debt to income ratio in 2003 increased by 105.2%, which is incredible. We note that many young people depend on their parents or their families to help them get through their education or to help them get on their feet because they do not have that ability in many cases, and especially now.
It is beyond me to understand why any member would vote against something that not only stands to protect consumers, but, more important, stands to protect our young people and our future.
Brian Masse NDP Windsor West, ON
Madam Speaker, one of the interesting things the member for Churchill highlighted was students' credit card debts. Could she comment on the compounding behaviour of student debt and interest rates?
For example, the Government of Canada borrows money at 0.25%, the Bank of Canada rate right now, for student loans, although the interest rate for students is higher. There is not only quite a significant difference in credit cards rates in the borrowing costs and what has to be paid back, but also the interest rates students pay for their student loans.
How does that affect students who are emerging into the economy so they can purchase homes, or cars, or get on their feet, get a job and progress? This is an important part of the debate today.
Niki Ashton NDP Churchill, MB
Madam Speaker, my colleague brings up an excellent point. The issue of student debt, which it seems only New Democrats raise in the House, is truly alarming. A few months ago, we understood that the student debt in Canada had increased over $13 billion on the backs of current and former students. This is debilitating when it comes to students looking for jobs, which in this current economic market do not exist.
How will they pay off this kind of debt? Many of them are indebted to their credit cards and through different loan programs. That is why we need some proactive action to ease the burden that many students, young people and ultimately many Canadians face.
Charlie Angus NDP Timmins—James Bay, ON
Madam Speaker, I took great interest in my colleague's speech. I have been listening all morning and I have heard a very distasteful line being promoted by the Conservative Party. They are really the Cadillac Conservatives.
During the worst economic crisis in Canadian history, the Conservatives are blaming the people who are losing their jobs. They are blaming the people who are being ripped off. They say we need some financial literacy, as though the people who come into my office, who are faced with usurious credit card rates, are somehow hicks and illiterates. The idea that if we help these people become smarter so they can become responsible, as though they were irresponsible in the first place, is absolute gall. The motion talks about protecting cardholders who pay on time, limiting abusive fees and penalties, prohibiting issuers from charging interest on debt that has always been repaid, ensuring that cardholders are informed of the terms of their account and protecting young consumers from aggressive credit card practices.
How can the Conservatives be so dismissive and out of touch with the reality of what average Canadians face right now, being ripped off by the banks and the credit card companies?
Niki Ashton NDP Churchill, MB
Madam Speaker, I thank my colleague for drawing attention to a serious lack of sensitivity and recognition of the extremely difficult situation many Canadians face. It is incumbent on all of us as members to touch base with the people that we represent. When we talk about Canadians, there is no doubt that many of them live in the ridings represented by Conservative members. They are looking for this kind of protection.
There is this idea that it is attributed to individuals as to why they are in a difficult situation. We know it is about supporting people who are paying on time. It is also recognizing that there are some sheer examples of abuse in this situation. There is also the need to recognize the difficult situation that people are facing in terms of loss of employment, or the situation that young people are facing as they are going into a job market that is beyond grim. We need the government to take action in this area.
The United States, where the economic situation is far worse than the one we face here, and for both of our countries it is getting worse, is taking the initiative to look out for the well-being of their citizens. Why are we not seeing the same thing here? The New Democrats are calling for that, and we hope we will get the support of all members of the House.
Brian Masse NDP Windsor West, ON
Madam Speaker, I am proud to stand here as a New Democrat and call for a credit card accountability, responsibility and disclosure act to be created. It is important for us to do this. With the economy in its current state and as we look for solutions to get out of this, it will require a team effort. That team effort is government and business taking responsibility. We know the banks got off scot-free in all of this. It is time for them to come to the table and produce a fair and balanced approach to its borrowing practices.
I want to go back to something that is really important. Back in 2003, John Manley, the Liberal minister who was known as the minister of everything because he had received so many portfolios, came to the House of Commons. He tried to negotiate with the parties to deregulate the banking system and make it more like the American system. I remember the debate quite well.
As a New Democrat, I opposed that. I give commendations to the Bloc members because they also opposed it. At the time, the Conservative Party/Alliance Party were excited about the issue and tripped over themselves to support it. If we had not stopped Mr. Manley and the Liberals, we would have had a far worse situation than we have today. Therefore, we did them a favour. We prevented the further deregulation and the creation a banking system similar to the American one.
The member from Winnipeg, who sits next to me, was quite active in that campaign and did a terrific job to ensure that people understood the issue. Canadians spoke loud and clear and said that they did not want that happen to our banking institutions.
Today we are starting to see what is happening. Over a series of time, there has been an effective marketing campaign to encourage people to sign up for credit cards, whether it be the retailers that offer credit card interest rates of up to nearly 30%, or the banks that offer up to 20% interest rates.
A number of practices are simply unfair. The credit card companies have made record profits over that time and they continue to make profits beyond the scope and pale of what people can even comprehend, because they are struggling to get by. It is time to take a reverse approach. Let companies have a profit, but it has to be fair and balanced. Let us redirect that income back into the economy as a stimulus and ensure we can settle people so they will not get further behind, which would help stimulate the economy.
We know the banking institutions are not doing that. We know the government is not releasing some of its programs and services in an expedient way. In fact, I was looking at some of the Industry Canada announcements, going back a couple of years ago. Money has never been spent, such as money for infrastructure, for example, the border infrastructure fund. There are many more examples.
One thing we could immediately do to alleviate some of the egregious attacks on consumers and their families is to put in a fair set of regulations. For example, I have a CIBC Visa card, which costs me $200 a year. There is no reason why that charge should be allowed. Two hundred dollars is quite a bit of money. On top of that, the service that one receives does not warrant that charge. At least that should be examined.
The United States recognizes this. The Obama administration is moving forward with a package that is going to ensure a better sense of balance.
When I talk about balance, one of the worst things right now for those who use credit cards is if they do not pay off the full balance, they get charged the interest rate on the full balance. For example, if people have a $500 credit exchange during the month and someone in their family gets sick or there is a crisis and they cannot pay back the full amount, they have to pay the interest on the full amount. That is unacceptable. It should be on the amount that is actually on the card. Once again, that would put money into the pockets of people so they could buy groceries, or pay their landlord, or pay for heating or cooling, all those different things that are important essentials.
The community of Windsor West has had an unemployment rate of 10% for a number of years, yet the government during the election said that there was nothing wrong with the economy. We understood the warnings with the threats to the auto industry ages ago, with no help or assistance from the government.
Unemployment is now at 15% and even higher given that many people have given up even looking for work. We are trying to find our way through it. The government needs to be responsible here and look at retipping the scales a bit. The credit card companies and the banks cannot have such a big advantage. Canadian taxpayers have had to buy up loans from the banks and support their systems. Taxpayer money has to be injected into the market economy because the banks will not provide that.
I have a couple of examples. Even before this crisis, an auto parts supplier in the county of Essex was producing parts for the Ford Escort and selling very well and doing very well in the market, It had workers making $12 or $13 an hour, not a rich salary, and they had modest benefits. The company brought in automation. It had a good assembly rate and a good quality rate. It had problems because the banks, even before that, changed their borrowing practises on them just because they happened to be in the sector. It was not because they were bad customers or that they were looking at closing or having a problem with a particular vehicle at that time. It was because they could. The bank actually raised the company's interest rate to a point where it ate into its entire profit from what it was getting from Ford Motor Company to produce the vehicle parts.
The problem is that there was nothing in there that was really productive, whereas those workers were doing what they needed to do every day. I do not think $12 or $13 an hour is a wage that one could really say is a Canadian dream. It barely lets people get by. Meanwhile, the banks were undermining that successful venture.
When we look at this motion and we talk about prohibiting the unfair application of credit card payments, protecting cardholders who pay on time, limiting abusive fees and penalties, prohibiting issuers from using a consumer's card history with another creditor to raise interest rates, prohibiting issuers from charging interest on debt that has already been repaid, ensuring that cardholders are informed on the terms of their account, and protecting young consumers from aggressive credit car solicitations.
Those are reasonable things to do. I would add another one that I do not believe has been addressed today, and that is the issue of privacy and security of information.
For those who are not aware, the CIBC has decided to outsource its credit card processing to the United States. That means that all our credit card information is now available through the Patriot Act to the Department of Homeland Security, the CIA and the FBI. All those organizations need to do is contact that credit facility and provide that information. They are not even allowed to tell CIBC that a person's information has been taken. As well, there is no process in place as to how our personal information is used within those agencies as to whether it is dispersed or scrubbed after an investigation is done.
The government, similar to the past one, has been remiss. We need to have an international treaty to protect privacy related to that and it has not done that. In fact, ironically, we have learned that even some Canadian government offices outsource some of their actual payment systems to the United States. That information once again leaves the country and becomes susceptible to the Patriot Act.
I want to go back to the economy right now. It is a fair and balanced approach when we start to look at the indebtedness of Canadians and what we could do to actually stimulate the economy. When we consider household debt right now, it is quite significant. It has gone up a number of stages over the last number of years, including that 84% of people have some type of a debt.
I would argue that this a very modest and responsible way to approach things. Everybody has to chip in right now to do the things that are necessary for our country to continue to exist and the middle class to flourish. The banks and credit card companies have an abysmal approach to lending practises that needs to be redirected. It is stimulus that will be good for many communities, as well as a local stimulus. We would stop a system right now that is counterproductive and, more important, is putting so many people behind at a time when they do not need to be.
Paul Szabo Liberal Mississauga South, ON
Madam Speaker, the member repeats, I think, the sentiment of virtually all members here, which is that there is a problem and it must be addressed.
My concern is that the member is suggesting that this is a modest approach but that it can create some sort of stimulus. However, the motion calls for the government to introduce a bill within six months and then we would go through the whole process which could take over a year and may not even happen if we are interrupted by an election.
My concern raises the point that maybe we should also be talking about the need for the government to educate the public about the scope, the magnitude and the impact of the problem. We, the consumers, also have things that we could do to mitigate the impact because it is compounding all the other problems.
Maybe the starting point is to get Canadians to start thinking about the saying “credit cards should never be used for credit”. If an individual needs a credit card to get credit, that individual is accepting the high interest rates when traditional bank loan rates are much lower. If an individual does not go to a bank to finance something that is required beyond the grace period of a credit card, chances are that it means that person has bad credit and should not be getting credit in the first place.
We all have responsibilities. I hope the member would agree that we must push the government to help Canadians start considering their personal circumstances.
Brian Masse NDP Windsor West, ON
Madam Speaker, right now 22.2 million credit cards are being used in Canada, so the horse is out of the barn.
I would suggest that we amend the motion and make it less than six months. I have seen legislation move very quickly through the House. In fact, some legislation has moved through in a day.
I am very much in favour of those suggestions but we need to do something now. We need to ensure that this is not just about lecturing Canadians. The problem is already out there.
I want to point out something that is really important right now. The Bank of Canada rate is at .25% and it has said that it will remain there for the next year. Despite that, the bank rates and credit card rates have gone up incrementally. How is that even possible? That is criminal at best and ethically it is bankrupt. We need to ensure the banks and credit card companies are accountable. With a .25% borrowing rate, how can even put this product on the market in this day and age when so many people are suffering and paying higher rates than are morally and ethically acceptable?
Charlie Angus NDP Timmins—James Bay, ON
Madam Speaker, it has been absolutely fascinating listening to the Conservatives saying that Canada is protected because we have a wonderfully regulated system. They certainly do not want to protect consumers because that would be regulation.
The fact is that the Conservatives have opposed proper regulation of banks from the beginning. It is in their blood. They pretend that the dodging sub-prime mortgage crisis existed only in the states. It started to happen here in Canada because the government was deregulating the mortgage market and it was caught out. Canadian taxpayers now have to underwrite $26 billion of toxic assets. Taxpayer money is now being used to backstop the banks.
However, when it comes to protecting citizens who are being preyed upon and penalized through all kinds of unfair predatory practices, the government's response is to blame the individual by saying that if they had been sharper they would have been more financially literate and that if they had taken responsibility for their own lives there would not be a problem.
The problem here is systemic. It is systemic abuse of individuals by the large banks and whenever they are in trouble they go to their friends and get a bailout while citizens are left high and dry.
Why does my colleague think the Conservatives continually have it in for average Canadians? Why do they continually cover any corporate abuse that happens in this country?
Brian Masse NDP Windsor West, ON
Madam Speaker, it is quite simple. This problem actually goes back to 1990 when Brian Mulroney's government rejected capping the interest rate. The Conservatives are protecting the fact that they were the ones who acted back in 1990. The Brian Mulroney government acted for itself,which is no surprise. That government said that if rates were capped it would have an adverse effect on consumers. The reality is that it has done exactly the opposite.
Once again, it goes back to the Mulroney era. It is no different than the stuff going on with Schreiber and everything else right now. There are a lot of problems with the Conservative Party and its history. It is interesting to note that Mulroney took a big cash settlement that we cannot even explain.
However, this problem goes back to the 1990s and the Brian Mulroney government rejecting this from the beginning.
Mike Wallace Conservative Burlington, ON
Madam Speaker, it is my pleasure to speak to the NDP motion today moved by the member for Sudbury. I have tremendous respect for him but he could have done a little better job in terms of researching the issue that he has brought in front of the House, particularly the way the motion is worded.
Part of the motion is factually incorrect. The credit card accountability responsibility and disclosure act of 2009 was not introduced by the Obama administration. It was introduced by Senator Christopher Dodd of Connecticut who is not a member of President Obama's administration. This is not that difficult to verify. The information is public and the member could have found out.
For us to have credibility when we talk about issues, we need to do proper research to ensure the information provided to the House is accurate. All we are asking for on this side is accuracy.
Instead of proposing something tailored for Canada, I find it ironic that the NDP is supporting a motion today that is a copy of a U.S. plan. There is not a day, not even an hour when NDP members are not up speaking and comparing us to America and saying that we cannot be doing things like the Americans are doing.
All of a sudden, however, they are giving credit to somebody else south of the border and applying it to the credit card system for consumers here in Canada that is not accurate and does not even reflect the Canadian experience. I am not sure why the NDP has proposed this today basing it on the American system, a system that it likes to criticize over and over again in the House.
In addition to that, the Senate committee on banking is conducting a review of the credit card situation here in Canada. I can say, from being on both the finance and industry committees, that both committees have plans in the very near future to review the credit and debit card system in this country. Why would there be a motion prior to getting information from all sides of the issue at the Senate committee and at the industry and finance committees?
Motions have passed in the committees and we on this side of the House have supported them. I am on both committees so I know that for a fact. A motion that passed at the finance committee was originally proposed by the Bloc member on that committee. We added to it and it became our motion. Our parliamentary secretary added some wording and broadened the study in order to allow us to look at more issues dealing with credit and debit card issues in Canada.
I do not want anybody to forget that in our economic action plan, which was supported by the House, there is an indication that the finance minister will be looking at that issue. The finance minister told everyone in the House earlier this week to stay tuned because it was being worked on and it was part of the plan that was coming. Why would the NDP introduce this Americanized motion today without having all of that good information from all sides of the argument to see where we are going?
What we want to do is look at what is good for Canada and Canadians and not necessarily look at what is good for Americans, which is what this motion tends to do based on the way it has been presented: that we should look at what the American motion does for the American system, which is different.
Even more strange for me is that the NDP motion comes just weeks after its members voted against budget 2009 when we announced our intention to bring tough but fair new regulation on disclosure requirements for credit cards and to limit business practices that are not beneficial to consumers. What is more, we introduced the necessary legislation to allow us to proceed with these new regulations. and, as we know, the NDP voted against that.
The NDP has clearly shown itself, in my view, to be incapable of standing up for consumers in this case. The NDP members cannot claim one thing on one hand, and then in their actions do something different. I think that is a sad commentary on where we are today and why this motion does not make any sense to me and to my colleagues on the Conservative side.
On the other hand, as I mentioned, our Conservative government is taking significant and decisive steps to help Canadian consumers who use credit cards, steps which my fellow Conservative, the parliamentary secretary, outlined for members earlier today. I would like to address another aspect of the strategy to help Canadian consumers who use credit cards or other financial services or products improve their financial literacy.
Witnesses appeared at the industry committee and the finance committee to talk about financial literacy. Through no fault of their own in my view, it has not been a priority for Canadians to understand how the system works. There are organizations that will help. In my riding in the fall, because we only have one more break week to be back in the riding, I have committed to organizing a public meeting strictly on financial literacy. Experts in the field of financial literacy will talk to the people of Burlington to educate them, to give them the tools they need to make proper financial decisions.
We are living in an increasingly complex world of financial services and products, many of which have become much more difficult for the average consumer to comprehend. Based on my experience, there are a number of financial products that have been put together over the years which many of those who sell those financial products have a hard time understanding. The range of financial products on the market or available through our local banks has been rapidly expanding, not only in availability but in complexity. This makes it difficult for the average investor to fully understand the risks or the fees that are involved. In this environment, and in light of the economic volatility we face today, strong financial literacy is not a luxury; it is an actual necessity.
In the words of Toronto District School Board trustee, Josh Matlow, who is spearheading an effort to get financial literacy added to the elementary school curriculum:
The reason that we're in this economic crisis right now is that many North Americans and people around the world didn't have the economic literacy that they needed to understand how to use credit cards properly and how to read the details of mortgage contracts.
That is the issue I propose to focus on today. First, I would like to consider what financial literacy actually means.
Financial literacy involves the ability to plan for one's financial future. Understanding the basics is crucial. Financial literacy is essential for people from all walks of life, including: the teenager who is setting up his or her first bank account and is trying to determine the best way to reach his or her goals; the family trying to make ends meet while saving for the family's first home; the investor trying to understand the risks and returns for his or her investments, or the benefits of compound interest; and the senior who is entering the world of Internet banking and ATMs.
May I add, as we were discussing pension plans and how they work at finance committee, it is obvious that people need more education on their pension plans. A lot of people do not even look at them until after the age 50. They do not understand what their defined benefit plan is offering them or, if they do not have one, what they have to do to save.
Those are the kinds of issues we need to get to, to ensure that Canadians are well versed on what is appropriate for their lifestyle and their future. Whether it is a sophisticated investment or a simple savings account, today's financial world cries out for improved financial literacy.
Indeed, a recent survey of the Canadian Foundation for Economic Education, which has appeared before us, suggested that Canadians “feel ill-equipped to make many of the economic and financial decisions that they face in today's volatile economic climate”. The survey also showed “troubling knowledge gaps among Canadians in basic areas of economic knowledge such as credit card interest rates and filling out tax returns”.
In the words of the foundation's president, Gary Rabbior, “When you have four in 10 Canadians who cannot calculate 8% on $1,000, and over 60% who do not know if their mutual funds held at financial institutions are insured, you are talking about a crisis of economic illiteracy”. Clearly, financial literacy is an essential skill that should be developed early in life. After all, a country's financial success is ultimately the sum of the financial successes of all of its households.
As Laurie Campbell, executive director of Credit Counselling Canada, has noted, “Two of the most fundamental things we need to learn as young people growing up are how to raise children and how to manage money. They are the most fundamental things in life”. They are fundamental as young Canadians now have more exposure to financial dealings than ever before. They have bank accounts, debit cards, credit cards, cell phone contracts, and online banking contracts. As they enter college or university, many will have loans and perhaps the beginning of an investment portfolio.
The world of finance is continually evolving and without strong financial literacy, it will be difficult for people to keep up. Without the ability to understand the financial products and services they use, consumers could wind up making unwise investment decisions or borrow well beyond their means and end up in a sea of debt.
By focusing on financial literacy, we can provide people with the knowledge to help keep their heads above water. When it comes to buying a house, for example, being financially literate means one may not have all the answers but at the very least would know the questions to ask, such as: what kind of mortgage can I get, what are my repayment options, what are the fees and taxes, how can I lower my payments, and can I really afford this?
Asking the right questions means understanding the true cost of borrowing. It means that knowing that the initial years of mortgage payments go toward servicing the debt, not paying down the principal.
Weak financial literacy could end up leaving people at a competitive disadvantage, unknowingly paying higher costs for basic banking transactions and short-term credit. They may face increased exposure to unregulated financial options and make themselves vulnerable to uninsured risks.
On the other hand, a greater understanding of financial information and increased financial literacy can result in better consumer choices, a larger and better market for their financial sector services and greater participation in capital markets. All that could translate into higher savings levels and decreasing indebtedness, making our economy even stronger. In study after study, the evidence is clear that the more we know financially, the more likely we are to save over the long term.
We have identified the issue: improving financial literacy. What about the solutions? We know the NDP does not have any, except maybe to call Senator Dodd in Connecticut to see what he is going to do with his bill. Luckily for Canadians, they have had the good sense in election after election never to have elected an NDP government federally.
Our Conservative government, on the other hand, has actually come up with some made in Canada solutions, after consulting with Canadians, to encourage and foster improved financial literacy. I would like to share with the House what our government has done through the Financial Consumer Agency of Canada, the FCAC.
This agency, in addition to its mandate to look at financial institutions' compliance with the consumer protection legislation and regulatory requirements, also undertakes consumer education initiatives. In doing so, it develops plain language, unbiased and educational materials on a wide range of financial products and services, which are going to be sent to the NDP offices as soon as I am done speaking. For instance, the FCAC has also developed a mortgage calculator that quickly determines mortgage payments and the potential savings resulting from prepayments, and online tools that help consumers shop for credit card and banking packages suited to them.
Since 2006, our Conservative government has provided new support for FCAC to build on its mandate. For instance, in budget 2007 we provided significant new funding for FCAC to undertake financial literacy initiatives, focusing primarily on youth, and to support the sharing of information with other financial education providers across Canada. I remind the House that this was new funding that was not supported by the NDP. Why did the NDP oppose helping financial literacy with this new funding? The funding was used to develop a free web-based interactive tool, The City, designed to help young people acquire strong financial skills and explore financial situations in a risk-free setting.
We also helped jointly fund the organization of the Canadian Conference on Financial Literacy, which took place in Montreal in September 2008. This event brought together more than 260 representatives from the government and the private and voluntary sectors to discuss Canadian and international experiences in developing, delivering, measuring and evaluating financial literacy programs, products and services.
We heard here the Canadian perspectives on this issue about improving financial literacy in Canada, not solely what the American senator from Connecticut wants to do in his country. However, we were not done there. We did more. In budget 2008, our Conservative government once again took steps to improve financial literacy. We provided the FCAC with $2 million in new ongoing funding to continue its work in that area and expand its research. Once again, I want to remind the House that the NDP voted against that.
This new funding has helped work toward the goal of significantly improving financial literacy among Canadians. For example, another free web-based interactive tool, The Money Belt, has helped provide financial information and tools to increase the basic financial knowledge of Canadians. This initiative provides an entry point to access various resources that teach the fundamentals of managing money. The Money Belt includes interactive tools on topics such as credit cards and bank accounts, combined with other financial tools.
Through FCAC, our Conservative government will continue to improve the financial literacy skills of Canadians in the long term through training initiatives and community partnerships. However, we are not done. We are helping to foster better financial literacy in other key areas as well.
Building on investments in the two previous budgets, budget 2009, our economic action plan, announced the establishment of an independent task force to make recommendations on a cohesive national strategy for financial literacy. Our task force, to be launched in the near future, will include representatives of the business and education sectors, volunteer organizations and academics that will be supported by a federal secretariat. Its conclusions will allow us to take stock of where more work is needed and make a strong contribution to ultimately empowering Canadians to make wise financial decisions.
Public interest groups such as Social and Enterprise Development Innovations have heralded this announcement by noting:
The government's commitment to work with all sectors to develop “a cohesive national strategy on financial literacy” is a critically important component of any long term economic recovery plan in Canada. Financial literacy is an issue that matters to all consumers of financial services including lower-income Canadians. We applaud the Canadian government for its leadership on this issue.
As my time is almost up, I will conclude by mentioning a couple of things. In addition to our commitment to financial literacy, this government is also working to introduce programs to provide incentives for families to build a responsible and secure financial future. For instance, to ensure home ownership remains an effective and affordable way to save and build equity for the future, we have put limits on new mortgages backed by a government guarantee. This includes fixing the maximum amortization period for new government-backed mortgages to 35 years and requiring a minimum down payment of 5% for those mortgages.
There is more I could say. I have more pages of notes here, but the fact is that financial literacy is an important factor to make Canada a stronger place for our families in the future, and I am very happy to answer any questions on that matter.
Malcolm Allen NDP Welland, ON
Madam Speaker, I thank my colleague for his speech on financial literacy. Perhaps rather than being in the House giving a speech on financial literacy to those folks who actually need interest rate relief, he really should have been giving it to the friends in the Conservative Party who are actually in the financial institutions, because they have needed it in the last year. The meltdown we see across the globe in financial institutions is about financial literacy, is about folks who do not understand what they are doing. In fact, the major players in the banking industry, including Canadian bankers, have said they do not really understand what they did. So perhaps the hon. member should have started with them instead of lecturing consumers on how they need to have more financial literacy.
What Canadian consumers need, and need now, is rate relief on their credit cards, not how to be able to decipher the rate relief. They need true rate relief. I wonder if my hon. colleague would comment on the fact that, for consumers today who are choosing hydro, a roof over their heads and food, not web-based financial literacy skills, how indeed the Conservatives intend to give that rate relief through the web?
Mike Wallace Conservative Burlington, ON
Madam Speaker, the fact of the matter is, in terms of financial literacy, it actually should start with the New Democratic Party. The previous NDP member who spoke talked about the 2.5% Bank of Canada rate, the overnight rate that is offered, for example, and why are the other rates going up. If NDP members had a sense of financial literacy they would understand, for organizations that loan money in this country, the overnight rate is not where they borrow money from the Bank of Canada. They would understand that is not what happens. They get their money, the cash that they lend out, from other organizations. The problem is global, not just in Canada. Those secondary markets that were providing cash to organizations that would then turn around and lend that money has shrunk, has gone, and they are not able to secure that funding.
When there is not the availability of a supply of cash to be used, that money becomes more expensive when they are able to attract it, which causes interest rates to change, which causes interest rates to go up.
I was on the finance committee when the banking organizations in this country testified, and I personally questioned them: Why would my credit rate go up by 2% when I have nothing to deserve that? They were able to give an answer that I did not necessarily agree with, but they have issues.
It is about literacy and understanding the system--