Mr. Speaker, I am pleased to speak today on this NDP opposition day regarding the motion presented by the member for Sudbury.
The Bloc Québécois supports, in principle, the motion that is before us today, that the government should take action to protect consumers who are particularly vulnerable in tough economic times.
However, when the government introduces legislation of this nature, as we sincerely hope it will, we will make sure that it is respectful of the jurisdiction of Quebec and the provinces in this area.
I would note that in Quebec we have had the Consumer Protection Act since 1971, and that this act governs contracts between credit card issuers and consumers. It will therefore be important for both Quebec’s jurisdiction and Quebec’s expertise in this regard, which is considerable, to be taken into account.
I would like to point out, and I will come back to this later if time permits, that in 2007 the Supreme Court denied a financial institution leave to appeal in a case involving one of the largest exemplary damage awards in the history of Quebec. That decision affirmed a decision of the Quebec Court of Appeal, and confirmed Quebec’s jurisdiction and its ability to protect consumers in their dealings with credit card issuers.
I will not read the motion before us in full, but we do agree that debt is a major problem in Canada and we find it surprising, to say the least, that the gap between the Bank of Canada’s key lending rate and credit card interest rates is continually growing, when we might have thought, given the rising numbers of all sorts of cards being widely used by consumers, that competition should be narrowing the gap. Surprisingly, the reverse is happening.
It is also true that the big banks and financial institutions are making large profits from that gap, and even though a few of the items in the NDP motion do not all come within the jurisdiction of the federal government, we believe it is worthwhile for the federal government to take action in relation to matters within its own jurisdiction in this regard.
On that point, item (a) in the motion before us talks about a measure that would “protect consumers from ‘any time, any reason’ interest rate increases and account changes”. That could provide a useful starting point that would, in this case, come under the jurisdiction of the federal government.
We have long said that the federal government could look into linking the credit interest rate to the Bank of Canada's key lending rate with reference to the criminal rate in section 347 of the criminal code, which would better synchronize the cost of credit and the usual rate of interest. In other words, rather than having the criminal rate in section 347 set in absolute terms, we think the government should look into making it relative, if you will, to the key lending rate of the Bank of Canada.
Since I referred to it earlier, I would like to elaborate on the matter of provincial jurisdiction. Everything that concerns local business and civil law comes under the jurisdiction of the provinces and Quebec. So the companies issuing credit cards are subject to the rules of consumer protection contracts in each jurisdiction.
The legislation on consumer protection sets out many strict requirements specifically governing credit cards of all kinds. Section 118, for example, defines variable credit and raises the issue of credit cards. Section 126 provides that a company issuing a credit card must send a statement of account to consumers setting out a number of points I will not mention here, but which are described quite explicitly in the legislation.
Section 128 provides that a company issuing credit cards may not increase the limit of the variable credit, called usually a line of credit or credit limit, except at the express request of the consumer. That is very important, and I will come back to that. For example, it is provided that notice of any change to the terms of a variable credit contract must be sent at least 30 days before it takes effect. So we can see that there are regulations in Quebec to protect consumers and that the Government of Quebec can, if it wishes, continue to legislate in this area. We believe, however, that the federal government could also do its part in its own areas of jurisdiction, as I mentioned earlier.
A number of examples of class actions are currently before the courts in Quebec against the practices of financial institutions contravening the Consumer Protection Act. I will come back to this later. I would, however, like to give a few examples of practices considered dubious. The typical example is that of over credit limit fees.
American journalist Bob Sullivan wrote a book on the hidden fees paid by American consumers. Practices in Canada are similar in many respects. Hidden fees include the famous over credit limit fees. The problem lies in the fact that the companies issuing credit cards now allow consumers to exceed the limit of the credit card rather than simply refusing the transaction. They subsequently charge the over credit limit fee. In the United States, the fees run between $10 and $35, which is similar to such fees in Canada. Within my own circle, someone mentioned this problem to me. I was stunned to learn that an institution could charge fees when, in a way, it was the negligent party since it had allowed the credit limit established under contract to be exceeded.
In 2004 and 2006, Option consommateurs launched a class action suit against certain financial institutions which issued credit cards. Their suit was against financial institutions which had made unilateral decisions to raise customers' credit limits and to allow people to exceed their limits by imposing over-limit charges, fortunately an offence under the Consumer Protection Act. I would emphasize that what was “fortunate” was that this practice is banned by the consumer legislation, and not the non-compliance with the law by certain companies. I am sure that was understood by everyone.
So, in November 2006 and October 2007, this class action was allowed by the Superior Court against the following financial institutions: Amex Canada and the Bank of Nova Scotia for over-limit charges to customers; Canadian Imperial Bank of Commerce, Citibank Canada, HSBC Canada, MBNA Canada, and the Bank of Montreal, for both raising credit limits without the cardholder's consent and for imposing over-limit fees. The National Bank of Canada was also included for increasing credit limits.
According to Option consommateurs, the purpose of this class action was to obtain the reimbursement of illegally charged fees and exemplary damages.
In closing, it might be worth pointing out that the consumer protection bureau states in its Internet site that:
The merchant or financial institution cannot raise the credit limit, if there is one, except at the express request of the cardholder. The mere fact that the consumer exceeds his or her original credit limit by making a purchase or purchases does not constitute an express request within the meaning of the act.
The class action is still underway and we wish good luck to all those involved .
I will not have time to discuss excess late payment charges. I will simply point out that it would be appropriate, in these difficult economic times, for the government to pass legislation on this. That is why we are supporting the NDP motion.