Madam Speaker, average Canadian workers and owners of small and medium-sized business have been hit hard by the financial impacts of the COVID-19 pandemic and lockdowns. I have heard from many business owners who are struggling to pay their bills and keep their businesses open, and I want them to know that I will not stop advocating on their behalf. In this Parliament we worked together to provide financial supports to individuals and businesses, but these supports have not been enough. Too many Canadians are falling through the cracks.
In March the Canadian Federation of Independent Business reported that one-sixth of small businesses in Canada are at risk of permanently closing. The average small business is now $170,000 in debt.
Not everyone in Canada has been suffering financially through the pandemic. A tiny minority of ultra-wealthy citizens and large corporations have greatly increased their fortunes while so many Canadians are suffering.
Banks and their CEOs have been some of the worst pandemic profiteers. Democracy Watch reports that four of Canada's six big banks are among the 50 most profitable banks in the world. While raking in profits, several of these big banks have raised their service fees during the past year or are planning to do so this summer. TD Bank reported second-quarter net income of $3.7 billion, 147% higher than last year. Its spokesperson was quoted as saying that fee increase decisions are never made lightly and only occur after careful consideration and review. Canadians would like to know exactly what careful consideration and review big banks go through before deciding to increase their fees during a global pandemic. Is being one of the top 50 most profitable banks in the world not enough? Do they need to be in the top 20?
Credit card companies charge an average annual rate of 20% on top of annual fees and cash withdrawal fees. Businesses are charged transaction fees, known as “interchange rates”, for every credit card swipe. In Canada, the average interchange rate is 1.4%. Retail giants like Walmart can negotiate very low interchange rates, while many small businesses pay between 2.5% to 3% per transaction.
In 2018, the government struck deals with Visa and Mastercard to lower their average interchange rates from 1.5% to 1.4%, but that was hardly worth celebrating. Even before the pandemic hit, the European Union had capped interchange rates at 0.3%. The sky did not fall and credit card companies still operate and make profits. The major difference is that the burden on small and medium-sized businesses has eased. Is agreeing to interchange rates nearly five times higher than the EU the best we can do?
Low-income Canadians are often forced to use payday lenders to cover financial shortfalls or unforeseen expenses. Short-term payday loans are regulated by the provinces, and their annualized interest rates could be as high as 400% to 500%. Some payday lenders offer long-term loans and lines of credit that are federally regulated. Annualized interest rates on these types of loans are as high as 50% and legally capped at 60%. There is no justification for capping rates at 60% when interest rates are at historic lows. This is predatory lending, and the government is facilitating it. This industry preys off people in need and locks them into a cycle of endless debt.
Canadians want to know when the government will step in and protect them from gouging by big banks, credit card companies and payday lenders.