moved:
That, in the opinion of the House, the government should take action to protect consumers who are particularly vulnerable in tough economic times; and therefore, this House calls on the government to introduce, within 6 months, comprehensive legislation, similar to the Credit Card Accountability Responsibility and Disclosure Act of 2009 introduced by the Obama Administration in the United States, that would: (a) protect consumers from “any time, any reason” interest rate increases and account changes; (b) prohibit unfair application of card payments; (c) protect cardholders who pay on time; (d) limit abusive fees and penalties; (e) prohibit issuers from using a consumer’s card history with another creditor to raise interest rates (“universal default” ban); (f) prohibit issuers from charging interest on debt that has already been repaid; (g) ensure that cardholders are informed of the terms of their account; and (h) protect young consumers from aggressive credit card solicitations.
Mr. Speaker, I will be splitting my time with the hon. member for Welland.
It is with great enthusiasm that I present this motion to the House for debate. The motion is a call for the introduction of a credit card accountability, responsibility and disclosure act.
The motion calls for immediate government action to protect consumers already hit by this recession from sky-rocketing credit card interest rates and fees.
The motion would introduce legislation similar to Obama's credit card accountability, responsibility and disclosure act 2009.
The New Democrats want the government to take action to protect consumers and small businesses from these confusing, misleading and predatory practices. New Democrats have always stood up for middle class families and small businesses, both groups who are suffering most in this economic downturn and with the current credit card practices.
The motion lays out an eight point plan that would protect consumers from the gouging they have endured over the last little while.
The first point of this proposal is the protection of cardholders from any time, any reason interest rate increases or account changes. The Canadian Community Reinvestment Coalition has repeatedly called on credit card companies to demonstrate that rate hikes are justified. In the Canadian regulatory framework no such requirement is in place.
We are not advocating that banks make public proprietary information that is part of a competitive marketplace, but we want a regulatory framework with teeth that can ensure effective protection through a process of independent auditing against arbitrary gouging.
Another point of the motion is to prohibit unfair application of card payments. Credit card issuers frequently offer short-term, lower rates to entice consumers to transfer credit from a competitor to credit cards they have issued. In the short-term this represents a savings. The problem is in the fine print and the short-term rates disappear quickly.
Further, as purchases are made customers will find that rates are applied differently within their account. Currently, the customer cannot choose to pay down credit with the highest rate. We are calling on the government to protect consumers by ensuring they have the choice that best suits them.
Credit cardholders who pay on time need to be protected. I have been hearing from people all across Canada who are outraged that even when they have a spotless credit history, they are getting hit with big rate increases.
A man from Victoria, B.C., has been a credit cardholder with a certain bank for over 20 years. Earlier this year he received a letter from his bank outlining important changes to his account. In the letter it stated that as of a little over a month later his interest would increase. This man was quite confused and rightly upset by this as he felt like he was being punished with an increase in the interest rate when he had done nothing wrong and there was nothing wrong with his credit. In fact, it was excellent.
This man, like hundreds of other Canadians, had done nothing to breach his agreement with his credit card company but was still being hit with a higher rate. The motion also calls on the government to limit abusive fees and penalties charged by credit card companies.
Credit card companies gouge consumers with many unreasonable fees and interest. They can charge over limit fees over and over again during one billing cycle. Also, we have examples of credit card companies enticing customers with an introductory 1.9% interest rate which can jump to almost 25% in two months should cardholders be even a day late on their payment.
We also want to prohibit card issuers from using a consumer's card history with one creditor to allow for interest rate hikes on another. Credit card companies can increase interest rates and terms for reasons unrelated to a card holder's behaviour on that card.
For example, if my neighbour pays his gas bill late, his credit card company can raise the interest rate on his credit card. Even if he is a day late, it could result in an interest rate hike without the card holder knowing.
How can these billion dollar companies justify hiking interest rates on a cardholder who is one or two days late on a payment by an additional 6% in some cases? I have heard of cases that hiked these rates even more.
If I get my credit card bill this month, and let us say this bill is about $1,000 and I pay $800 toward this bill, the next month the interest I am paying will be calculate on the $1,000, not the $200 remaining. Only in June would I pay interest on that $200 as long as I did not put more expenses on the card.
Our motion calls on the government to prohibit issuers from charging interest on debt that is already paid. This is unfair and gouges consumers even further.
This motion also calls for ensuring cardholders are informed of the terms of their account. Most consumers are unaware that these new premium cards that are being sent to them, unsolicited in many instances I might add, are reducing the already small margins of profits made by local and small businesses. With charges of up to 4% on the total price of the sale instead of a flat transaction cost, businesses on the brink are being pushed closer and closer to the edge.
Our motion would ensure that cardholders are informed of the terms of their account and that it costs merchants more when using premium cards.
This motion also calls for the protection of young consumers from aggressive credit card solicitation.
I have too many examples of students who work part-time jobs and are juggling minimum wage jobs who are being aggressively pursued by credit card companies to sign up for credit cards. These students need protection from the predatory practices of credit card companies that run aggressive mailing and marketing campaigns on their campuses.
Right now the average Canadian student debt among those who borrow and graduate from a four year program is already $22,700. Credit card debt will only further burden these students.
Canada is not the only country focusing its attention on this issue. Renewed effort by governments in the United States and recent action in the European Union illustrate a global push to hold credit card companies to account for their fee practices. It is time our government focuses its attention on this matter as well.
In a poll conducted by the Canadian Federation of Independent Business, one in five consumers reported receiving unsolicited premium cards which come with higher interest rates. The majority of those who receive these high interest cards were the poor, elderly and least educated.
We cannot count on credit card companies to police themselves or to be concerned about the most vulnerable. That is our job. It is time government stepped in to help families in these tough times, which is why I am pleased to table this motion today in the House.
