MASSE IN THE HOUSE: Masse Speaks on Credit Card Interest Rates and the Need for Regulation in the Industry

MASSE IN THE HOUSE: Masse Speaks on Credit Card Interest Rates and the Need for Regulation in the Industry

NDP Opposition Motion - April 23, 2009:

April 21, 2009 — Mr. Thibeault (Sudbury) — 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. Brian Masse (Windsor West, NDP): Madam Speaker, I thank the member for Churchill for her comments in debate today.
One of the really interesting things that she highlights is the student issue and their personal debt for credit cards. I would like her comment as well 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 terms of the borrowing costs and what has to be paid back, but also the interest rates students pay for their student loans.
I would like to hear from the hon. member about how that really affects a student emerging into the economy as someone who can purchase a home or a car, to get on their feet, get a job and to progress. I think that is an important part of the debate today.
Mr. Brian Masse (Windsor West, NDP): Madam Speaker, I am proud to stand here as a New Democrat and call for the credit card accountability responsibility and disclosure act to be created. It is something that is important because as we have the economy in the current state it is and as we look for solutions to get out of this it requires a team effort. That team effort is government and business and it is also about taking responsibility.
We know that the banks have got off scot-free in all of this. It is time for them to come to the table and actually produce for Canadians a fair and balanced way to be able to actually look at the borrowing practices.
I want to go back to something that is really important in terms of how we got here. I remember back in 2003 when John Manley, the Liberal minister at that time who was actually known as the minister of everything because he had received so many portfolios, came to the House of Commons and negotiated with parties on how to deregulate the banking system and make it more like the American system. I remember that debate quite well.
I stood here as a New Democrat opposed to that. I give commendations to the Bloc as well because they opposed that. At the time it was the Conservative Party and the Alliance Party who got all excited about the issue and were tripping over themselves to support it.
If we had not stopped that by Mr. Manley and the Liberals at that particular time we would have actually had a far worse situation than we have today. So we did them a favour back at that time, preventing the further deregulation and a more American system as was approached here in the House of Commons.
The member who sits next to me from Winnipeg was quite active in that campaign and did a terrific job to make sure that people understood that. Canadians spoke loud and clear and said, do not do that to our banking institutions.
We arrive here today at this particular point in time and we are starting to see what is happening. Over a series of time there has been an effective marketing campaign to sign up people for credit over the years, whether it be the retailers with regard to those who are offering credit card rates of up to nearly 30% or the banks themselves that offer up to 20% with regard to interest rates.
There are a number of practices that are simply unfair. The credit card companies have made record profits over that time and they are continuing to make profits right now that are 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 them have a profit, that is fine, but it has to be fair and balanced. Let us redirect that income back into the economy for a stimulus and make sure we can settle people out so that they are not going to get further behind and it will actually help stimulate the economy.
We know that the banking institutions are not doing that and we know that the government is not releasing some of its programs and services in an expedient way as it should be. In fact I was looking at some of the Industry Canada announcements going back a couple of years ago where money has never been spent or money for infrastructure has never been spent, for example the border infrastructure fund. There are many more examples.
One of the things that we could immediately do is alleviate some of the egregious attacks on consumers and their families by putting in a fair set of regulations. For example, a card like mine, the CIBC Visa card that charges $200 per year just to have that card. There is no reason why it should be allowed a charge like that. Two hundred dollars is quite a bit of money and on top of that the service that one receives is not warranted in terms of the value. It is important to note that should be at least an examination of that.
What is interesting is that the United States recognizes this. The Obama administration is moving forward with a package that will make sure there is a better sense of balance there.
When I talk about balance, one of the worst things happening right now for those who are using their credit card, if they do not pay off the full balance, then they actually 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 of $300 or $400--many people are losing their jobs who have to put money toward rent--they end up having to pay the interest on the full amount. That is unacceptable. It should be on the amount that is actually on the card. That is something that once again would return money back into the pockets of people so people for example could buy groceries, or pay their landlord, or pay for heating or cooling, all those different things that are very important essentials right now.
Coming from a community like Windsor West where we have had 10% unemployment for a number of years, the government came forward during the election and said that there is nothing wrong with the economy.
We understood the warnings with the threats to the auto industry ages ago with no help and no assistance from the government and at the same time then in basic denial that there would actually be a problem.

We actually now are up to 15% unemployment, even higher than that with all the people who have given up even looking for work, and we are trying to find our way through it. The government needs to be responsible here and look at retipping the scales a bit. It cannot be such a big advantage to the credit card companies and the banks.
Canadian taxpayers have had to buy up loans from the banks and support their systems. They have had to use their own taxpayer money to inject cash and borrowing into the market economy, because the banks will not provide that. I will give a couple of examples.
Even before this crisis, an auto parts supplier, for example, in the county of Essex, where they were producing parts for the Ford Escort, which is selling very well and has done very well in the market, basically had workers making $12 or $13 an hour, not a rich salary, with modest benefits. They had a good assembly rate and a good quality rate.
They 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, not because they were looking at closing or having a problem with that particular vehicle at that time. It was just because they could. They actually raised their interest rates to a point where it ate into their entire profit from what they were getting from Ford Motor Company to produce the vehicle parts.
That is a problem, because there is nothing in there that is really productive, whereas those workers were doing what they needed to do every single 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.
That is why, when we look at the motion we have here, we talk about prohibiting unfair application of 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, places such as CIBC have decided to outsource their credit card processing to the United States. What that means is 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 have 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, whether it is disbursed, or whether it is scrubbed after an investigation is done.
The government, similar to the past one, has been remiss. We have to have an international treaty to protect privacy related to that, and it has not done that. In fact, ironically, what we have learned is that even some Canadian government offices outsource some of their actual payment systems to the United States. That information then once again leaves the country and becomes susceptible to the Patriot Act.
However to go back to the economy right now, this 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% 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. Actually a lot of it would be local stimulus. We would stop a system right now that is counterproductive and, more importantly, putting so many people behind at a time when they do not need to be.

Mr. Brian Masse: 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. I think they are appropriate suggestions to make but we need to do something now. 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 is going to remain there for the next year. Despite that, bank rates and credit card rates have gone up incrementally. How is that even possible? That is criminal at best. We have to make sure that banks and credit card companies are accountable.
With a .25% borrowing rate, how is it they can even put this product on the market in this day and age when so many people are suffering and paying higher rates than morally and ethically acceptable?

Mr. Brian Masse: 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 kind of acted back in 1990. The Brian Mulroney government acted for itself, and that is no surprise. That government said if rates were capped it would have an adverse effect on consumers. The reality is it has been 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.
This problem goes back to the 1990s and the Brian Mulroney government rejecting this from the beginning.