February 5, 1937

CON

Richard Bedford Bennett (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. BENNETT:

Topic:   HOME IMPROVEMENT LOANS
Subtopic:   PROVISION TO ENCOURAGE REPAIR OF RURAL AND URBAN DWELLINGS
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LIB

Charles Avery Dunning (Minister of Finance and Receiver General)

Liberal

Mr. DUNNING:

From a practical standpoint I agree entirely with the view taken by the leader of the opposition. Of course, I cannot offer a legal opinion except that of the Department of Justice, but looking at the matter as a practical one it is quite possible for a default by an individual debtor to occur while the lending institution is still lending to new borrowers.

Topic:   HOME IMPROVEMENT LOANS
Subtopic:   PROVISION TO ENCOURAGE REPAIR OF RURAL AND URBAN DWELLINGS
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CON

Richard Bedford Bennett (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. BENNETT:

Quite so.

Topic:   HOME IMPROVEMENT LOANS
Subtopic:   PROVISION TO ENCOURAGE REPAIR OF RURAL AND URBAN DWELLINGS
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LIB

Charles Avery Dunning (Minister of Finance and Receiver General)

Liberal

Mr. DUNNING:

Let us assume for the moment that the plan continues in operation for a year. It is conceivable that some of the earlier borrowers at the end of the year may be in default, but at the same time the lending institution is continuing to lend to new borrowers. The manner in which the guarantee shall become effective as between the lending institution and the government has not yet been worked out in detail because of that difficulty. We have endeavoured to leave it subject to future arrangement, but it is important, as the leader of the opposition says, that whatever is done should have sound law behind it. The Department of Justice has said, regarding the matter, that once the debtor has made default the liability of the guarantor arises in the absence of provisions to the contrary in the agreement. The creditor is not bound to request the debtor to pay or to sue the debtor before proceeding against the guarantor. The guarantor, however, cannot be permitted to suffer by reason of any arrangement which has taken place between the creditor and the debtor. The rule is that any material alteration in the terms of the debt which is guaranteed, made by the creditor and the debtor without the guarantor's assent, will discharge the guarantor, and a binding agreement by the creditor to give the debtor an extension of time is deemed to be a material alteration. That is precisely the point my right hon. friend makes. It is important however to observe that the guarantor is not discharged if he agreed in the contract of guarantee or in some other way that time might be given to the debtor with impunity or if he afterwards confirmed any agreement giving time. Mere omission on the part of the creditor to press the debtor for payment will not, if there is no binding agreement to give time, discharge the guarantor even if the debtor subsequently becomes insolvent. By a binding agreement is meant an agreement given for valuable consideration and enforceable by debtor and creditor. The intention is to execute a contract of guarantee with each lending institution. The contract will be made subject to the act and the

Home Improvement Loans

regulations made under the act, and the regulations will contain the conditions upon which an extension of time will be granted. Thus the lending institutions will have in the contract of guarantee itself the consent of the government to extensions of time, subject to certain conditions.

The question arises whether there is power under paragraphs (b) and (f) of clause 8 to make regulations permitting the lending institutions to grant extensions of time. The Department of Justice, while not admitting that the bill as now drafted is defective in this respect, thought that as the point had been raised it would be wiser to insert a new paragraph (c) in section 8 to remove all doubt. Perhaps I might read that now, although we have not yet reached the section. Paragraph (c) as amended would read as follows:

In the event of actual or pending default by a borrower the extent to which the lending institution and the borrower may, notwithstanding the provisions of paragraph (c) of section 6 of this act, alter or revise any of the terms of their agreement respecting a home improvement loan without discharging the guarantee under this act.

With this amendment the Department of Justice say that regulations could be passed under which the lending institutions would be able to grant extensions of time in certain cases even if some of the instalments were not payable until more than three or five years, as the case may be, after the loan was first made. That is the advice I have on that point.

Topic:   HOME IMPROVEMENT LOANS
Subtopic:   PROVISION TO ENCOURAGE REPAIR OF RURAL AND URBAN DWELLINGS
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?

Leslie Gordon Bell

Mr. GOLD WELL:

Is it the intention of the government to guarantee fifteen per cent of individual loans, or fifteen per cent of the aggregate amount loaned?

Topic:   HOME IMPROVEMENT LOANS
Subtopic:   PROVISION TO ENCOURAGE REPAIR OF RURAL AND URBAN DWELLINGS
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LIB

Charles Avery Dunning (Minister of Finance and Receiver General)

Liberal

Mr. DUNNING:

The aggregate.

Topic:   HOME IMPROVEMENT LOANS
Subtopic:   PROVISION TO ENCOURAGE REPAIR OF RURAL AND URBAN DWELLINGS
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CCF

Major James William Coldwell

Co-operative Commonwealth Federation (C.C.F.)

Mr. COLDWELL:

Then how are you going to arrive at the condition of default when the guarantee would become operative?

Topic:   HOME IMPROVEMENT LOANS
Subtopic:   PROVISION TO ENCOURAGE REPAIR OF RURAL AND URBAN DWELLINGS
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LIB

Charles Avery Dunning (Minister of Finance and Receiver General)

Liberal

Mr. DUNNING:

As I said just now, the transactions will be continuous. This must be worked out in practice. In a sense it will be a revolving amount. When shall we determine a block of aggregate losses? That is a question we have to work out with the lending institutions. If our experience is similar to that of the United States it will not be a troublesome matter, because the proportion of loss there has been very small. The point must be worked out between the lending institutions and the government in the guarantee agreement, as to when we will assume a cut-off date for the establishment of an

aggregate loss with respect to the total loans made by an institution. The difficulty of course is the continuity of the transactions, the lending of ever more and more money. I cannot say in terms that we would positively make a cut-off one year or two years from the date of commencement of the scheme, but there must be a time agreed upon. I have taken this ground in communication with the institutions that we think in fairness to the government every reasonable effort to colled from a debtor must be exhausted before we will admit that a particular default constitutes part of the aggregate loss of that institution.

Topic:   HOME IMPROVEMENT LOANS
Subtopic:   PROVISION TO ENCOURAGE REPAIR OF RURAL AND URBAN DWELLINGS
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CON

Richard Bedford Bennett (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. BENNETT:

That will have to be set by agreement, though.

Topic:   HOME IMPROVEMENT LOANS
Subtopic:   PROVISION TO ENCOURAGE REPAIR OF RURAL AND URBAN DWELLINGS
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LIB

Charles Avery Dunning (Minister of Finance and Receiver General)

Liberal

Mr. DUNNING:

That will have to be set by agreement. We have to work it out. Precisely what the decision is to be is now under consideration.

Topic:   HOME IMPROVEMENT LOANS
Subtopic:   PROVISION TO ENCOURAGE REPAIR OF RURAL AND URBAN DWELLINGS
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Section agreed to. Sections 4 and 5 agreed to. On section 6-Conditions of loans.


LIB

Donald Elmer Black

Liberal

Mrs. BLACK:

Mr. Chairman, paragraph (d) says:

The maximum charge which may be made by an approved lending institution for a home improvement loan shall not exceed a rate of discount of three and one-quarter per centum for a one year loan repayable in equal monthly instalments and proportionate rates for other periods.

I asked the minister the other day if the same rate would apply to Dawson or the Yukon Territory, where normally we have to pay from twelve to twenty per cent interest. Money may be put in the bank, and no interest is paid on it by the bank, but we have to pay to the bankers there the rates of interest I have mentioned. Will the rate provided for by this subsection apply there?

Topic:   HOME IMPROVEMENT LOANS
Subtopic:   PROVISION TO ENCOURAGE REPAIR OF RURAL AND URBAN DWELLINGS
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LIB

Charles Avery Dunning (Minister of Finance and Receiver General)

Liberal

Mr. DUNNING:

No loan can be made anywhere in Canada under the provisions of this legislation at a higher rate than that named in the bill.

Topic:   HOME IMPROVEMENT LOANS
Subtopic:   PROVISION TO ENCOURAGE REPAIR OF RURAL AND URBAN DWELLINGS
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CCF

Abraham Albert Heaps

Co-operative Commonwealth Federation (C.C.F.)

Mr. HEAPS:

This is the clause dealing with the limitations, fixing the maximum winch may be lent at $1,000 on certain homes and $2,000 in the case of a duplex. The purpose of the bill is said to be to provide employment. If that is so, personally I should not object if the measure went further than is proposed in this clause. It makes very little difference to a workman whether he obtains work in a small home of a value of three, four or five thousand dollars, or in an apartment block

Home Improvement Loans

worth $50,000. I do not know how far the government might have to go in the way of guarantees if they went beyond the provisions of the present clause, but I believe the maximum is much higher in the United States. Could the minister give the committee some information on that point? I should like to know if there is any objection to extending the scheme to provide for the renovating and remodelling of larger premises than are provided for in the present clause.

Topic:   HOME IMPROVEMENT LOANS
Subtopic:   PROVISION TO ENCOURAGE REPAIR OF RURAL AND URBAN DWELLINGS
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LIB

Charles Avery Dunning (Minister of Finance and Receiver General)

Liberal

Mr. DUNNING:

Under the plan at present in operation in the United States, following their earlier experience they have extended it to include commercial buildings, churches, large industrial buildings and others of the kind. But we feel that we had better start with what we have and gather experience and then see whether it would be wise to extend it beyond the present limitations.

Topic:   HOME IMPROVEMENT LOANS
Subtopic:   PROVISION TO ENCOURAGE REPAIR OF RURAL AND URBAN DWELLINGS
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CCF

Abraham Albert Heaps

Co-operative Commonwealth Federation (C.C.F.)

Mr. HEAPS:

The minister the other day gave an idea of the amount which has already been granted by the banks for the renovating of buildings-

Topic:   HOME IMPROVEMENT LOANS
Subtopic:   PROVISION TO ENCOURAGE REPAIR OF RURAL AND URBAN DWELLINGS
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LIB

Charles Avery Dunning (Minister of Finance and Receiver General)

Liberal

Mr. DUNNING:

Homes.

Topic:   HOME IMPROVEMENT LOANS
Subtopic:   PROVISION TO ENCOURAGE REPAIR OF RURAL AND URBAN DWELLINGS
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CCF

Abraham Albert Heaps

Co-operative Commonwealth Federation (C.C.F.)

Mr. HEAPS:

Well, buildings as covered by the provisions of the bill. Can he give an idea as to the amount that has been requested from the lending institutions?

Topic:   HOME IMPROVEMENT LOANS
Subtopic:   PROVISION TO ENCOURAGE REPAIR OF RURAL AND URBAN DWELLINGS
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LIB

Charles Avery Dunning (Minister of Finance and Receiver General)

Liberal

Mr. DUNNING:

No, we have not that

information.

Topic:   HOME IMPROVEMENT LOANS
Subtopic:   PROVISION TO ENCOURAGE REPAIR OF RURAL AND URBAN DWELLINGS
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CON

Richard Bedford Bennett (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. BENNETT:

The average is between $300 and $400.

Topic:   HOME IMPROVEMENT LOANS
Subtopic:   PROVISION TO ENCOURAGE REPAIR OF RURAL AND URBAN DWELLINGS
Permalink

February 5, 1937