I turn now to the other point I had in mind. In the preamble we have the government expressing its belief that defence preparations may be expected to expand purchasing power and the demand for consumer goods, and at the same time limit the quantity of consumer goods available for ordinary or civilian requirements. Then the preamble goes on to say that this may result in inflationary pressures which it is desirable to do something about. I am sure the government is getting tired of our pressing this point at this special session, but we will keep on pressing it as long as we are here. If the government admits, as it does in the preamble, that these factors can create inflationary pressure, thus shoving up the cost of living, and just because it believes that to be the case sees fit to bring in this kind of legislation, then I submit they have the power to bring in price control legislation and do something about this problem directly.
I should like to get some assurance from the minister with respect to the Farm Improvement Loans Act. I understand that the intention is to increase the amount of the down payment and shorten the time during which the loan can be repaid. I think the minister will realize that if that is done it is going to make it very difficult indeed for the small farmer, or the man with an averagesized farm, to meet those conditions. If the intention is to try to cut down the number of loans made under the act, would it not be better to tighten up considerably the conditions under which entitlement to a loan is granted? In other words, in order to get a loan to buy a machine or to make an improvement on his farm, the farmer would have to convince the bank manager that the article was absolutely essential to the efficient operation of the farm. But once entitlement is granted I say that the terms of repayment should not be made any more onerous than they are at the present time. As the minister knows, the price of farm machinery is at a very high level today. If you are trying to buy a self-propelled combine costing $5,000, or a tractor costing three or four thousand dollars, and a substantial down payment has to be made with repayment within two years or less, it will be very hard for the small or
Consumer Credit Act
average-sized farmer to meet those conditions. Surely it would be better to tighten up the conditions under which entitlement is granted.
As my hon. friend is aware, the Farm Improvement Loans Act is not under consideration at the moment. In my budget remarks the other night I referred to the fact that, as a part of the moderate curtailment of credit which the government feels is desirable in order to prevent further inflationary price rises, the question of loans under the Farm Improvement Loans Act was being reviewed, and that the conditions would be made somewhat tighter. But no final decision has yet been taken as to the exact basis on which that will be done. I shall be very glad to take into consideration the point that the hon. member for Acadia has raised.
On that point I should like to ask the minister a question relating to something I referred to in my speech. Perhaps he will recall what I said, but if he does not it is all right. I referred to the growing practice in my own community, and I believe also in other parts of the province of Saskatchewan, of bank managers asking farmers to give additional security on the purchase of a machine to that which is provided under the act. They are asking that the farmer deposit in the bank the title to his land, and as I understand it if the farmer has it in his possession it must be a clear title. Under the act there is provision for a mortgage and a hypothec in certain instances, but I refer to cases where the terms of the loan make it impossible for the bank to require a mortgage or hypothec. The minister is a lawyer. I should like him to tell me what it means when the bank manager asks the farmer to deposit the title to his land.
I am not familiar with the particular circumstances to which the hon. member for Assiniboia refers. I am also not too familiar with the detailed application of the Farm Improvement Loans Act and the methods followed by the banks. I can inform myself as to the conditions to which he refers. Generally speaking, however, the banks are entitled to and do ask for additional security in the case of the larger loans under the act. They take it in different forms, and I suppose the extent to which they ask for security depends upon their assessment of the creditworthiness of the applicant and the credit risk which they are assuming. I will make some inquiries and ascertain whether the practice, to which the hon. member refers, is widespread.
Is not required to. My hon. friend will realize that under the Bank Act generally speaking banks are not entitled to lend on the security of real estate. This provision in the Farm Improvement Loans Act is an exception to the general law in that respect, and they take it as additional security.
I do not think the minister has got my point. I say I realize that, under the Farm Improvement Loans Act, if the loan is greater than $2,000 and the term of repayment is five years or more, the bank may take that kind of security. The cases to which I am referring, however, are cases where the term of repayment is a good deal less than five years. As I understand it, the banks are not allowed to take that kind of security under the act, and instead of asking for a mortgage on the farm they are asking the farmer to bring his title to his land and deposit it with the bank during the term of the loan. From the farmer's point of view it is just a mortgage because he has not the title any more. He cannot sell his farm until he gets the title back. He cannot take a mortgage on the farm until he has the title. In the meantime the bank has his title.
one or two observations I should like to make. One has reference to the operation of the Farm Improvement Loans Act in Newfoundland. The provincial government has recently passed three acts. One deals with loans to farmers for the purpose of making improvements; the second is to assist fishermen, and the third is an industrial loan. A large amount of money has been provided in each case. They have set up these banks, as they call them, and appointed new managers. The intention is to lend money to farmers and fishermen to purchase equipment.
For example, if a fisherman wants to get a fairly good sized boat, with an engine that may cost $1,000, he can go to the loan board and obtain a loan. I think that is covered under this particular bill, and I should like to draw the attention of the minister to the three new loan boards established in the province of Newfoundland. They have just started to operate. We are not over-flush with money in Newfoundland, and it is desirable that fishermen and farmers should be given some encouragement. As a matter of fact, traditionally fishery has been carried on by means
of credit. The merchant goes to the bank and borrows perhaps $10,000, $20,000 or $30,000 to buy supplies. Then he gives out those supplies on credit to the fishermen without any security at all. The fishermen start fishing in June and turn in their fish toward the end of August, or in September or October. The fisherman pays for the supplies he gets at the end of the season. I should like the minister to keep the conditions in Newfoundland in mind because we. need credit there to carry on our business.
That would most certainly be done. That illustrates the point I made, namely, that in reviewing this whole situation the implementation of the bill will be on a selective basis. If it is clear that a general enforcement of credit terms with respect to the purchase of consumer goods would be inapplicable to the circumstances which the hon. member for St. John's West has outlined, then of course it will not be made applicable to that type of transaction.
I am informed that it is. Certainly the general purpose of the legislation is identical, although the method of administration may vary. We have a considerable amount of experience as a result of four or five war years, and that experience will be followed, but its purpose is exactly the same.
Before the supper recess tonight I had made some strictures on instalment buying. I think I should say that I realize there are some things that have to be charged, and that it is advantageous to the country to have the payments spread over a period of time. I am thinking particularly of the manner in which many householders in the city of Ottawa and elsewhere buy coal. It is advantageous to the country if they get their coal early in the autumn or even during the summer months, and spread payment over the winter months. I was glad to hear the minister say just before I rose that it would be done on a selective basis, and I should like to suggest that that particular feature be kept in mind. I do not think there is a coal merchant in this city charging the kind of interest rates to which I alluded before dinner tonight. I think that it is advantageous to the economy of the country, and the spreading of the mining period over a longer period of time, to have citizens enabled to buy their coal during the summer or early autumn and pay for it as they use it without a high rate of interest. I know that the coal merchants do not charge such high rates.
My hon. friend may recall that during the war, in the corresponding provision of the consumer credit order under section 2, fuel of all kinds was exempt from the operation of the order. Essentially what this type of control does is to stipulate a minimum down payment and a maximum period of time over which the instalments may be spread.
Just as a matter of illustration, during the war the minimum down payment in the case of automobiles and most other goods was one-third, with the payments spread over eighteen months. For most other goods the down payment was a third and the maximum period of credit was six months, for wearing apparel except furs. Ten months for all other goods where the amount financed was less than $500 and fifteen months for all other goods where the amount financed was greater than $500. I do not want to say this would necessarily be the rule that would be put into effect in this case, but something of that sort would be the course followed.
Mr. Chairman, I hope the minister will take into consideration the situation in which many families find themselves today because of the housing shortage in some of our more crowded municipalities. I am sure he is familiar with it. They formerly rented apartments, but are no longer able to find them, and are forced to purchase homes at prices far in excess of what they would normally be able to carry. Consequently, they carry large mortgages on those homes. Many of these homes are in outlying districts or new districts, and the people are carrying a large burden in local improvement taxes. Many of them have moved into houses from apartments which were equipped with stoves, refrigerators, and the like, so they have all these things to put into their new homes. The burden is well-nigh intolerable. One could say that the same thing applies to an automobile because, in many instances, the people working in cities are forced to purchase homes at some distance from the towns in order to find housing. I do hope the minister will take all this into consideration in laying down the rules for this new legislation.
The minister has answered nearly all the questions I was going to ask, but can he give us an indication in general terms as to whether the government has a figure in mind showing what the effect may be in the way of reducing purchases, or whether what was done during the war would give us a yardstick by which to measure the magnitude of the results which would follow these restrictions?