Mr. Fraser:

Where would you go if not to a legitimate institution?

Mr. Rodriguez:

How does the minister expect these low income earners to get some measure of justice if they think that somehow or other they are getting taken? The onus is now in the low income earner to take the institution to court. I can just see a person making $5,200 a year in Nickel Belt taking IAC, AVCO, or the Royal Bank to court because he thinks he is paying too much interest. The minister probably would say that under the bill he can stop making payments on his loan and then the institution will take him through the court process. But low income earners are threatened by and are leery of the court system and of the whole process.

The minister hopes the system will work with enlightened people, when by and large the low income group are afraid of the whole system, and certainly they are not aware of their rights. We know, all of us who have riding offices in prominent locations, of the problems that our constituents bring to us; we know the kind of help they need as they go through the maze of bureaucratic red tape, and I think the minister also is well aware of that.

We have suggested an alternative. We think that the present system of loan ceilings should be retained. It eliminates risks, and it seems to us that that is the crux of the problem and why

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Protection of Borrowers and Depositors

the so-called private sector people, banks and finance compa-nines, will not lend money to low income earners. It seems that risk is the problem.

What happened to free enterprise?

Mr. Rodriguez:

Even in that system we think there is a solution. Certainly the government can guarantee the loans, and this is not a unique idea. We do it for student loans, we do it for loans for farmers and for fishermen; we do it right down the line. We do it through EDC. Imagine a bank guaranteeing INCO a loan at small interest rates. Study after study carried out by committees of this House and of the other place have pointed out that people in this sector of society are locked into poverty, and we have not done a thing to change that pattern. We have tinkered with the income tax structure, but they are still locked in. Here is the minister bringing in a bill trying to use what he thinks is the free enterprise system to solve the problem.

We think that one possible solution to eliminate the risk is to guarantee the loan, so if perchance a person falls short on a loan the lender will not lose as a result of it. It seems to us on this side of the House that this would be a better approach to the problem.

We also think that the ceiling ought to be maintained, otherwise how is the interest rate going to be determined? According to the bill the interest rate would be determined on the basis of the applicant's background, his age, his financial stability in terms of his job, his physical health, his mental health, etc. But here is the crux of the problem, even with that simple approach.

When a person goes to borrow money from the bank or from the finance company, if this bill is passed the way it is the lender could ask to see the interest rate he is being charged. How generous that is! But does he have the right under the bill to ask how his interest rate is determined, what factors were used to determine it? Is he allowed to say he does not agree with those factors and to ask where they got them, whether they got them from his neighbour? He has no control over information regarding his personal life. He cannot even ask to see it. That is a fundamental shortcoming in the bill. It is even more ridiculous. If he wants to find out about the institution with which he is doing business, such as information on how many times it was brought to court for an infraction of this act, he has to go to the administrator and pay a fee. Imagine, he has to pay a fee for information about the institution with which he is doing business!

This puts another burden on low income earners to get the necessary information on which to make decisions within their ability to decide. I do not think that is fair. Furthermore we surround this administrator with secrecy. He cannot reveal anything about the operation which he may be investigating. He cannot reveal that information to the person who may come to him and, for a fee, ask pertinent questions. We think that a change in this regard should seriously be considered.

We also think that there should be a credit ombudsman under this legislation so that if a low income earner thinks he

is being taken to the cleaners with respect to the interest he is being charged, or with respect to any other item under the bill, he could apply to the ombudsman. The ombudsman could then investigate the matter and, if in his opinion there was an infraction of the act, he could take the matter to the administrator who would lay a charge against the lending institution. The state would pay the cost to take the case through the courts of the land. It seems to us that this would prove to be far more fair and would provide protection for the low income earner who tries to obtain credit in the market. We do not think the onus should be placed on the low income earner, on the borrower, to take the institutions to court. What we are proposing, we think, is a very viable solution to the problem.

We also have positive suggestions for the government on a matter which was touched upon earlier. We certainly think that one of the problems of our society is the improper use of credit. We do not think we have really done our utmost in this area or that we have done everything possible to provide funds for credit counselling. Certainly the minister put out press releases about the $300,00 granted to the Consumers Association and $100,000 elsewhere. That just scratches the surface. We have to make an effort to educate our people to the use of credit, not the abuse of credit. That goes not just for low income earners but for middle income earners as well.

We are discovering that we should be spending more money on teaching French in our elementary schools, and everybody is beating his breast saying that is what should be done, but in this area as well money should be spent to teach young people the wise use of credit. It seems to me we can do that through the school systems, community colleges, the Consumers Association of Canada, and community oriented groups which operate in every community across this land. We could spend all kinds of funds. There was a $3 million surplus as a result of tickets left over after the Olympic lottery. Surely that should be put into a fund for these kinds of community programs. There are funds available, and we should set the right priorities.

As I have said before, we think that the administrator should have more power than he is given under this bill. As we see it, the role of the administrator is simply to collect data and information, and for a fee he can dispense part of that information to an applicant. Under a previous consumer bill a couple of sessions ago, Bill C-2, the competition bill, the administrator had considerable power to decide cases, and those cases can be taken to the courts. We say that the administrator in this particular instance ought to have that same kind of power.

We think also that there ought to be some changes made with respect to the whole question of discounting tax and social security payments. This bill proposes to get rid of the worst aspects of this particular practice by defining this operation as a lending transaction. We think that leaves a lot to be desired, and that it just exposes the low income earner to a

mutually agreed upon interest rate. That particular clause ought to be changed and made more effective.

Clause 37 ought to be changed as well. It defines offences and punishments for such offences. Clause 37 outlines offences with respect to interest rates, and we think it should be beefed up considerably. It has been argued in this Elouse that the stronger the punishment, the greater the deterrent. I have heard that for the last year. Many Conservative members have argued that in this House.

Hang them.

Mr. Rodriguez:

The hon. member wants to get back to hanging. Following the logic of members of the Conservative party, we should tighten the bill up. We do not think that for gouging poor people a $10,000 fine is enough. We would like to see a $250,000 fine or 10 years in jail, or both on summary conviction. It seems to me that with respect to offences and punishment clause 37 could be tightened up considerably.

With respect to advertising, the bill ought to contain some provision with regard to our free and easy way of advertising credit. That is contrary to the very thing we talked about earlier, credit counselling. We are all acquainted with this little gimmick: "After you have decided on leather, paper or wood, and after you have decided on yellow, green or brown, isn't it nice to be asked, 'Will that be cash or whatever?' " It seems to me that that does not teach people the wise use of credit.

Whenever we can create a need, we can go out and buy something, and all we need is a little plastic card. The minister says that all the bill proposes to do about that is to make sure that advertising includes the rate of interest. Again that does not get at the crux of the problem. We would like to see that kind of advertising abolished altogether. We do not need that kind of free and easy approach to advertising credit, and in our opinion putting in the interest rate is not in line with proper consumer education with respect to the use of credit.

The main thrust of the bill is the question of ensuring that low income earners do get credit. We cannot agree with the government, and with the minister in particular, that the bill will ensure protection for low income earners and that they will get credit. We think the scales are tipped against the low income earner but that they can be evened up.

This bill could be much fairer, and in committee we are going to try-as we have with the last two consumer bills-to put forward amendments which will provide some protection for consumers. The minister will have a chance to prove himself to be a friend of the consumer. We will judge his performance by his willingness to accept amendments, and we hope the amendments we put forward will make the bill much fairer for low income earners. We will try to be as constructive as we can, but we must tell the minister quite frankly that the crux of the bill is the area I have just delineated, and we must make some changes. Our support for the bill will depend upon what changes are made at the committee stage, and at report stage when the bill comes back to the House.

Protection of Borrowers and Depositors

[DOT] <2110)

Mr. Adrien Lambert (Bellechasse):

Mr. Speaker, first of all,

I must thank the minister and the government for bringing forward Bill C-16, which gives us the opportunity to discuss this very important subject, namely the very wise use of one's credit to ensure one's future and to protect one's dependants.

As a matter of fact, it is a very important subject and in the release, dated October 27 which was distributed to us by the minister, I find the following in the second paragraph:

This bill on credit has several goals:

1) to protect Canadian borrowers from loan sharking and excessive interest rates.

We have been in favour of this objective for a long time, Mr. Speaker. Furthermore, I think we said it often enough in this House to convince every Canadian.

2) to increase the quatity and the quality of information on credit available to the public, thus eliminating unjustified complications and causes of confusion in this area,

3) to establish strict and consistent regulations in order to protect all borrowers and depositors

4) to rationalize federal legislation on credit.

I say that all these goals are highly commendable, Mr. Speaker, and that is way the day after the bill was tabled in the House of Commons, there were big headlines in the newspapers: Measures to protect consumers and borrowers from loan sharking.

Then a deep sigh of relief was breathed by those whom the bill is designed to protect. They told themselves: at last, the government is going to protect the little people, the underprivileged. Yet, it must be remembered that here, in this very House, bills as commendable as this one have been introduced and passed, bills which are now in our statute books but have failed to bring the expected results. It does not mean that the law is not good. It is because it is not being strictly enforced. Laws are applied slackly to the big interests, to those who control our economy and our credit.

It has often happened that legal proceedings were taken against monopolies and then the case dragged on before the courts, and finally, after a hearing was held, those companies were imposed fines with as much impact as a quarter for ordinary people. A fine of $25,000 for corporations which have earned millions and millions of dollars of excess profits looks good in the eyes of the public, but it is not what one might call a very effective law.

That is why, as far as this bill is concerned, I consider that those sanctions provided here are not severe enough. We will still witness circumstances allowing people who are used to live as hangers-on at the expense of the low-income earners to make tremendous profits by circumventing the law. If by any chance some organizations are sued, the poor judge who on the bench convicts those organizations or individuals must abide by the law and enforce the maximum penalty, which I think is far too weak.

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Protection of Borrowers and Depositors

Mr. Speaker, rates of interest are the basis for the major issue in our country-inflation. And in the communique as well as in the bill, we see that interests will now be cataloged. There will be interests that will be called legal interests. There will also be what will be called usury interests. Some others will be called unwarranted interests and criminal interests. But who will determine what interest rate the consumer, the borrower is dealing with. Ele will have to complain, to appear before agencies, even to take legal action in order to establish that the law gives him no protection, even if it says: The lender has to establish that the interest rate is warranted. There are two sides to every question. If the complainant wants to show his side of the story, he will have to pay, Mr. Speaker, in order to establish that he is really penalized by an interest rate which is exorbitant, unwarranted or even criminal.

Then, in such circumstances, I think it would advisable, when the bill is before the committee, to bring forward an amendment in order to clarify the situation and to determine once for all what should be a normal interest rate, a specified rate, and never mind the rest. I believe that all other rates are usurious, either unwarranted or criminal, it is loan sharking. And the government itself must presently suffer the consequences of such loans at exorbitant interest rates; that is inflation.

The same thing occurs in industry, trade, business, everywhere unduly high interest rates. That is why prices are rising. That is why many businesses are in a difficult position. That is why we have inflation and also unemployment. All these things go hand in hand.

Furthermore, Mr. Speaker, the release reads as follows:

Consumer credit has shown a tremendous increase since the last war. In 1948, the outstanding consumer credit totalled $835 million. By 1967, it had spiralled to $8.6 billion and, finally, to almost $24 billion by 1975.

Mr. Speaker, I am prepared to believe that private individuals go into debt in a thoughtless and excessive way, but are the governments setting a good example in this connection? Are the governments not going too far? Are the governments speaking the voice of reason in this matter?

Whether it is the central government, the provinces or the municipalities, let us examine the statistics. Let us compare them with statistics on personal indebtedness and we will discover that our governments have really not set a good example in that regard. We are drawn by an example. When the example is good, so much the better; when it is bad, so much the worse. But just the same we are imitators.

Mr. Speaker, there are all kinds of factors inciting the small wage earner to spend hastily. How many ads are shown on television? We know, Mr. Speaker, how costly is the use of television whether for advertising or for political information to the public. It is exceedingly costly. Throughout the day we have TV programs inviting people to spend. All the fine points of such and such a product are shown, even when it is beyond one's means, today there is the advantage of credit cards for ladies and gentlemen. Spend, mortgage your future. That is

done under the complacent eyes of governments, members of Parliament, like us. And little is done, not by members of Parliament because quite often they are too busy, but in any event we all know this is going on almost if not 24 hours a day.

Just look at the pages of your papers, particularly those dealing with credit. Look at the enticing ads inviting people to spend, and in the other page: Madam, order your Master Charge, Chargex, or any other credit cards. Yet we know that the use of credit cards requires moderation. It is very useful to travel. It is excellent. But one has to know how to use it. When there is exagerated advertising like that it is not surprising that at a certain moment individuals should be in debts over their heads for years and years to come.

Mr. Speaker, I remember Commander Desjardins, the founder of the caisses populates, who was an officer in this House when he was younger, an exemplary man, a man who practiced what he said. It is a lot, Mr. Speaker, to practice what one says. To tell others is nice but to practice it is better because the example, as I suggested earlier, is much better than words-acting.

What did Commander Desjardins do? He realized that the little French Canadian people in our community had possibilities but that our money was not being used as it should. While I was still very young I attended a meeting with my father in a school room-not like the nice ones they have today but with little tilt-over seats. Everybody tried to fit in-it was fine for the smaller ones but the taller ones had problems. And for the first time I heard someone say that thrift is a virtue, and since it is a virtue it must be practiced. We were shown that if we wanted to cooperate, if we wanted to put our pennies, our dollars together it was possible to use them in our community to prepare the future of our children. I understood the lesson, I took note of it, and several people my age noted the idea. We understood that thrift is a virtue. We have tried to put it in practice. It has therefore become the practice to think before spending, to earn first and spend later. Today, with the advantages of the credit system which is made available to them, people are led to believe that the best way to live is to spend today what they will earn in five, ten or twenty years if the Good Lord keeps them healthy. It is not surprising that figures show that people are in debt and that they have mortgaged all their credit.

Mr. Speaker, I think we should also take action in this bill to limit this exaggerated publicity, this invitation to spend, thinking that there will be no end. We should be careful, Mr. Speaker! Here is an example of this: Suppose there is a refrigerator full of food in the house. Because it is full, everyone has the right to take from it, but no one has to replenish it. Will it become empty? Of course, it will, and very soon! In our country, we are living somewhat in this way. We have the impression that we are entitled to everything and that we have no obligations. This is why there are so many people who do nothing and who produce nothing. This is why the economic situation of our country is going down and this is why our country is in a slump.

November 1, 1976

I have just dropped my glass. This is not a great loss. If there were only one glass lost in the administration of the government, I think we could show a surplus at the end of the year.

Mr. Speaker, we are asking people to make sacrifices and to tighten their belts. Let us look at what happened at the Olympic Games. We were supposed to have modest Games. We were told the Games would not be too expensive. I too like beautiful games! Recently I got a French a deck of cards and I found it very beautiful. That is fine, but we must restrain ourselves.

We also had a lottery and this is a modern or ancient way to finance the public sector. People were urged to buy tickets in order to win a million dollars. I have known poor people who needed a higher income so as to pay their debts, but they took chances because there was a catch behind the ticket.

What happened during the Olympic Games? In order to go and see foreigners run for 15 days, we have mortgaged the Canadian people for 20 or 25 years. Children yet to be born will have to pay taxes for such wastefulness. The same amount could have been spent on more profitable projects. If homes had been built for low or middle income families, the same number of jobs would have been created and we would have something to show for it. Now we are caught as well as the mayor of Montreal and also Mr. Bourassa who is having a hard time in the province of Quebec precisely because of the positions he took on those issues.

Mr. Speaker, I do not want to be considered as a member of Parliament, a Quebecer who is against those organizations. Indeed not. But I want to prove that they really went too far. Today we are asking Canadians: Tighten your belts, you must absolutely practice restraint and economy.

Mr. Speaker, this bill contains other good provisions and gives some advantages to small earners who sometimes will have to take legal action. The loan aspect has been looked after to prevent unwarranted rates and the credit rating must be taken into account, but we do nothing about the true rate which is charged and which is responsible for small interest rates. I said several times in this House that I am not an expert but it does not matter, we have eyes to see and ears to hear. Interest rates are controlled by chartered banks. The minister says in his statement and I quote:

Banking institutions issue a large part of consumer credit and are exclusively under federal jurisdiction.

It means that banking institutions are our chartered banks and that we should have a provision in this bill about the power that should be given to the Minister of Consumer and Corporate Affairs, a very special provision to ensure that interest rates be somewhat reduced so that they will not increase excessively. And if we exceed the ceiling provided in this bill, we must have the guts to take legal action, even against the big institutions that create 95 per cent of the money supply in our country. Mr. Speaker, this is the main source of credit.

Protection of Borrowers and Depositors

I know that individual credit is controled, that the credit to small enterprises is controlled, but we should control the credit of the community and stop getting money from institutions that charge unwarranted rates, and it should be provided in this bill.

Yet, Mr. Speaker, I know that during the debate on this bill, in committee, at the report stage and on third reading, we shall have the opportunity to study the question further. At that time we should study many other clauses. We should say frankly what we think about them and I encourage all my colleagues in this House to study the matter further before they pass the bill with which I agree in principle, but some details should be adjusted. I ask that we study this bill very carefully and, when it will be passed, that the minister and his senior advisers make it work efficiently so that it will not be a mere joke.

M. Speaker, those are the comments I wished to make at the second reading stage. I shall take the floor again a little later.

Mr. Pierre De Bane (Matane):

Mr. Speaker, I am pleased to take part in this debate on second reading of Bill C-16 which we are beginning to consider today. It is certainly one of the most important bills introduced in this session of Parliament. Also, there is the fact that we have been longing for this day when the federal government would take its responsibility under the constitution in this area of interest rates.

Obviously this bill covers all aspects of the cost of loans, which could give rise to the issue of constitutionality, since it covers all financial institutions and does not make any distinction between the various kinds of loans. For instance this legislation covers both the amount owing a seller and the loan obtained from a bank. Clearly the latter case has always been a federal matter, but the former is much less evident. I hope at the committee stage the minister will clear that constitutional matter for all aspects of this bill. I take pleasure in stating this, because we have here in the gallery a distinguished visitor, the Minister of Equipment of the province of Quebec, and a former Minister of Financial Institutions and Co-operatives in the Quebec government, the hon. William Tetley.

As I said, Mr. Speaker, I am pleased to take part in this debate, because this bill meets a number of problems concerning trade practices, and interest rates, an area where there has been an obvious lack of consumer protection. Let me give you two examples only. There is nothing in our statutes to protect consumers against loan sharks, whose interest charges are as high as 1,000 or 2,000 percent, and there is no current provision either under which depositors or borrowers could know precisely the yield on their savings or their borrowing costs. Such is the sad fact in our country today, and this bill will certainly meet all such problems faced by consumers. Of course, the legislation covers a number of other problems also. For instance, if no interest rate is specified in the contract, the applicable rate is the prime rate. If information is not disclosed in the manner specified in the act, no credit charge is payable. A borrower may choose at any time to terminate a non-mortgage loan simply by repaying the principal and interests, without incurring any penalty.

November 1, 1976

Protection of Borrowers and Depositors

If a borrower feels he is charged an unwarranted rate, because he finds another lender offering the same kind of loans under similar circumstances but at a significantly lower rate, he may elect either to change his loan to get a similar rate, or to enter into a new loan with the other lender at a lower rate, and repay his first loan without incurring any penalty.

I see the hon. member for Nickel Belt (Mr. Rodriguez) does not take seriously this last mentioned feature. He is critical that the legislation does not provide an interest rate ceiling. I will speak on that later on, to show that the ceiling so much talked abolit by the hon. member for Nickel Belt is a false protection. It was tried in the United States in a number of states, and also in Britain where the socialist government dropped it last year, because there is no way that such methods can attract savings, since they cause distortions in the market by ignoring current yields. Money will go where the yield is higher.

Finally, but without limiting the list of subjects covered by the bill, I would remind that if a borrower feels he is being charged an unwarranted rate, he may make an application to the court, and the latter will determine whether the rate is warranted or not, or wait for the lender himself to take the initiative, and then the burden will be on the latter to prove that such rate was warranted.

Finally the borrower will be able to take legal action if, in his view, he has been charged too high an interest rate, notwithstanding any settlement or payment he may have made. Moreover the legislation provides for stiff penalties for loan sharking such as fines of at least $1,000 and up and five years' imprisonment.

I mentioned a few aspects of this bill and a few of the problems it aims at solving but its impact is far greater. I commend the Minister of Consumer and Corporate Affairs (Mr. Abbott) for bringing it forward but regret it was so long overdue, since the federal government has not dealt much with interest rate matters since 1956. So much so that most provinces took the issue into their own hands, which resulted in the motley and even inconsistent legislation that we have in Canada today.

The banks, which granted about 30 per cent of all personal loans in Canada hardly ten years ago, now account for 60 to 70 per cent of all loans. This shows how this bill was necessary because, of course, banking operations do not fall within provincial jurisdiction.

Evidently, the first thing that strikes us is that in our country, up until today, it was almost impossible for a consumer to know what was the cost of his loan or the yield of his deposit. This is the first problem with which this bill comes to grips. Now, all institutions will have to calculate in the same way the yield on deposits and on loans. For example, as far as deposits are concerned, in the case of savings accounts, there will have to be monthly balances instead of a quarterly, half-yearly or yearly balances. This represents for thousands of depositors fairly important aggregates. Up until today, it was

impossible for the consumer to know the real cost of his loan not only because each lending company or each institution which granted credit, such as the stores or the retail houses, calculated the changes differently but because each could have additional costs, the so-called service costs, bonuses, life insurance costs, withdrawals on the capital that was lent. Because of this situation, there was a lack of uniformity in the way of calculating and of indicating the costs and interests as far as borrowing and saving was concerned. Of course, this situation was particularly unfair to the consumers.

In the case of mortgages especially, there is a serious lack of uniformity and of fairness in the disclosure and in the computation of interest on bonuses, discounts and commissions. Consequently, it is not easy to compare between the various credit institutions or even between the different possibilities of credit or of saving offered by the same institution. The notion according to which the cost of a loan depends on the risk that the lender is taking is of course rather artificial since a person who goes to a bank and uses different plans of that bank is going to borrow money at different rates. If he uses his credit card, Chargex or Master Charge, the interest rate is about 18 per cent and, in the case of a term deposit, in general, the interest rate will be about 14 per cent and if he chooses a negotiated loan, today the rate is about 12 per cent.

If somebody borrows from the same institution under three different systems, the rate is of course much higher with the credit card. 1 am quoting only this example but if we make a further comparison between many banking institutions, which apparently makes no difference for the borrower, it will be even more obvious that all methods of computation always manage to go against the consumer's interest.

I am concerned by two other aspects of the bill, Mr. Speaker. Today, in spite of all the studies which have been made, we still have no specific information in this field, which represents nevertheless 22 per cent of Canadians' available income. This bill will finally enable full and precise disclosure of all terms concerning credit transactions, at every stage of loans, from the request prior to the contract to its expiration. Banking institutions will have to maintain a register of all their transactions and submit it to the administrator who will be responsible for the enforcement of this legislation.

Second, this legislation is proposing measures designed to standardize basic concepts used in credit and deposit activities. They will include in particular various forms of charges and costs related to a lending transaction, which will all have to be lumped together in one credit charges rate, the method of calculating rates, both on loans and deposits, and the way and frequency in which payments on loans or yields on deposits will have to be credited.

As for the point raised by the hon. member for Nickel Belt (Mr. Rodriguez) concerning the reduction of the effect of unwarranted credit charge rates, I am convinced that this goal will be pursued both directly and indirectly. Indirectly through more competition resulting first of all from increased and improved disclosure of information related to credit and,

November 1, 1976

secondly, from the standardization of the credit notion into basic concepts used in credit matters.

First of all, in the case of an unwarranted credit charge, in any dispute the onus to justify the credit charge lies upon the lender according to the risks that the borrower represents and according to the capital cost and the operating expenses. The purpose of this provision is to establish ceilings on the credit rates by requiring lenders to take into account the risk which a given borrower may represent. It eliminates the obligation to establish a ceiling on the explicit rates, fixed at a constant value, which were not efficient enough as I said before, as a means of control on the credit charges and for the allocation of credit.

Secondly, and especially in order to control loan shark practices, including its latest forms, which several members of Parliament have denounced these last few years, and 1 will give you just a few examples of these such as loans on the anticipated reimbursement of taxes or on the anticipated welfare allowances. The provision concerning the ceiling of credit charge rates will punish with fines and imprisonment those who lend money at a rate in excess of the designated illegal rate. One has to note that people who loan money on anticipated tax refunds and loan sharks now lend money at annual rates varying between 300 per cent and 2,000 per cent. Loan sharking represents the second major source of income for organized crime, second only to drug traffic. The heavy penalties provided in the bill will at last give police the means to fight efficiently against those offering such criminal rates.

The other objective is to rationalize the federal legislation and establish high standards for the protection of the Canadian borrower. Today, as the minister indicated, the federal legislation is scattered over the Small Loans Act, the Pawnbrokers Act and the Interest Act. These three acts are incorporated into Bill C-16, so that we may now find some sort of consistency and standardization in the federal legislation.

A while ago I was also referring to the lack of information in this area. This bill will finally provide for the creation of a Canadian data bank on the granting and use of consumer credit, which will provide the government and those who are interested in protecting consumers' interests with exact data on the nature and extent of the indebtedness within the various strata of the Canadian public, the availability of credit and its accessibility to the various categories of borrowers-including the terms of loans-the need for and use of credit.

The fact that it is now incumbent upon the lender to prove that his rates of interest are justified, that severe sanctions are now provided for plus a competent application of the act should help interest rates to fluctuate with the market and related transactions to be both fair and equitable.

One of the most important concepts in this bill, Mr. Speaker, is that requiring a single global cost of the loan. Credit costs will include all expenses, costs and fees which the borrower must pay to make a loan, other than registration costs and similar costs. Present practice has it that additional costs are added to the official rate of interest thereby hiding from the borrower the real cost of his loan.

Protection of Borrowers and Depositors

By prescribing that all costs be included in the cost of credit and be calculated in the same way by all lenders, the act will at long last give a true idea of the real cost of a loan and enable accurate comparison of various conditions offered by lenders.

Again with regard to the point brought up by the hon. member for Nickel Belt (Mr. Rodriguez), I would remind him, as I said in my opening remarks, that the experience was made in England where it proved conclusively that interest rates imposed upon the borrowers represent a high risk, that they tend to be set just below the criterion rate and that borrowers very seldom contest them before the courts. On the other hand, the burden of the proof falling to the lender, as Bill-16 stipulates, this will encourage lenders to regulate themselves.

The borrower who feels that the interest rate is either unjustified or illegal can stop his payments, wait till the lender sues him before the courts, and the lender will have the onus of the proof, in that he will have to prove that his rate of interest is justifiable in view of the risks taken.

Mr. Rodriguez:

And he won't be able to get any more credit!

Mr. De Band:

Mr. Speaker, as you are aware, the hon. member for Nickel Belt, for lack of rational arguments to support his point of view, resorts to insults and foul language which, to my mind, is the most obvious proof that he has absolutely no argument to refute the position taken by the government.

What the hon. member for Nickel Belt (Mr. Rodriguez) does not tell us is that although he would impose an interest ceiling, he cannot say by what mysterious alchemy he will force savers to go to such or such a sector if the rates imposed are not in line with the risks they will face. The best way to prove it is to consider the evolution of loans granted by loan companies since 1968, in this margin up to $1,500, with a regulated interest rate. We thus realize today that merely 20 per cent of the loans are granted in this sector and that, in spite of that, loan companies are losing money. So that explains why this financing source is dried up and people representing high risks are now at the mercy of loan sharks.

Another item which is highly important in the bill, Mr. Speaker, and which was detrimental to borrowers, is the possibility, if we except the mortgage which is another matter, for them to prepay their loans, without paying any penalties beside the normal interest and also that the penalty for late payment will not be over 1 per cent. In my opinion, this is very important and all active lawyers know to what extent some lenders will go to force borrowers to borrow for rather long terms with no possibility of prepayments.

The bill also includes the illegal interest rate which is different from the unwarranted interest rate. The illegal interest rate means a rate highly superior to the current rate, so much that it becomes completely unwarranted and it will obviously be necessary to penalize and discourage unacceptable practices such as loan sharking, loans with excessive rates on tax refunds and on various government allowances. Police authorities maintain that loan sharking is now the second

November 1, 1976

Business of the House

revenue source of organized crime in Canada, after drug traffic. It yields at least $3 billion a year.

Till now, no federal or provincial legislation could fight efficiently against such practices as loans on income tax refunds, old age security or welfare cheques mainly because the penalties provided for in the legislation were ridiculous compared to profits realized.

Finally, with regard to the removal of interest rates ceiling on which 1 would like to insist, I want to point out that if the ceiling is set above the rate essential to the lender to operate in a certain sector of the market, the market rates will prevail and the rate ceiling will become useless. On the other hand, if the set rate is below the rate essential to the lender, he will withdraw his money from the regulated sector. In fact, the lenders will reduce the loss risks until the profits with element of risk in the regulated sector balance with those on the market generally.

In the United States, a good many states have set ceilings on interest rates. Experience has shown that when ceilings are higher than the set rates on the market, there is no real difference between rates asked for in regulated sectors and others. However, in the states with ceilings below the set rates on the market, the rates tend to get close to the ceilings.

Mr. Speaker, 1 call it ten o'clock, and 1 hope 1 will be allowed to go on with my remarks at the next sitting of the House.

Mr. Hnatyshyn:

Mr. Speaker, at the conclusion of today's sitting I wonder whether 1 might ask the deputy House leader on the government side whether he would let us know what the business of the House will be for tomorrow, and for any additional days he cares to comment upon.

Mr. Blais:

Mr. Speaker, I am always ready to provide the hon. gentleman with as much information as I possess. In this instance I would indicate to him that tomorrow we will be proceeding with the bill presently under study. In the unlikely event that we will complete that business, we will proceed to order No. 5, the bill to amend the Currency and Exchange Act, and subsequent to that we will undoubtedly have further consultations.

Mr. Bert Hargrave (Medicine Hat):

Mr. Speaker, my remarks in this adjournment debate this evening are in response to my question to the Minister of Agriculture (Mr. Whelan) on October 15 relating to offshore imports of beef from Australia and New Zealand. I was deeply concerned that although the minister had announced his individual permit requirements before any beef imports would be permitted into Canada-that was after October 17-he had not indicated that he intended to use this device actually to restrict beef imports.

Later on October 19 the joint statement of the Department of Agriculture and Department of Industry, Trade and Commerce did announce Canadian beef import quotas of 17.5 million pounds to apply to all countries importing into Canada as from October 18 to the end of the year, and notably to Australia, New Zealand and the United States.

I acknowledge that this long delayed action will limit beef imports for the remaining two months of this year. But surely as every cattleman in Canada knows, the damage already has been done. The fact remains clear that until this announcement of October 19 Canada was the only country in the world to permit unrestricted access to our beef markets.

In spite of our small human population Canada now ranks as the fourth largest importer of beef in the world. Actually in 1976 Canada is first on the basis of per capita consumption. This is the situation even in the face of our record high domestic production of cattle and beef, especially steers and cows. In spite of the repeated statements by the Minister of Agriculture that these offshore beef imports did not depress our own domestic beef and cattle markets, there is ample evidence to show this is not true and that these massive beef imports, starting after August 12, 1975, have seriously depressed and continue to depress our fed cattle markets and our cow and feeder markets.

In June, 1974, the Montreal Beef Wholesalers Association made available data that clearly support this statement. In addition a comparison of price spreads in Canada and the U.S.A., between hind and front quarters and between all grades of cows, shows up this depressing element in Canada which of course is directly related to the price discounts permitted by Canada on these offshore imports compared to the same imports into the U.S.A. If more evidence is needed on this issue there is an economic paper by Freebairn and Rausser in the November, 1975, issue of the "American

November 1, 1976

Journal of Agricultural Economics" dealing directly with price changes due to beef imports.

There can be no doubt now, three weeks after the U.S.A. triggered its meat import law, that Canada's level of beef exports was the final action that brought on President Ford's October 9 action to control the level of imports into his country. That action was reflected in every cattle and beef market in Canada. Even at Walsh on that same day, which is in my market area, where we had 1,500 feeder yearlings, including my own, there was a drop of about $2 per hundred weight in response to this U.S. action.

Widespread concern by all Canadian cattle producers is now most apparent. Public meetings are being held in every cattle producing region. Very little advance publicity is necessary to get a crowd of cattlemen to discuss this cattle crisis. Three weeks ago in Lethbridge 300 feeders and cow-calf operators turned out with only two days' notice to let off steam, if you like, and draft an appropriate resolution to the minister. 1 was there and spoke to them. Then on October 22 in Stettler 800 concerned cattlemen held another somewhat similar meeting. The Minister of Agriculture will be hearing more about that.

Perhaps the most unique evidence of this national cattlemen's concern is the class action legal suit brought by three Maple Creek, Saskatchewan, ranchers for $52 million against the Minister of Agriculture for failing to take adequate action to curtail Oceanic beef imports. That represents $1 million a .week for a 12-month period which, in their opinion, represents only a nominal loss to the Canadian beef producers. This class action suit is for real and has been properly served by lawyers acting for the Maple Creek ranchers on behalf of all Canadian cattlemen. Those of us who are old enough to remember Canada's flourishing sheep industry under range conditions, especially in western Canada, cannot help but speculate somewhat fearfully that Canada's cattle industry could go down the drain with another big push from these Australian and New Zealand imports, just as was the case in respect of lamb, mutton and wool imports from the same countries 30 years ago.

The answer, of course, is some specific policy direction to control offshore imports to reasonable historical levels and to establish further fair bilateral trade policies in beef and cattle with the U.S.A. I do not mean a supply-management policy promoted by the Minister of Agriculture. His description of the U.S. cattle industry as supply-management oriented because of its meat import law with power to impose import quotas is sheer nonsense.

Hon. E. F. Whelan (Minister of Agriculture):

Mr. Speaker, I want to put a couple of things on the record. We have asked for positive evidence to be presented to us regarding the importation of Australian and New Zealand beef affecting the price of finished beef which, as the hon. member knows, is based on Omaha prices. We have always stayed ahead of Omaha prices. U.S. prices have always been under ours, which is the normal pattern. When our prices climb much higher than theirs, they ship meat from the United States.

Adjournment Debate

When the hon. member refers to controls, I say he must have a very short memory because the government had controls on U.S. meat. Let us not forget that there were times during our weeks of slaughtering when the U.S. took over 68 per cent of the slaughtering in this country. That was when people asked me to put on controls. I did so, 1 put on quotas, but I did not hear any American say that the President of the U.S. was protecting American prices when he triggered his program, not only with respect to Canada but with respect to the 24 countries that ship meat into the United States. To insinuate that this market belongs to the American producers is quite wrong because the American price on finished beef in Canada and the United States is still based on the Omaha price, and it has stayed constant. The U.S. was bringing in Australian meat at the same time at between 65 cents and 70 cents a pound.

On October 15, and again on October 27, the hon. member asked for clarification of the steps which have been taken to protect Canadian beef producers as the result of the implementation of quotas by the United States. I trust that the following explanation will adequately serve this purpose because of the action we took when the President of the United States put his supply-management system into force. That is what it is, no matter what anybody says. He was trying to run it through voluntary quotas. It did not work, so he triggered his meat import law and he hopes that will work. Nevertheless it is a supply-management system. He says, "That portion of the market belongs to you, that belongs to you, and that one to someone else." If that is not supply-management, 1 would like to know what in heaven's name it is, because he is using his law for that.

In a press release dated October 13, 1976, I announced that the government was acting to protect our beef markets from any disruption due to the U.S. action, thus clearly conveying the intention to restrict Australian and New Zealand imports if they threaten to disrupt Canadian markets. This statement is quite contrary to the comment made by the hon. member in his question of October 15, which was to the effect that nowhere does the statement indicate the intention to restrict or reduce Australian and New Zealand imports. This is quite false.

Oh, oh!

The Acting Speaker (Mr. Ethier):

Order, please.