Let me explain what I mean by that. Property and civil rights are primarily within the jurisdiction of the province; but if the federal parliament can only deal effectively with legislation in its field by passing ancillary legislation in the field of property and civil rights, it can do so even though it does invade that field. If you do so invade the field of provincial jurisdiction, the provincial law in the matter falls to the ground as against the dominion law.
We have legislation to-day in Nova Scotia, Manitoba, Quebec and some of the other provinces dealing with the question of these charges, and the moment we enter the field under the heading of interest or any questions ancillary to interest we invade a field which the provinces have already covered. This would mean that their law would be of no effect. If we did that in order to cut down the high interest rates, I would not mind so much, 'but here we are proposing as a parliament to enter that field in order to enable these small loan people to raise their interest rates to the exorbitant rate of 26i per cent per annum, and I submit we should not do that.
There is another matter I would draw to the attention of the committee. If we reserve this field entirely to ourselves, it means that we do so against the wishes of the province of Ontario. The representative of the government of Quebec also took a similar stand, that the province wanted to reserve that field to themselves. The Minister of Justice will know that this question is dealt with in the civil code of Qudbec, and that if we enter that field we interfere with that provision of their civil code. The province of Quebec objected to our doing that; nevertheless we are here asked to do it. I submit that it is not wise for us to do so; that it is wise at this present stage of our development to restrict ourselves to controlling the top limit of cost of loan and also interest rates and leave the province to say whether these small loan companies shall be able to charge anything at all by way
Industrial Loan and Finance
of service charges and the like, always, of course, below the limit of cost of loan fixed in the criminal code.
Furthermore, the provinces have the means of administering the law, and if we enter that field against their wishes, are they going to show the same desire to enforce the law? In other words, if we put something in the criminal code, they can, by administering the criminal law, absolutely wipe out the loan shark people. They have their attorney general's department, their police courts, and their crown prosecutors to prosecute these people in the courts. But if we enter the field and undertake to look after the whole thing, are we going to set up a parallel system of administration of justice to make sure that these small loan people do not break our small loan legislation and loan sharks do not operate? That is something I would ask the Minister of Justice to consider.
I have suggested already that I think cooperative lending is one of the solutions of our present difficulties. I think it is the solution of many of our difficulties to-day and it should be encouraged, in every way. We have to-day a very valuable institution, the Canadian Association for Adult Education, started, I believe, under the aegis of the extension department of St. Francis Xavier university, and that association would be pleased to extend its activities in the field of educating the people in regard to the benefits of cooperative lending institutions. In the United States they have a federal credit union law, and the federal government actively promotes these institutions. Their growth in the United States has been very fast and the people are encouraged to save and provide for their future. By so doing they are also able to provide for the. credit needs of their friends, who get credit cheaply, and the depositors get a good return on their money. I further suggest that this government should appoint some person actively to promote the spread of credit unions throughout Canada. I go further and suggest that the government should legislate, to set up a federal credit union law. If it does not see fit to do that, I submit it should make a grant of at least
810,000 to enable the Canadian Association for Adult Education to preach this doctrine of cooperative credit throughout Canada. I am glad, that the Minister of Justice applauds that. It would be something in the way of really constructive legislation-much better than this business of giving special privileges to a few companies, with their exorbitant demands.
There is another angle with which I want to deal before I conclude, and that is the question of the extent to which the chartered banks of Canada should fill the needs proposed to be filled by these companies. We know that the Canadian Bank of Commerce has entered the small loan field and that it is lending money at a lower rate of interest than is charged by the small loan companies. Mr. Stewart gave evidence before our committee indicating that their effective rate of interest was 10-5 per cent. I quote this from the evidence of Mr. Stewart, of the Canadian Bank of Commerce:
Well, Mr. Chairman, the Canadian Bank of Commerce entered the personal loan field in Toronto in June of 1936. Before the end of July of that year personal loan departments were opened at Halifax, Montreal, Winnipeg, Calgary and Vancouver. It is true, as Mr. Dobson says-as all banks have I should imagine -that up to that time we made small loans; but it seemed to us that there was a wider field. There was a considerable amount of criticism against the banks because of the fact that credit facilities were not available to wage earners; and to some extent with a view to dissipating any such criticism we entered the personal loan field. There was also probably a selfish motive too in that it built up a substantial amount of good will for the bank. The system, as I say, is in vogue throughout Canada. The loan departments are at Halifax, Montreal, Winnipeg, Calgary and Vancouver, but each and every branch bank is equipped to handle such small loans although the department is the last word in the confirmation or the refusal of the loan. The branches, however, work up the application, send it into the central department and there it is accepted or declined. In so far as volume is concerned, since the department was started we have made 60,423 loans, for a total amount of $8,800,000. The average amount of loan made is $146.
Then he said that "off-setting the savings balances on which interest is allowed the effective rate is 10-5 per cent."
He goes on to show what these small loans are made for:
Medical, dental and hospital bills 15-73
Consolidation of debts 28-0
Outside loan liquidation 6^
Taxes, real estate, mortgages and interest,
insurance premiums 8-6
Travel and education 3-4
House improvement expenses 1,1-7
Motor cars 7-03
He goes on to say:
I think we can make a little money from now on provided we keep to the present figures.
On the question of whether the other banks could be encouraged to enter this field, I suggested in the committee that if they were encouraged to enter the field they would meet the need for credit now being met by these
Industrial Loan and Finance
companies. In this connection Mr. Dobson, president of the Canadian Bankers' Association said:
Now, if your committee should recommend and the government should decide to ask us to cooperate in the small loans field and provide an increased rate for monthly payment loans, I believe it is quite possible and probable that some other banks might then decide to take up that extended loan field. I do not mean to say they are going to take the business away from the small loan companies and go right through with that type of business. I do not believe for a moment that the small loan companies are not going to stay in business. I believe they are required there, but the banks might extend their field further, that is all.
Subtopic: INDUSTRIAL LOAN AND FINANCE CORPORATION