I understand the remarks of the hon. member. He mentioned the rate of interest of 235 per cent. But as I said, it seems to me that, under the existing laws the highest rate of interest than can be charged on a loan of less than $500 is 12 per cent unless it comes under the Small Loans Act, in which case the rate can be 24 per cent per annum. If I am correct, if the case did not come under the Small Loans Act, it came under the Money-Lenders Act, chapter 181 of the Revised Statutes of Canada, which act provides a ceiling of 12 per cent on loans below $500.
As I say, there are many cases in which the trouble is not the rate of interest but fraud; and the civil laws or the common law applicable in each province would, to my mind, cover those cases and recourse can be had to the ordinary civil remedies for such situations.
As far as the best known institutions of lending are concerned, credit is well regulated, as all hon. members know. For instance, the banks have regulations applying to the interest they can charge. There are also other lending institutions like the companies coming under the Small Loans Act, which companies are regulated by the act pertaining to them and which provides a maximum rate of interest of 24 per cent on very small loans, that is to say loans under $350.
In our statutes there are also other acts which regulate interest. An example is the Farm Improvement Loans Act which provides a ceiling of 5 J per cent interest. Similar
provisions are also to be found in the Fisheries Improvement Loans Act. In the National Housing Act the rate of interest is fixed by order in council and is not to exceed an interest rate of more than a certain percentage above the rate on government long-term bonds. Generally speaking, I would say that the recognized institutions of credit are regulated by the present provisions of the law. I would say that the effect of the bill which is now before the house would be to regulate loans of more than $500 by professional lenders or loans of more than $1,500 by small loan companies. Of course this is a field which is to my mind, extremely restricted, if we look at it from the viewpoint of the average citizen or if we want to look at it from the viewpoint of our friends of the C.C.F. with regard to the low wage earner.
It is difficult to find many cases in which a low wage earner would have to borrow sums greater than $1,500 or $500. If these people who must borrow have not been able to secure a loan from the bank, from any cooperative of the kind which was mentioned this afternoon in the debate; in fact, from the recognized credit institutions, it seems to me that they have a difficult case. If we were to put on a ceiling-I mean as long as the Small Loans Act is not amended-which would provide a lower rate of interest than the one provided in the Small Loans Act, these people would not be able to find a lender. What I mean is this. It seems to me that there would be the chance of creating a black market there. Of course, in our society of free enterprise it seems to me that there are some cases in which what would appear to be a usurious rate would not be a usurious rate because of the special circumstances applying to it.
Possibly the problem which the hon. member for Assiniboia (Mr. Argue) has in mind could be solved in this way. Maybe there could be a rule of equity which could apply to credit in some cases where definitely there has been exaggeration by the lender or where a lender may have taken advantage of a particular situation. I am quite confident that even the sponsor of the bill does not believe that this bill would obtain the result he is seeking to obtain, even if it were adopted. I am quite sure that his intention was to have a debate, and up to this point-excluding the one at present speaking-I think the contributions have been very good and helpful to the situation.
However, it seems to me that you cannot solve that problem simply by saying that there will be a ceiling of 12 per cent on all loans.
I am thinking in particular of business transactions where somebody, for instance,
will make an arrangement with someone who is willing to lend some money but where the lender would want to participate in the profit resulting from the operations of the company or of the organization and would be justified, according to the circumstances, in asking as high as 50 per cent interest. In some cases I think 50 per cent would not be a usurious rate. Of course, I know that in some cases there are abuses. But here again I think the cases which we have to complain about and which everybody-especially those who have had cases like the ones we have in our law offices-wants to correct are really cases of fraud and are really cases in which we must have recourse to the courts.
For the reasons which I have mentioned I do not think that the bill would have the desired result. Much as I sympathize with the purposes of the sponsor of the bill in desiring to correct a situation which we all want to correct, I do not think the present bill would have this result. Therefore I cannot support it.
Topic: INTEREST ACT
Subtopic: AMENDMENT TO PLACE CEILING ON INTEREST RATES