I think there are only two members in that corner who have taken part in the debate and brought some of these facts to our attention. I feel there are many more complex aspects of this bill than those which are being brought before us by the sponsor of the bill or the other members of his party.
I do not think there is any doubt about the importance of credit. We have all heard this afternoon and this evening about the many important phases of credit in so far as our economic structure is concerned. This has been very forcibly brought to our attention by many of the previous speakers. Since we have changed from an agrarian civilization to a more or less industrial civilization, a change has been brought about in our attitude toward this matter of credit. The suburban type of life that many live today has created a need for credit. The great increase in the volume of money lent by these companies is proof without a doubt of the need for this business of lending money. If it were otherwise I think we would not have seen the great expansion that we have seen in this business.
The government has kept pretty well apace with this expanding business in so far as legislation is concerned. I should like to bring to the attention of the house the various implications of the dovetailing of these two bills, No. C-3 and No. C-5, the amendment to Small Loans Act and the amendment to the Interest Act. I feel they are very closely related. Up until the Small Loans Act was passed in 1939 the only applicable law was the Money-Lenders Act which restricted the rate of interest on loans up to $500 to 12 per cent per annum. No mention was made in that act of the interest rate that might be charged on larger loans and this created a problem which resulted in interest rates of 400 per cent or 500 per cent developing. The Small Loans Act, therefore, was designed to plug the gap by providing for a rate, including all charges of any kind, on loans up to $500.
After a long study in which many interesting witnesses were called from social welfare groups, banks and loan companies, and after discussing it very thoroughly the committee decided that two per cent per month on the unpaid balance was a fair and reasonable rate. However, there was no restriction on loans over $500 until 1956, only three years ago. It was apparent at that time that the Small Loans Act needed overhauling. As a result we have, as you know, rates of interest set at 2 per cent per month on the unpaid balance up to $300; one per cent from $300 to $1,000, and one-half of one per cent from $1,000 to $1,500. Briefly, that is the government's position with regard to the legislation which is in force to protect borrowers in Canada. I feel, Mr. Speaker, this is as far as we should go. It takes care of by far the largest group of borrowers. It takes care of the group that we wish to protect just as much as our friends in the C.C.F. wish to protect them. I feel the low income group is protected by the Small Loans Act today.
Another point I feel we should consider before any changes are made is that this lending business is a process whereby money is bought and sold on the lending market. We all know that the cost of buying money is higher today than it was a while ago. I believe, in fairness to the loan companies, we should mention the fact that their costs of operation have gone up as well. I believe, therefore, it would be improper at this time to make a change, for that reason alone. After all, we should not be asked to legislate to protect people against their lack of good judgment or common sense. I do not believe it is practical to legislate to cover all situations in which people may find themselves. I understood the hon. member for Burnaby-Coquitlam (Mr. Regier) to say that in his
province there was a ceiling imposed on the rate of interest that credit unions could charge. I wonder why the family he mentioned did not go to one of the credit unions to borrow the money because in this way they would have been protected to the same extent this bill suggests we should protect them. I should like to hear more of the facts in that particular case, because it seems rather odd to me that a well established bank would turn down a request for a $2,400 loan when the applicant had a house which was completely paid for and had no encumbrance against it.
The hon. member for Assiniboia told the house this afternoon that the total of all consumer credit outstanding in Canada, as of September, 1958 was $1,947 million, according to the Bank of Canada statistics survey from which he quoted. He also went on to say that, according to that same survey, the banks had done a poor job on the consumer credit basis. He went on to say that they had been doing only about 25 per cent of the consumer credit business. But that business in total is $499 million. This amount of business done by the banks was transacted on the basis of approximately Ilf per cent, or about the same figure that he is proposing in this bill. Of this total amount of business of $1,947 million, the small loans companies did $372 million worth. That is a terrific amount of business which they have done, over and above what the banks have done. These people that use the small loans companies which had this vast amount of business went to those loans companies for various reasons. Maybe their credit rating was not sufficient for the banks; maybe it was a matter of accessibility; maybe some personal reasons were involved. There may have been many reasons why they went to the small loans companies and did $372 million worth of business.
If my hon. friend wishes to take away this opportunity and to make this amount of money unavailable to the people of Canada, where will these people go for their credit? What effect will this action have on our country's economic situation? I have heard hon. members talking, not only in that corner of the house but in other places, about unemployment. If we take $372 million out of circulation on the small loans companies basis, I would think that action would have a direct bearing on unemployment today. What about those thousands of young people who are moving into new homes? How are they going to furnish these homes and equip them with stoves, refrigerators, and such things if small loans are not made available to them?
Business of the House
Then I come to this business of 54 per cent interest on a $20 article which the hon. member mentioned this afternoon. I am not going to say anything about the 54 per cent. I am going to stick to that figure of $2.25 which he used in respect of this particular article. It might be a hot plate; it might be a steam kettle or some other appliance or piece of equipment which is needed. The buyer of this piece of equipment may feel, "It is worth $2.25 to me to have this piece of equipment; we need it and in order to increase our standard of living it is essential". He is therefore quite willing to pay $2.25 for the use of this article. I do not think it is the function of the government to tell that man whether he should or should not have this article, or whether it is essential that he have this product. I do not see why we should be asked to legislate in order to alter people's minds. We must give people some credit for using common sense and good judgment.
There is another way in which to look at this matter. Maybe this particular article was on sale. Maybe he saved two or three dollars by buying it when it was on sale and so saved the $2.25 or at least had that saving coming to him as a result of this special sale. I think there are many occasions when it may be advantageous to the purchaser to use the small loans business which is made available to him. It may be all right for us to pass legislation whereby we tell the lenders that they cannot charge more than 12 per cent for loans. But on the other hand, we cannot tell them that they must lend the money. That is a decision that it is up to the businessman to make, in my opinion. This would not be the case if the socialistic idea were put into force.
This bill would freeze the limit of interest on credit to 12 per cent. On the one hand you would freeze the interest rate on the money lent. But on the other hand, the loan companies must go out and buy the money. On the one hand they are told they cannot charge more than 12 per cent. On the other hand, there is nothing in the act to say that
the price at which they buy this money must be a stable one. You cannot freeze the rate on one side without doing the same thing on the other side. The selling price and the cost price of money must be handled in the same way in either case.
I take the view, Mr. Speaker, that we are operating under a free enterprise system. I am happy to say that I belong to a party which down through the years has promoted free enterprise in business. I feel that money is no different from any other commodity; it is bought and it is sold. In a free market it will seek its own level. If this business of small loans is as lucrative as our friends in the corner tell us it is, I say that many people will get into the small loans business. The more people we get into the small loans business, the more competitive it will become and in the long run competition should control the maximum and control the business. Therefore, Mr. Speaker, I feel that at the present time the situation is well in hand.
Topic: AMENDMENT TO PLACE CEILING ON INTEREST RATES