[Recorded by Electronic Apparatus]
Thursday, February 6, 1997
.0931 
[English]
The Chairman: Good morning, everyone. How are we?
[Translation]
Good morning, Pierre.
Mr. de Savoye (Portneuf): Good morning.
The Chairman: Welcome to our committee.
Mr. de Savoye: Thank you very much, Mr. Chairman.
[English]
The Chairman: Ladies and gentlemen, pursuant to Standing Order 108(2), our study of credit card interest rates will now begin with the first witnesses.
As you know, several members of the House of Commons, including members of this committee, have requested that the industry committee look at the question of card interest rates and some other issues related to it. One member wrote to me on behalf of this group to ask that the industry committee pursue this. Subsequently, the steering committee agreed to do this.
This issue has been studied several times in the past. I believe this is the fourth study in ten years. In this context the committee does not seek to simply restate earlier positions but to move the agenda along in dealing with the issues of credit cards and to discuss with both government officials and the industry the problems that are emerging and the problems that are being solved.
Members of the committee have had distributed to them the findings of previous hearings. We'll use that as a basis for our own public hearings in the next few weeks.
We're going to start with officials from the Department of Industry who in their careers have spent many months and years studying these issues. I think we can all benefit from their own particular experience and their advice to us. From the Office of Consumer Affairs we have with us Vinita Watson, director general; David Waite, a senior analyst; and Jean-Baptiste Renaud, an analyst.
Ms Watson, perhaps I can ask you to be the lead for your team. I welcome you to the committee. I know you've been here before on this issue. I very much appreciate your coming back and talking to us one more time.
Ms Vinita Watson (Director General, Office of Consumer Affairs, Department of Industry): Thank you, Mr. Walker.
I thought I might start by briefly telling you that when we were here in December of 1995...setting the situation as to what we told you then, what we see the situation as being now and where we think we might go with this.
A year ago, when we came before this committee, we told you there were new cards in the marketplace. There was more choice among the cards, and new products were being offered. From all appearances, the market seemed to be a competitive one. The interest rate charged on bank cards was falling in line with the decline in the Bank of Canada rate and was responsive to changes in the rate, albeit with a little bit of a lag. So at that time, we said, competition appeared to be serving consumers well. Our only issue, really, was adequacy of information and reporting.
The outcome of that meeting in December 1995 was the request by the committee chairman, Mr. Godfrey, to the Canadian Bankers Association asking for consideration of annual reporting to cardholders of the amount of interest they had paid in the year.
We think the credit card picture today is a little bit different in that rates have tended to be somewhat more sticky than we would have liked. Bank card rates did not respond to steady declines in the short-term rate until about the end of 1996. By the end of the year the standard bank card rates had fallen by 1% versus the 5% decline in the Bank of Canada rate. The retail card rate had remained stuck where it has been for many years, at 28.8%.
.0935
There are two points we really want to make with respect to the sticky rate. First, the spread appeared to be increasing past its historical average. It's been about 9% over the last decade, from 1986 to 1996. From 1991 to 1995 it was 10.5%, and last year it was 12.5%. In fact, at the end of January there was about a 13.5% difference. So the spread seems to be increasing, and we are not able to adequately explain the reason for this increase, based on the data we have.
We don't have any data on retail cards, and we are concerned about the adequacy of credit disclosure in the retail sector. The polling data we have suggests that consumers are less aware of the interest rate on retail cards than on the bank cards. In fact, some data we received just yesterday from an Angus Reid poll done last week showed that fully 38% had no idea what interest rates retail cards carried and only 14% were even in the ballpark. They thought they were somewhere between 26% to 30%. Most consumers polled thought the rates were around the same as the bank card rate, which of course is not the case.
The increase in spread is potentially quite a large cost to consumers, given there are13 million cards - and this is a conservative estimate - that have interest-bearing balances of about $1,300 to $1,500.
However, there have been some pluses over the last year as well. Sticky rates are only one side of this. There have been some positive developments over the last year. There's been a much greater dispersion in the interest rate and signs of increasing competition. Until last year, banks were competing for market share. But the competition tended to focus on incentives, such as reward points and mileage points. Over the last year we have started to see the competition actually move to price competition, with all but one of the major banks now offering low-interest cards.
There's been much better publicity of the low-rate cards in the last several months. We were gratified to learn, from the same Angus Reid poll we got the results from yesterday, that while in April of last year 70% of consumers were not aware of the low-rate card option, last week almost 60% were aware there were low-rate cards. So there's been a great increase in awareness. The financial institutions have been much more aggressive in publicizing this in the last year.
Some retailers are beginning to be a little more forthcoming in engaging in lower credit cost approaches. New competitors are entering the market. Our view is that the combination of keeping this issue in the public view plus increased publicity by the card issuers on this issue - the retailers very recently, but more particularly the financial institutions - has helped greatly, so that is a plus.
In terms of the options, we're of the view that interest rate caps on credit cards are not the answer. I'll be happy to answer questions on that subject, as best I can. In our view, they tend to distort the market. They restrict choice, ration credit, and can have unintended consequences.
.0940
We think the best thing we can do is have good, clear and complete information to give to consumers so they can make informed decisions. We need to have a competitive market. We think in the long run those are the best guarantees for the best outcomes for consumers.
I would also say that information disclosure today is significantly better than it was a decade ago, largely initiated at the urging of the 1987 parliamentary committee. We have done quite a bit ourselves over the last decade, at the urging of committees such as yours and with our own initiatives, in terms of consumer information and education. We can talk about that as well.
We think there are some things the industry could do to make better and more timely information available to consumers. We have some suggestions in the information package that was provided to you. I'll be happy to go into it or not, or just leave it at that, Mr. Chairman.
The Chairman: I think that's sufficient to start with. I have people ready for questions.
[Translation]
Do you have any questions, Mr. de Savoye?
Mr. de Savoye: I certainly do, Mr. Chairman.
Ms Watson, I want to thank you for your presentation.
I read the documents that your office sent us. I have problems with a few of your statements.
First, however, I noticed in the table contained in the document you sent us that the percentage of cards fraudulently used is a quarter of 1%, the amount of fraudulent accounts is 12 one hundredths of 1% and that the delinquency ratio is 1%. One can only conclude that banks and companies issuing credit cards have been managing these cards very closely. Their losses in bad debts are quite small overall.
However, the delinquency ratio being 1%, interest is only paid on that 1%. That would lead me to conclude, and the other committee members would also have to conclude, that it is this 1% delinquency ratio that in fact finances the whole credit card system, apart from the amount that is paid by the retailer to the credit card issuer. If I wanted to be very frank, I would say that 1% of people, poor people, pay for the other 99%. And, as you mentioned, interest rates are going down very slowly and it is this 1% made up of poor people who are being taxed abusively.
You mentioned that the public is more and more aware of the fact that low-rate credit cards are available but you would have to admit that this increase in awareness on the part of the public is due mainly to the fact that 150 members of the House of Commons have been going public in the newspapers to warn people that something needs to be done. The banks did not take that initiative.
On page 5 of your document it says:
- "What Are the Options?"
- Interest rate caps on credit cards are not the answer
You then say:
- they distort the market, restrict consumer choice, ration credit, shift demand... and most affect
people with the lowest incomes
Let's talk about the consumer's choice. I have a card. I'm not dumb but it was my impression that because I was paying an annual fee, my interest rate was lower. No, that is not the case. If I am late in paying, I have to pay for that; I pay an interest rate of 17%. I do have points that will provide gifts, generously provided for by the 1% of the public that does not have the means to pay their bills at the end of the month.
You said that a cap would restrict consumer choice. Do consumers really have a choice? Maybe they've started noticing over the past two months that they possibly have a choice thanks to the members in the House who raised this issue, but certainly not thanks to market forces.
You said that it rations credit. What micro or macro-economic law says that asking all financial institutions to respect the same parameters will ration credit? Financial institutions have to respect other guidelines and to my knowledge that has not changed, in terms of mortgages, the ability to borrow if one has the means to do so. Personal credit margins are flourishing. So how would a bill preventing abuse restrict normal, proper credit that respects people's ability to pay?
You say that this will shift demand to other high cost lenders. That is already the case. Some people are paying 17, 18 and even 28 per cent to big department stores. A 28 per cent cumulative monthly interest rate is 32 per cent. Our poorest consumers are already dealing with high cost lenders, that is, the big banks and the big department stores.
You say that this will most affect people with the lowest income and I have just explained that 1 per cent of people, made up of poor people, are paying for the other 99 per cent. Everything that you've said already exists, Ms Watson. How could you think that by continuing in the same way, we will resolve this problem?
I am ready for your answer, Ms Watson.
[English]
Ms Watson: You've raised a number of points, and I will try to answer all of them.
First of all, if I understood you correctly, I think you said that 1% of people - the delinquency ratio is the number that you quoted - were paying for the other 99%. I don't believe that's the case. If you look at the table on page 2 of the facts and figures that we have given you, the delinquency ratio is not the actual interest-bearing balance. The rate of delinquency involves those accounts that are overdue by three months or more. As a ratio of all accounts, when compared to all accounts, it is 1%. It's varied from 0.09%.
Mr. de Savoye: I'm sorry, Ms Watson, but I'll intervene here. In French, it says proportion de comptes en souffrance. On my statement for a credit card, when my account is en souffrance, it means that I didn't pay it by the due date. So can I rely on these figures and on the titles that are there? If I can't, I would appreciate having a corrected version.
Ms Watson: I'll be happy to supply it for you. I'll let Jean-Baptiste answer.
[Translation]
Mr. Jean-Baptiste Renaud (Analyst, Office of Consumer Affairs, Department of Industry): A 21 to 25-day period of grace is allowed to pay the bill, which about 50 per cent of people do, and they do not pay interest. Approximately 33 per cent of consumers pay more than the minimum amount, but less than the full amount. Approximately 10 per cent do not pay the minimum amount, whereas 1 per cent of bills are left unpaid and are therefore outstanding.
.0950
Mr. de Savoye: They're not outstanding; those are bad debts.
Mr. Renaud: Those are bad debts because no payment will have been made for at least three months.
Mr. de Savoye: And they pay after three months?
Mr. Renaud: If their financial situation improves, I imagine that they pay. But if it does not improve...
Mr. de Savoye: I would appreciate having a table that provides us with numbers that will allow us to assess the situation. Your document and the explanation that you have provided me with today are both very different.
[English]
Ms Watson: We'll be happy to provide you with the other information; I will pass that on. I apologize if the French table is not as clear as it should be.
You raised some other points as well, and I'll try to get to those now.
In terms of what was responsible for the interest rates coming down, for the low-rate card options, and for the publicity, this is something that has been happening very much over the last year. While keeping the issue in the public view through your committees has certainly been very helpful, to give the institutions their due, I think they have also....
This goes back to last spring. Last April, for example, American Express launched a very aggressive campaign when it introduced its low-rate card. You see, the institutions themselves are competing for a share of the market that is not, per capita, growing that much in terms of the cards. The number of cards has not been increasing as much as it did in the past. The institutions are competing for a growing market share, and they are now competing quite aggressively on price, as well as other aspects such as those that you mentioned - mileage points or other incentive points that the cards offer.
Today your interest rates are from 9.25% on a credit card all the way up to 18.9%. I would argue that this dispersion in rates is a big dispersion, and it's a sign that the market is working. You pick the card that suits what you want, and you pay for it.
Mr. de Savoye: Can I ask for more precision on this?
[Translation]
May I ask you for a few more details, Ms Watson? What percentage of card owners own low-rate cards? When you say that the market is working, you can't just be talking about supply; you must be talking about demand and the way that demand and supply meet. I would like to see both sides of the coin.
[English]
Ms Watson: Yes, I'll be happy to give you what data we do have. Based on polling data that we got yesterday, we understand that about 8% of card holders use the low-rate cards. This number undoubtedly will increase, because low-rate cards are a fairly recent option. I think the Royal Bank was the first to introduce them in 1992, and now virtually every one of the major six banks but one offers a low-rate option. The Caisses populaires Desjardins just introduced a card in January, and the National Bank introduced a card in the fall of last year. So you're starting to get these cards, and the numbers will grow.
My colleague has pointed out to me that in the material we gave you we have included suggestions on how we can better advertise these options. Ultimately, however, it is the people who pick the card that they want.
[Translation]
Mr. de Savoye: Let's talk about the information that you have been providing the public with. If I've understood correctly, you've only published 5 000 copies. The number of householders that we send to the people in our riding is much higher. Furthermore, it was noted, after researching this, that only 20 per cent of those who receive the document want to receive it again.
.0955
You think that you are very knowledgeable when it comes to advertising.
[English]
The Chairman: Ms Watson.
Ms Watson: We are doing our best to make information available as widely as we can. We send our credit card costs quarterly to all of the consumer organizations across Canada. We send it to the media. It gets picked up in the media and gets reported on. We rely on people such as yourselves to include the information in your householders. We have a web site now to give people the latest information. We have just started publishing a one-pager on lowest credit card options - I believe it was included in your packages - that we will now put out every month. It has information about the lowest-rate cards available. We are doing our very best.
We are also now just about at the stage of being able to put a pilot on our web site, whereby a consumer can simply type in the amount of their balance and the program will show them, based on their balance, which is the lowest-rate card of all the low-rate cards that are available in the market.
I recognize the fact that not everybody is on the Internet or has access to a computer, but we are relying very heavily on consumer organizations, and we have received very positive feedback from consumer organizations with respect to this particular interactive service.
The Chairman: Thank you very much. There will be opportunities again, Mr. de Savoye.
Before Mr. Schmidt starts his questions, Ms Watson, you mentioned the Angus Reid survey. Could you get that to the committee, please?
Ms Watson: Absolutely.
The Chairman: Thank you. Mr. Schmidt.
Mr. Schmidt (Okanagan Centre): Thank you, Mr. Chairman.
I thank you very much for coming here this morning. It's good to see you again.
There are a couple of questions I would like to ask you.
I think one of the points you made was that you wanted the industry to be more forthcoming in the disclosure of the various issues that are involved in credit card rates, like the conditions of granting credit, the conditions of payments and things of that sort. You also indicated that there had been some improvement in this regard, and I can't help but reflect on one of these so-called information pieces that was sent out by one of the banks.
Other banks sent different information, but one in particular definitely did make the point that they had low-rate credit cards. But this particular piece of information was in such small print and hidden in all the other stuff that anybody who happened to catch this was a person who read verbatim everything that particular advertising piece presented. The chances of a million people who received that piece of information picking out that one little line were infinitesimally small. How do you respond to that kind of a situation?
Ms Watson: First of all, I think the low-rate credit card options are recently being advertised more aggressively, more visibly and more clearly by the institutions.
The second suggestion that we would make is to tell the financial institutions that there are things they could be doing to perhaps look at the balance of the role that they play between being sort of a card marketer and a financial counsellor.
After all, it's in the banks' interest as well to have people pay their credit card bills on time. Perhaps the banks could include a notice about low-rate cards - as we've suggested in our information material - for somebody who is carrying a balance. Perhaps they should include a notice that asks if the person is aware that the bank does offer low-rate cards.
Mr. Schmidt: That really wasn't my question, but the next step that I want to get to is these low-rate credit cards that are being presented. They're being presented as low-rate credit cards, all right, but the low rate applies only to a six-month period, after which time it reverts to another rate. So it can be quite misleading for a financial institution or even the department to say yes, there are now all these low-rate credit cards. They do not last. They are there for a restricted time period.
.1000
Ms Watson: Mr. Schmidt, you're referring to only the introductory low-rate card. The American Express card had a six-month introductory low rate. The low-rate cards offered by the financial institutions that I'm referring to are at a low rate that remain at a lower rate. Those cards, in fact, have been tracking the decline in the Bank of Canada rate quite reasonably.
Mr. Schmidt: I appreciate that, but the point is, when we make these generalized statements we ought to have full disclosure. That's really the point I'm trying to make here.
Ms Watson: I agree with you.
Mr. Schmidt: There ought to be full disclosure whenever it happens. It's not only in this particular area. I think it has to do with the other area as well.
We all know, I think, that many people in Canada today would be at a complete loss to figure out the interest costs on a particular bill if you told them the rate was 7.9%. They'd have no more idea how to figure out how much that would be than would the man in the moon, it seems to me. The unfortunate part is that this is reality.
How do we translate into language or into numbers that actually provide full disclosure? It's all very well to talk about full disclosure for people who really understand the technical, legal and financial language, but what about the consumer, the person who is using this credit?
Ms Watson: You make a very interesting point, and a good one. I think this is what the committee was getting to last year when it made the request that it would be helpful for a consumer to be able to see, at the end of the year, how much they had paid in interest over the year.
Now, on your credit card statement it does very clearly say. If you paid interest in one month your next month's statement will show the amount of interest you've paid as a dollar amount. So it will say $30.22, or whatever the amount was.
More than that, you could say, just as we do at the end of the year on mortgages, for example, that this is what you paid in a year in interest charges on your mortgage. You could ask the banks and the other institutions, including the retailers, to do the same thing on credit cards so that people will know what they've paid in interest.
Mr. Schmidt: Yes, we could. The point is, should we?
Ms Watson: I'm all for better disclosure. Yes, I think this information is very helpful, because we have studies that show that people consistently tend to underestimate the amount of interest they pay. So getting something that says, at the end of the year, that in $10 or $5 bits you have paid $60 or whatever in interest, may be helpful.
The Chairman: On that point, some organizations, but not all, do that now, right? Is that your point?
Mr. Schmidt: Yes.
Ms Watson: I'm not aware of any that will give you the interest you have paid on your credit card over the year. I'm not aware of any.
The Chairman: American Express gives you a pretty good breakdown for some of their cards and the cost of all fees associated with it.
Ms Watson: Yes. I don't know whether that includes interest charges, Mr. Chairman.
The Chairman: It does.
I'm sorry to intervene - my rudeness. I'm sorry.
Mr. Schmidt: No problem. We do that. We have to be friends here even though we share different....
The other point I want to make is with regard to the partial payment of a balance, particularly with regard to certain financial institutions. You may have a $1,000 balance, of which you pay $999.95. So left outstanding is five cents. At the end of that particular month, the interest charged is on the full $1,000, even though you have paid part. Full disclosure would suggest that you'd better know ahead of time that this is the situation.
The other part of it is, is that an actual reflection of the interest rate? Is the rate not in fact considerably higher simply because what you thought you had outstanding and what the interest was charged on is really not what was outstanding? In fact, only five cents was outstanding.
.1005
Ms Watson: To use your example, the financial institution credit cards calculate interest on a daily basis. They state quite clearly you need to pay the full amount, otherwise you will be charged interest. You have a grace period only if you pay the full amount, otherwise you are charged interest. They give you the daily interest rate quite clearly on your statement.
They also give you the monthly rate. On the retail cards, interest is calculated monthly in all provinces except in Quebec, where interest is calculated on a daily basis and partial payments are credited fully the dates they are paid.
If you pay at least half of the amount owing, you are not charged interest on that half. That halves the amount you must pay. So if you pay half, you are only charged interest on the amount you have not paid.
Mr. Schmidt: I am quite aware of this. The point I'm trying to make here is that even though there is this statement that you will be charged the full amount and this is a calculation of daily rate, it's not an accurate description of the amount that was actually outstanding.
You can say I'm charging you 7.9%, but 7.9% on $1,000 calculated on a daily basis over a 30-day period is a considerably different number from the daily interest charged on five cents over a 30-day period. That's the point I'm trying to make. The interest rate is quite different. Even though they say ahead of time you will be charged for the full amount, the interest rate by implication is charged on a daily basis, when for 29 or 30 days you did not have a $1,000 balance outstanding, you had a five cent balance outstanding. So the interest rate should reflect that position. It would be a huge amount rate-wise.
Ms Watson: I think you're talking about whether the terms of credit are appropriate, and perhaps that question is better put to the banks. As long as the banks are stating clearly how they calculate interest and when they start to calculate interest, they are giving the information to consumers. The question of whether that is the right way to do it is perhaps something that could be posed to the banks.
David, do you have anything to add?
Mr. David Waite (Senior Analyst, Office of Consumer Affairs, Department of Industry): The opposite point of view from the one you're expressing is that financial institutions consider they're giving an interest-free loan from the date of purchase until the date at which the bill is paid, as long as the bill is paid in full. If the bill is not paid in full, the interest-free allowance is not given.
We have had several cases where people have discovered they'd missed the amount of their statement by $1 or have been a day late in paying and have been charged for an entire month's interest. Our experience has been if they phone the bank, credit union, or whatever and complain about this, it's fixed instantly. That's not a perfect situation, but that's what happens.
Mr. Schmidt: Even though that is the counter-argument - and I'm sure we'll hear it again, because I will also ask the institutions that very question - the other part of this is that the merchant is charged as well for doing that transaction. So there isn't absolutely free credit being granted. It may be free to the consumer, but let's not kid ourselves, the consumer is paying the merchant for that charge. So it's not entirely quite as clean as you would suggest.
I think the real point here is full, honest and accurate disclosure. That is the issue here. We really have to be careful about that, because not everybody is as sophisticated as you are in understanding credit, terms of credit, computation of interest rates and things of that sort. They vary also.
.1010
That raises another point. In your discussion or research, have you discovered that the formula used for the calculation of credit charges is standard across all credit cards, be they financial institutions or credit-granting retail outlets?
Ms Watson: As I said, retailers charge interest on a monthly basis, financial institutions charge on a daily basis, and the methods are pretty standardized.
Mr. Schmidt: That applies whether it's monthly, daily or quarterly.
Ms Watson: Yes, it's pretty standardized.
Mr. Schmidt: They're not pretty; they either are or they aren't.
Ms Watson: They are.
Mr. Schmidt: Okay.
The Chairman: Mr. Lastewka.
Mr. Lastewka (St. Catharines): I would also like to thank you for appearing this morning to help us understand this project. I have a number of questions.
You said the gap got worse and you made some remarks after that. I didn't understand that. I need to understand what you meant when you said that at the beginning of your comments.
Ms Watson: I'll try to explain it. Over the last ten years or so, the spread between the Bank of Canada rate and the standard Visa and MasterCard rate has been about 9%. If you go over the last five years, that gap has been about 10.5%. You could argue, based on data available, that the jump from 9% to 10.5% really reflects sort of higher delinquency, fraud, and so forth.
In the last year, the standard Visa and MasterCard rate has not tracked the Bank of Canada rate in the same way it had over the previous nine years. So the spread has widened a little bit. That was the point I was making. But now over the last year we have also seen the lower-rate cards.
Mr. Lastewka: Okay. That's what I thought you were saying.
I want to refer to page 8, the credit card facts and figures chart. I drew a line across the top and it showed the gap was always under 11%. I think you just said 10.5%, but there were a couple of times when it got close to 11%. It was always under 11% and the trend for the whole year of 1995 was to increase six times, as shown on the chart.
When you talked about delinquency or fraud, the first thing that came to my mind was that either the cost of doing business went up or the profit-taking was higher. Maybe I'm wrong, but if that was the trend for six consecutive periods, what was done about it, what was highlighted, or what responsibility does your department have when you see something like that?
Ms Watson: The increase in spread is something we have flagged in the credit card costs quarterly over the last year. It is also something Mr. Manley has spoken about publicly several times over the last year - make a plug for our work, David tells me. This is a full-page ad American Express took out when it introduced its lower-rate card last April. It basically said that Industry Canada raps banks over credit cards. It sort of highlights the study we've done, the credit card costs quarterly. The minister has spoken about it on several occasions. So we are basically telling consumers as well, as fairly, and as clearly as we can.
Mr. Lastewka: I have a couple of more questions if I have time.
The Chairman: Yes.
Mr. Lastewka: People have different types of credit cards - petroleum cards, Visa cards, and so forth. You almost have to carry a dictionary with you to understand how each one presents its data.
.1015
As I look at it, we're trying to make it simpler for people, but what's been happening is that it's been getting more difficult for people.
What really upset me on my last Visa card was that the information was so small, for example, and the space provided to tell the person what percentage of interest rates they had paid was so small.... The better technology we get, I guess, the smaller the type gets, and if it's blurred, you don't see it at all.
It struck me around Christmas that we should be looking at trying to standardize how data should be presented to the customer - our constituents - such that when they read their statements they're reading it the same as if they get two statements, three statements or four statements.
I understand what our colleague from the Bloc was saying. Pierre, I understand what you were trying to get at. I thought that was part of it - to understand clearly what's in the statements.
Ms Watson: I would start by making the observation that information disclosure has greatly improved over the last decade. There's no question. Anybody who hordes bills, as I do, just has to pick out an old bill to see the difference.
That said, I fully agree with you that we need to keep working at making this information as clear, as simple and as transparent as we can, particularly as the number of new products that come on the market increases. That is something we do work on with the institutions and the Canadian Bankers Association.
Generally, the information presented with respect to the financial institutions' credit cards in particular, Visa and MasterCard, is pretty standard in the sense that they will basically have the block giving you that same type of information. With retail cards, it varies a bit more. We have been working, and will continue to work, with the Retail Council of Canada, for example, to help improve disclosure.
The question of whether you need something like a Schumer box, a standard format that says you will disclose everything in this format, did come up in the cost-of-credit disclosure legislation we have been working on. Governments, both federal and provincial, have now agreed to have harmonized cost-of-credit disclosure.
It's an issue we're looking at. It has its pluses and minuses. If you flag only five things in a mortgage statement, does that mean I as a consumer don't need to look at the other fifteen things? The box is an issue we're looking at, but we're always looking to see how we can improve disclosure and whether we can standardize it.
Mr. Lastewka: I guess I was looking at it from a simpler fact - the standpoint that the credit card could show purchases to date and interest paid to date. To me, that flags to the person, ``Please understand: here's how much money you've spent on interest making these purchases this year''.
In this day and age, with computers and so forth, I'm having a hard time understanding why that can't be shown.
Ms Watson: I'm sure technologically it's feasible, but administrative costs, I would guess - and certainly this is what the institutions and the retailers tell us - are quite high on credit cards of all types because the number of transactions is so large. It's not like a monthly mortgage, which you pay once or twice a month. The number of transactions you get on a Visa statement is quite large.
Some institutions and some cards in fact will give you a breakdown - some will do it once a year, some will do it once a quarter - to tell you this is what you spent on travel, this is what you spent on service charges or whatever. Whether you want it to be a cumulative thing, I'm not sure.
.1020
I think part of the problem also becomes that as you keep loading information, people become more selective about what they're going to see. I look at department store bills, and it takes me five minutes to find it, because it has lots of ads in it. I look at the bottom line. If we load too much, there is that trade-off that we need to consider as well.
Whether you want to do this every statement - I certainly think people should know periodically, whether it's once a year or what.
Mr. Lastewka: I guess once a year or a quarter the consumer should know that.
Ms Watson: I agree.
Mr. Lastewka: They provide that information on the purchase side today. It's as if they want to show you how much you've purchased, but not how much you've paid interest for.
The Chairman: Thank you very much, Mr. Lastewka.
[Translation]
Mr. de Savoye: Do you have another question? You have five minutes.
[English]
I think I'll go back and forth. There's a long list of government members who want to do that.
[Translation]
Mr. de Savoye: Ms Watson, earlier on I heard you say something that I would like to confirm. I heard you say,
[English]
``It is in the banks' interest that people pay their card balance on time.''
[Translation]
Is that what you said?
[English]
Ms Watson: Excuse me?
Mr. de Savoye: ``It is in the banks' interest that people pay their card balance on time''.
Ms Watson: Yes, that's what I said.
[Translation]
Mr. de Savoye: Ms Watson, the banks are in business to lend money. If people pay their bills on time, the banks do not make any money. Consequently, I think it is a little naive on your part to make that statement.
Furthermore, I see that the Bank of Canada has reduced its bank rate. When the Bank of Canada brings down its bank rate, it is not because that morning they felt like doing that; it is because there are economic consequences that follow. The cost of credit will go down, which will allow businesses to borrow more to make further investments, consumers will have access to more credit and finally this will increase demand and in the end, we hope, create jobs.
When the laws of the market function correctly, financial institutions bring down their interest rates proportionately in keeping with that of the Bank of Canada. That is the normal way it works.
In the case of credit cards, that does not prove to be true. For too long now and particularly so for the past 18 months, the laws of the market are no longer functioning correctly.
Because of your functions, I'm sure you must be interested in these matters. It seems to me that the banks are operating on the principle of what the market can bear. Do you think that there is any collusion at the present time or are these anomalies in fact normal?
[English]
Ms Watson: I must reject a couple of the assumptions you have made. When I make the comment that it's in the banks' interest that their customers pay their bills - all institutions lose more when people go bankrupt. I think on balance you would rather have your customers be happy and be paying their bills. I think that's reasonable.
On the question of whether the banks are charging what the market will bear, if the market is a competitive one, then the outcome is always in the best interest of the consumer in the long run. And from what we can see, there are signs of competition. The market appears to be functioning competitively in this regard. There is a huge dispersion in the rates that are now available and on the types of credit cards that are now available to consumers. I do not know what else one could look at.
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Mr. de Savoye: I'm sorry. You said ``the market appears''. In the position you're in, I would expect from you either affirmation or negation of that fact, not a statement that it ``appears''. It could appear to any one of us because we're not familiar with those rules and that market. You should be very familiar with it and should tell us that the market operates normally or the market does not. The way I understand your answer, you're not sure yourself.
Ms Watson: No, excuse me. If I gave you that impression, that is not the impression I meant to leave with you.
Like other institutions, banks make some data publicly available. Other data they guard because it is commercially confidential. Based on the data that are available publicly, we have no reason to believe that banks are not behaving in a competitive way. The Competition Bureau has looked at this in the past, and has not found any reason to believe that the banks are not behaving competitively.
So when I said to you that it ``appears'', I was merely making a statement of what information we have. We do not have access - quite rightly - to commercially confidential information.
The Chairman: Mr. Ianno.
Mr. Ianno (Trinity - Spadina): Thank you very much, Mr. Chairman.
Thank you for giving us the opportunity to communicate with you today.
Can you explain to me what your role is in terms of the Canadian overall...? Is your role to protect the consumer, or is your role to...? I don't know what the other part of it is, because I had to look to make sure it was Industry Canada that was presenting. I'm coming from a different perspective, and I'd like to know what you're doing to protect my constituents so that in effect they are treated fairly.
Ms Watson: Well, I'll tell you what we're doing. We're making sure that we have efficient, fair, open, transparent markets, with good framework laws and good protections that support the interests of consumers in the long term. We have a Competition Act that looks at consumer protection, that deals with misleading advertising and other forms of misrepresentation. We have product safety. We have health product safety. There are consumer protections built into various laws. Our office is concerned with protecting the consumers by making sure that they can make informed choices in the market, both in terms of having the adequate market frameworks, but also in terms of making sure that the best information is provided to them.
Mr. Ianno: So when you say the market is working, I see that you rely a lot on the market forces. You say that as long as the market is working, we are accomplishing our goal. The question I have is as follows: since 1987, when the study was put in place.... You indicated that last April was the first time that somehow the market introduced this low-rate card. Is that correct?
Ms Watson: I believe the low-rate card was introduced by the Royal Bank in 1992, and there have been many more cards since that time. In terms of the array of products, types of credit cards and what they offer you, the variety has been increasing every year for the last five or ten years anyway.
Mr. Ianno: So do you believe that 9% above prime is a fair market interest rate? In other words, 9% plus 6% is 15% - or whatever the actual number is. Is 15% fair?
Ms Watson: I have no basis on which to make that assumption. You have to make an assessment of the risk and reward based on your portfolio.
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Mr. Ianno: So if it's 6% plus 20%, would that be fair?
Ms Watson: I don't think you can answer that in a simple -
Mr. Ianno: If it's 6% plus 30% -
Ms Watson: I'm not sure, sir, that you could answer that as a single number.
Mr. Ianno: So in other words, Canadians can't rely on the consumer affairs office at Industry Canada to step in.
Ms Watson: I think if there were any indication of a problem in the marketplace -
Mr. Ianno: And who would determine that?
Ms Watson: You determine that based on what's happening in the marketplace. We have framework laws -
Mr. Ianno: So is 6% plus 30% is a point at which alarm bells ring or not?
Ms Watson: It depends, sir, on the rate of inflation.
Mr. Ianno: So if it's 6% plus 50% -
Ms Watson: You know -
Mr. Ianno: What is the point at which Industry Canada somehow or other protects my constituents?
Ms Watson: When the minister -
The Vice-Chairman (Mr. Lastewka): Excuse me for a minute. I think Mr. Ianno is trying to find out what the responsibility of the Office of Consumer Affairs is to his constituents and to the people of Canada concerning credit card rates.
Mr. Ianno, is that what you're trying to get at?
Mr. Ianno: As my colleague says, why are the words ``Consumer Affairs'' in your title of operations?
Ms Watson: Why are the words there? Because the Minister of Industry is responsible for that part of consumer affairs that is not delegated specifically to other departments.
Mr. Ianno: But the department does not see its role as the protection of the consumer. Is that correct?
Ms Watson: No, that is not correct.
Mr. Ianno: I'm missing the point somewhere.
Ms Watson: The department has a role to play in protecting the consumer, and the department takes its role very seriously.
Mr. Ianno: Let me change now to what this industry committee has been looking at in terms of just banking, but let me ask the question from a different perspective. What is the maximum amount a bank can charge on loans?
Mr. Waite: The usury rate.
Ms Watson: The usury rate is what is in the Interest Act.
Mr. Ianno: What is that?
Mr. Waite: It's in the Criminal Code and it's 60% per annum.
Mr. Ianno: It's 60% per annum. So that, I guess, might be the limit at which you would step in?
Ms Watson: The minister has stepped in on a number of occasions when he felt that the banks needed to explain why they were charging what they were and why the rate hadn't moved. We have had a number of interventions. Your question is really about whether the government should legislate a rate.
Mr. Ianno: Would you, in consumer affairs, have advised him to step in?
Ms Watson: In terms of legislating a rate?
Mr. Ianno: When would you advise him to step in?
Mr. Waite: Perhaps we could clarify that the previous standing committees have recommended that we actually produce this quarterly report -
Mr. Ianno: I understand; I read the reports you gave us.
Mr. Waite: - and we've been doing that since 1987. Actually, last March we did flag the growing spread between the bank rate and the credit card rates. It was put into this. It got significant media coverage. The minister did indicate his dissatisfaction at that time. American Express introduced its low-rate card and there was a lot of publicity. So in that sense we did step into the market and provided information which we thought was useful.
The Vice-Chairman (Mr. Lastewka): Mr. Ianno, I'd like to now go to Mr. Schmidt.
Mr. Schmidt: Thank you, Mr. Chairman.
I'd like to follow up on what Mr. Ianno was saying because it is the concern. In March 1987, if these notes are correct, a committee similar to this one recommended that in no instance should the spread between card rates and the bank rate exceed 8% for financial cards and 16.5% for retail cards. The recommendation was to restrict the spread. That's really what they were after and I think that was an attempt to answer the kind of question that Mr. Ianno is asking.
While that doesn't put a cap on the interest rate of a credit card it does reflect a relationship. What is your response to something like that?
Ms Watson: At the moment, looking at where low-rate credit cards are, you have low-rate cards, as I said, that are at about 9.25%. The Bank of Canada rate is 3.25%, most recently. If you were to put a cap or have no more than 8%, what you would probably see is what tends to happen with caps: it would become the floor, and all rates would migrate to 11.5%.
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You would also see, a little bit like squeezing a balloon, that where you hadn't capped is where the activity would be. So you may see transaction fees, other charges, and direction of consumers to other forms of credit. That's been the experience.
Mr. Schmidt: It's interesting, because what you're really saying is it's almost impossible to protect the consumer.
Ms Watson: I don't think so.
Mr. Schmidt: That's the danger in this kind of thing.
I quite agree. When I asked the question, I anticipated your answer, because it is true that a cap becomes a minimum. It's almost inevitable that that will be the case, and yet we have in legislation today that it is a criminal offence to charge someone 60% or more.
There was at one time a limit in the Interest Act as to what any loan could go to.
Mr. Solomon (Regina - Lumsden): It was 12%.
Mr. Schmidt: Yes, and at that time all loans didn't immediately float to 12%. They did not. They were well below that. It did not become a minimum. There were a lot of differences to that situation. So what is really going on here?
Ms Watson: Access to credit is also an issue you want to look at in that regard. If you put a limit on the interest rate that can be charged, you will find that a lot of people will be denied credit, and those people will go -
Ms Brown (Oakville - Milton): Good.
Ms Watson: Whether that's a good thing or a bad thing is really one's judgment, but among those people will be new Canadians and lower-income Canadians who will need more credit, or perhaps students or people who have just finished their studies and are just embarking on their careers. There may be people who do need short-term help with money for some reason.
Mr. Schmidt: Well, the whole issue here isn't that they don't need the help. It's a terribly useful tool. Credit is a tool, and it ought to be used, and used properly. But there are people who need protection, because some of these tools are like fire. Fire controlled is beautiful, but fire out of control is a disaster.
Ms Watson: I agree with you 100% that people ought to be educated to use credit wisely. That is exactly what we're trying to do through our focus on informing people, on giving contributions and grants to consumer organizations, and on helping and counselling people.
Mr. Schmidt: I agree, but I submit that in many ways that's an oversimplification of the issue, because there are some people who, against their better judgment, understanding, and knowledge, will still do things to their detriment. While we can't protect people against themselves or from themselves - I don't think that's our role as government - it is our role to protect the consumer to the degree to which institutions take unfair advantage of unsuspecting, unknowing, or inadequately equipped people. That is at the heart of this issue.
Ms Watson: I agree with you. You used the words ``unknowing'' and ``unsuspecting'', and we're back to -
Mr. Schmidt: Or in some cases unable.
Ms Watson: That's a different order of issue.
Mr. Schmidt: But there's no distinction needed. People are granted credit not on the basis of their ability to think but rather, in many instances, on their assets. In fact in some cases credit cards are issued with absolutely no attention given to their asset base or even their earning power.
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Ms Watson: I'm afraid I can't really speak to how the institutions give credit. That may be something you would want to ask of the banks. I understand the CBA will be here before the committee on the subject of their lending practices.
The Chairman: All right, thank you.
Mr. Shepherd.
Mr. Shepherd (Durham): Thank you very much.
I'd like to continue in the same vein. Clearly we don't believe that all consumers have equal knowledge on how to deal with credit. We've agreed on that. But you've also told me that it should be an educational function. The bottom line is that our educational institutions just don't do that. That's the problem. So we send all of these people out into the marketplace, and a certain number of them become captive to it.
Today we live in a country with escalating consumer bankruptcies and escalating household debt. The question centres around the responsibility of financial institutions. I'm not talking about that 1% statistic. The bottom line is that you have about a 30% or 40%.... I don't know what the statistic is on people who can't handle this, who are going to be in debt to these financial institutions for a lifetime. What responsibility do we have as a government to ensure that financial institutions take discretion in who they lend to, and in the amount of credit they actually lend?
Ms Watson: First of all, I should tell you that we share your concerns about consumer indebtedness and the rising levels of bankruptcy. In fact, we are trying to understand the causes of this. We have a pilot study under way now that attempts to explore the causes of bankruptcy in order that we can better understand what the reasons are. We are working with Statistics Canada on a study that they will do next year, and which is going to look at the whole issue of indebtedness in order that we can try to understand it. So it is a concern we share with you.
On the question of the responsibility of lending institutions and where the government steps in and so forth, I come back again and again to the idea that we do need to make sure that people have the information to know what they are getting into. If somebody is not capable of understanding because he or she is handicapped, that's a separate issue. People do need to understand and need to be well informed, however, and it is the duty of financial institutions and other lenders to make sure this information is provided. We have made the point that we think this role of providing financial advice ought to be looked at and re-examined in order to see if it could be balanced better.
Mr. Shepherd: Let me just clarify. I'm not saying that people are incompetent. The bottom line is that governments are incompetent. Governments all over the world can't control debt, so the bottom line is that I'm saying there must be a referee in this game.
Some European countries have taken this a step further. They have said that if financial institutions don't go through this process, don't check on what other credit a person has been exposed to, and what is a reasonable level of debt, they can't collect. Wouldn't that put a little bit more of a fiduciary relationship between financial institutions and their customers?
Ms Watson: I can't really speak to the banks' lending practices and to how they check on their customers. When we have asked the question of doing reasonable checks on credit, we are told by the institutions that they're not in the business of losing money. They do have sound checks and practices in terms of credit, but what the specifics are is something you really would need to ask them.
Mr. Shepherd: But I think the level of debt is something we need to ask you about. That's what this is all about. That's what governments are all about. They act as referees between the people and their institutions. But I don't think there's a referee here.
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Ms Watson: We are doing some work on finding out what the causes are for the rising indebtedness.
Mr. Shepherd: Is bankruptcy a new phenomenon in our society?
Ms Watson: Bankruptcy is not a new phenomenon. The increase in bankruptcies is of concern, and that's why we have started a study to try to figure out why this is happening. We don't know. We have a lot of anecdotes, but we don't have anything hard that we can point to and hang our hats on, and I think that's what we need to get.
The Chairman: Thank you, Mr. Shepherd, for now.
Mr. de Savoye.
[Translation]
Mr. de Savoye: Ms Watson, it was mentioned that when a consumer has to pay a very high interest rate on purchases, an interest rate bearing no relationship to the Bank of Canada discount rate, there is a likelihood that this consumer will not be able to follow the economic movement. In other words, if the consumer is paying an unjustifiably high interest rate, his personal disposable income is very much more limited than that of people who have access to a normal interest rate or who are not paying interest.
Since you are concerned with consumers and you must be aware of what is taking place in the consumer market, can you tell me how much money is being paid in excessive interest rates on credit purchases by consumers compared to the normal credit of 9%?
What is the shortfall for the retail market because this money is being paid to banks in the form of interest rather than being used for retail purchases? What is the negative effect among consumers slowing down the recovery of the economy? I imagine that you must have studied this matter since it is part of your mandate.
[English]
Ms Watson: I'm afraid I have no way of answering that question. I don't know if there is an answer to that question. Excess interest rate - I don't know how one determines what is an excess interest rate charge above what is reasonable. I cannot -
Mr. de Savoye: You don't know what is an excessive interest rate?
Ms Watson: I know that -
Mr. Schmidt: Sixty percent.
Mr. de Savoye: Oh, 60%. Thank you.
Ms Watson: I have no way, Mr. de Savoye, of determining what the books of a financial institution are, or a lender are, to say that this is what their portfolio looks like, this is an appropriate level of risk, this is an appropriate level of reward. We don't do this for any industry. We do not know this information. This is not something special for the banks or the financial institutions or the retailers. We do not have this information at this level for any industry, so we are really not in a position to answer this question. It's not unusual.
Mr. de Savoye: Do you have the outstanding balances for 28 days or whatever - 60 days, 90 days? If you have the outstanding balances, to have the global total Canada-wide, you must get this not through a crystal ball but by adding, card by card, what their total is. If you add it card by card, you have the interest rate that is being charged, and if you know the outstanding balances, it's a simple multiplication to know what part of the interest is due to the excess of the low-rate cards, let's say 9% up to 17%. You could develop three or four scenarios to answer my question, and we could measure the economic impact on the marketplace of the money not flowing to the retailer, but flowing directly to the bank. This is the essence of my question. I am very surprised you cannot supply an answer to me.
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Ms Watson: Your question has one assumption in it that I really can't address, and that is people have a choice in the type of card they pick. If I choose a card that offers -
Mr. de Savoye: I will interrupt you, because I understand what you're saying. What I want to point out to you comes from the Hansard. One of our MPs quoted an example. He said a 1% lower interest rate for the consumer means $10 million per month of money you could put in the marketplace. That is a lot of money. I suggest you have a closer look at that issue.
[Translation]
Thank you, Mr. Chairman.
[English]
The Chairman: Is there any final comment on this? No?
Mr. Bodnar.
Mr. Bodnar (Saskatoon - Dundurn): Thank you.
It appears that percentage-wise, a lot of consumer spending occurs with the use of credit cards of all sorts. Am I correct? Do you know what the percentage is? Is it 10%, 20%, 40%, 50%? What is the percentage? Or are we best off just saying it's substantial?
Mr. Waite: We don't have figures for credit cards of all kinds. We have figures for Visa and MasterCard issuance, and I believe at the moment it's around 30% of retail purchases.
Mr. Bodnar: As we can see even by reading today's papers, economic recovery generally occurs when interest rates come down, and there has been a substantial reduction in interest rates and in the bank rate. The bank rate came down substantially and the rates came down on certain mortgages on the purchases of homes or for certain capital expenditures for businesses.
But most people don't use that type of financing. They use credit cards in the purchase of items, especially in consumer spending. I would suggest it's extremely difficult to stimulate consumer spending when the consumer credit card rates remain high, even though the bank rate has gone down and down. Again, it appears to be a problem that we do not have consumer spending increasing, even though the bank rates have gone down substantially, or at least the increase is not great.
From what you have observed in your department, are the lending institutions or the credit card lenders trying to capitalize on an expected recovery by having the exceptionally high interest rates? Your own graph shows and you've indicated here that the interest rates charged by most major retailers have remained at 28.8% since the early 1980s. We've had the bank rate as high as about 16% or 17% and as low as it is today, and their rates remain high.
First of all, I don't know if there's any competition when they're all remaining at 28.8%, but are they in a position of really being the problem in the recovery in consumer spending in this country?
Ms Watson: You will have the retailers coming, and I think that is a question to ask them.
Mr. Bodnar: Oh, I know.
Ms Watson: The minister has in fact in the past written to the Retail Council inquiring about why their rates are at the level they are at, and the answer they have given is that their costs are higher, fraud is higher, they have higher administration charges, this is an add-on service, they're not in the business of providing credit, and so forth. But all of that aside -
The Chairman: If I might interrupt you there, could you table that correspondence for us, please?
Ms Watson: Yes.
The Chairman: Thank you.
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Ms Watson: All of that aside, when are consumers going to start spending more? I saw something on my E-mail this morning that mentioned Angus Reid, I believe...the Royal Bank had some work done on consumer spending and so forth. Given their levels of indebtedness, it seems that people are basically going to try to balance their books a little bit, and then they are going to spend carefully and cautiously in certain areas, such as RSPs or children's education or housing.
Mr. Bodnar: Of course. And also part of balancing their books is having to pay exhorbitant service charges on credit cards, even though the bank rate is very low. I won't argue with you on that because I believe there are probably many different opinions on this and because I have one final question before I'm cut off.
The Chairman: Yes.
Mr. Bodnar: What is the relationship between the major credit card companies like MasterCard and Visa? Who owns them? Who owns Visa and who owns MasterCard? I don't know how they function. We see Visa everywhere. It's not just an entity suspended in the air. Who's behind Visa and who owns Visa?
Mr. Waite: The individual issuers of the cards own them. So when the Royal Bank, for example, issues a Visa card, they own their Visa operation. It's a little bit like a franchise, in essence.
Mr. Bodnar: Okay. Who owns the franchise?
Mr. Waite: They are publicly owned companies. Visa and MasterCard are publicly owned international companies.
Mr. Bodnar: Under what names?
Mr. Waite: There is a Visa Canada and a Visa International and the equivalent for MasterCard, I believe.
Mr. Bodnar: Are the companies traded publicly?
Mr. Waite: Yes.
Mr. Bodnar: Does any one particular shareholder or any particular shareholders have the controlling shares in those companies?
Mr. Waite: I'm sorry, but I don't have that information.
Mr. Bodnar: In other words, do the banks own Visa and MasterCard?
Mr. Waite: I don't have that information available, but we can certainly find it for you.
The Chairman: Thank you very much, Mr. Bodnar. I think that's an area we'd like to pursue and make sure we understand.
I'm going to turn this over to Mr. Schmidt, and then with the indulgence of the committee I'm going to go to two members of the government party, then to Mr. Solomon. Some people have been waiting for a long time.
Mr. Schmidt: Thank you, Mr. Chairman. I'm so glad Mr. Bodnar asked that question, because it reduced my questions by at least one.
The question I'd like to address has to do with the teeth the division of consumer and corporate affairs should have or could have or does have. We'll start with the last one first. What teeth do you have other than publishing what's happening? If there is what appears to be enough of a discrepancy that would prompt the minister to write a letter to the Retail Council of Canada, what is the consequence if there is no change? And there hasn't been a change in some of the cards, those from the retail industry in particular.
Ms Watson: The federal government's biggest consumer protection weapon is the Competition Act, which deals with the elements of anti-competitive behaviour like market dominance and misleading advertising. That is all consumer protection. That is the federal government's consumer protection weapon, and it is a very good and effective instrument for protecting the interests of consumers.
In Canada, consumer responsibility is dispersed among the provinces and the federal government. The federal government is responsible for only certain federally regulated activities. The provinces are responsible for everything relating to contracts. In fact, when the committee talks about banks it's important to realize that not all financial institutions are federally regulated. We have provincially regulated financial institutions as well. So the responsibility for consumer affairs is dispersed in Canada.
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Mr. Schmidt: I appreciate that. If I interpret your answer correctly, though, it means that as far as interest rates on credit cards are concerned, it would not be your responsibility even if there were some teeth put into this to control them in any way. That should go to the Competition Act and that should go to the provinces.
Ms Watson: No, that's not what I said, Mr. Schmidt.
Mr. Schmidt: That's my conclusion based on what you said.
Ms Watson: I'm sorry, I didn't make myself clear. Interest rates would be something that would fall under the responsibility of the Minister of Finance and the Interest Act. They would not be the responsibility of the Minister of Industry, who is also responsible for consumer affairs.
Mr. Schmidt: With that, then, the conclusion is that you have no teeth, you don't want any teeth, and the teeth exist elsewhere.
Ms Watson: Respectfully, I must disagree.
The Chairman: Okay for now, Mr. Schmidt?
Mr. Schmidt: Yes.
The Chairman: Okay, I'm going to Mr. Regan, followed by Mrs. Brown and Mr. Solomon. Mr. Ianno is on the list for a second question, and then I think we should begin to see our way to finishing up. The witnesses have been here for a while, so if anybody else wants to indicate another question, let me know as soon as possible.
Mr. Regan (Halifax West): Thank you, Mr. Chairman.
If the government were to limit interest rates on credit cards and limit annual fees - transaction fees, service charges, and perhaps shipping and handling charges - how else could the banks or other financial institutions get around that?
Ms Watson: When you limit the return on one type of business line, what generally happens is that you tend to limit the tolerance for risk in that business line. I would expect that you would therefore get a certain amount of rationing. You would also see a clustering towards whatever that limit was, and not the dispersion that you have in the rates today. You would also find that other, new forms of credit would emerge, although I have no idea what they might be.
Mr. Regan: I think you made these points earlier.
Have you examined the impact that consumer debt levels that are associated with credit cards have on lower-income consumers?
Ms Watson: We are working with Statistics Canada to look at the whole issue of consumer debt. This will be quite a major piece of work.
Mr. Regan: Why hasn't this happened sooner, though? Why not until now?
Ms Watson: Statistics Canada used to do - and still does - periodic studies looking at indebtedness, although they haven't done one for a few years. It's a very big undertaking, and it's an expensive undertaking. They will be doing one next year to look at consumer debt.
Mr. Regan: What did you learn from previous studies?
Ms Watson: The last one was in 1984, so I don't really think we can draw much from it. I'm also afraid that I don't have a good enough recollection of the findings in it to tell you about 1984. It's a very different market today.
In terms of whether or not we got something out of the Angus Reid survey, to which we had put just a few questions as part of a normal survey, we did have some data on who owed what on credit cards. Not surprisingly, it tended to vary with education and with income.
Mr. Regan: Don't go through it unless there's some conclusion to be drawn about the impact on low-income consumers. It's a question of the kind of problem it really causes. Would it be a positive thing or a negative thing if credit cards were in fact to be eliminated, and if there was therefore some limit on the availability of credit?
Ms Watson: I do not know the picture for the economy as a whole, for low-income Canadians as a whole. We do know, however, that credit cards account for only about $6,000 when a person has declared bankruptcy, whereas the amounts owing by people who have declared bankruptcy are over $50,000, on average. Credit cards account for about $6,000.
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Mr. Regan: The report in 1992 by the Standing Committee on Consumer and Corporate Affairs and Government Operations recommended the government introduce in the House of Commons credit card disclosure legislation in the form contained in appendix one at that time. Why shouldn't we do that now?
Ms Watson: We will be having harmonized cost of credit disclosure, which will apply not only to credit cards but to all forms of consumer credit. We will have harmonized disclosure laws across Canada. Ministers have agreed that will come into effect under the internal trade agreement at the end of June 1998.
Mr. Regan: Does that include a common method of calculating interest-bearing balances?
Mr. Waite: It includes a common method of calculating the interest rate. It doesn't preclude charging a daily interest rate or a monthly interest rate. It allows variations in that sense.
Mr. Regan: Thank you.
The Chairman: Ms Brown.
Ms Brown: Thank you, Mr. Chairman.
I understand credit card rates are really only part of a much broader picture that you are responsible for. Keeping that in mind, I want to thank you for the good information you have provided to us.
I sense a kind of dichotomy developing around the table between how you understand you are supposed to do your job and what the committee members seem to expect you to do. I think we had better get to the bottom of that. I'm going to make a few comments and ask a few questions and then you can answer them all at once, if that's okay.
You seem to collect information, analyse information and release information in an intense and pressured atmosphere to get all this work done, but in a very passive way in the sense that all you do is publish these little reports. Is that true?
Many times in the course of this you've spoken about the market as a phenomenon. I get the feeling it's simply to be observed and you have absolutely no opinion as to how something might be improved or not. You seem to be puzzled by my colleague's description of government as a referee in this game of living as a Canadian or the protector of people. I get the sense you're saying you are analysts of the economy as it relates to consumers, but you don't really have opinions about it.
Do you ever get active or upset over there about things other than public service cutbacks or something like that, which everybody would get upset about? When something was observable by you and you thought it was different or worrisome, like the spread we talked about going to 13.25, what exactly did you do? Did you demand a meeting with the deputy minister to alert him to this changing trend in an economic indicator? Did you send a strong letter to the minister, or did he just happen to pick up your quarterly publication and say ``oh, dear'', and decide to write a letter to the Retail Council?
How much impact are you having with the good information you have? For example, when the total debt moved from 77% of disposable income to 95%, what actions did you take then? Did you have a meeting with the minister to tell him about your concerns?
On another point, you keep quoting the Competition Act. Many of us think that is a shark with no teeth. Its teeth were removed in the last administration. Seeing this sort of passive description of what you do - and I'm not underrating how hard you work or the quality of your information, because as an academic exercise I think it's excellent - were your teeth removed in the last administration, or did the Office of Consumer Affairs ever have more power or impact on the minister it served? I know at one point there was a minister and now you're in Industry, but even so, you do have a minister.
You come up with academic numbers and studies and put out little brochures that I'm not sure anybody reads, but how do you get meaning in your job? How do you make your life meaningful? Do you ever compare what you do to the public interest, to the public good?
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And what impact are you having? That's what the public wants us to find out from the bureaucracy. How are you making their lives better? Or are we just making things easier for the issuers of credit cards in this particular case?
Ms Watson: You've asked a lot of questions, some of which I am in a position to answer.
We take our role seriously. I can speak only for myself about my job. I do not treat it as an academic exercise and I am not dispassionate about it.
Ms Brown: Good.
Ms Watson: I want to put that on the public record too.
In terms of what we do, when we see things that are a concern to us, we do speak to the minister, we do speak to the deputy minister, we do speak to the associate deputy minister. We do make our concerns known.
The minister and the deputy have, over the course of the last year, taken some very forceful and public stances on this issue of credit cards and the high interest rate. The minister has also expressed concern about the difficulty people are having with jobs in the economy and the need to get the economy going. This is of interest to the department and to us personally.
I would not agree with your description of us just responding in a passive way. If you give people the tools to act autonomously, I don't think that is passive, and I believe we do that for consumers. Also, if you have in place the right frameworks that allow markets to function efficiently, I don't believe that is passive.
But I don't think Canada can close itself off from the rest of the world, either. We have a very open economy, where capital flows and credit flows. What we can do is make sure we have very well-informed and demanding consumers and markets with very sound frameworks. I don't believe that's passive, and we do give advice when we think there are problems.
Mr. Waite: Maybe I could supplement that a little bit.
Ms Brown: She didn't comment on the past compared to now as far as the consumer affairs department having more or fewer teeth.
Mr. Waite: The only way I can answer that is in general. I think it's fair to say that government resources have been reduced in all areas, and that has affected consumer affairs branches right across the country, in provincial governments as well as in the federal government.
In terms of producing our report, we don't just print off a few thousand copies and send them into the dark somewhere. We make sure they go to all the media in Canada, all the MPs, and all the senators. We do a number of media interviews as soon as these things go out, every time. There's been a lot of media interest. It seems to me the media has picked up on this issue because of this report.
And yes, we do have discussions with the industry representatives when we see things like this happening.
The Chairman: Thank you very much.
Mr. Solomon.
Mr. Solomon: Thank you, Mr. Chair.
I want to acknowledge my support for Ms Brown's questions. I was going to ask most of what she asked.
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You indicated earlier that the Office of Consumer Affairs follows certain indicators, so I would conclude then that you would know that the number of bankruptcies in Canada are at record levels. That's number one.
Number two, you know that the prime rate is at record low levels.
Number three, you would know that the spread between the prime and the credit card interest rates are at record numbers - that is, they're extremely high, higher than ever before.
You would also know, fourthly, that credit card debt accounts for about 20% of total consumer personal debt, which stands right now at about 90% of family disposable income in Canada.
Ms Watson: I should clarify that last point about credit card debt.
The Chairman: Ms Watson, before you start the answer, I just want to say to Mr. Solomon that these questions were pursued at great length earlier in the hearings, so we can just do it in a summary, and you can check the hearings for the record. Okay?
Mr. Solomon: Right. Thank you.
Maybe you weren't understanding clearly my last point, but information I have shows that credit card debt now accounts for 20% of record levels of personal debt, which stand at 90% of disposal income in Canada. I'm not sure about the 12% figure with respect to bankruptcies that you mentioned earlier. That's a different figure, which I was not aware of, but now I am.
My question is this. You are aware of all of these economic indicators. Your department, asMs Brown has indicated, is supposed to be not only tracking these things, but trying to suggest to the government of the day that perhaps something should be done.
You also indicated that we're an open economy and that we have to operate internationally. Well, I think financially and economically we have a lot of independence and flexibility. Our prime rate is 3.25% and the American rate is about 8.5%, whereas before it was always higher than the American rate. So I think we have the flexibility somewhat to do certain things to affect our consumers.
I want to know from you where your department fits in. I think Ms Brown has asked that in more general terms, but do you believe that the consumer affairs office exists to serve consumers - and are you doing that job, in your view? - or do you believe that because you're in the Department of Industry you're coordinating all of your efforts with respect to the industry barons of Canada, so as not to really make any waves?
The Chairman: Are there any questions there you'll have an answer for?
Ms Watson: Oh, absolutely. Let me start with the point of clarification. Consumer credit as a proportion of total household indebtedness -
Mr. Solomon: Personal debt.
Ms Watson: - is about 20%, but it is not all credit cards. It includes other things like personal loans, lines of credit, and so forth. So it is not totally credit card; that's the clarification.
Mr. Solomon: The 20%?
Ms Watson: Yes. You have on this facts and figures sheet this consumer debt line at 20%. That is not credit card debt. It incudes a lot of other debt - consumer lines of credit and so forth. So it is not credit card debt. That's the clarification.
Mr. Solomon: So what is the figure?
Ms Watson: We don't know for everything. We do know that credit card loans as a proportion of banks' non-mortgage loans to consumers is about 20%.
Mr. Solomon: That's what I was referring to.
Ms Watson: Okay. And that's only for the banks. We've got the information only for the banks.
On your second point, whether you think the Office of Consumer Affairs is there to serve the interests of consumers, I would answer absolutely yes. We do make our views very well known, and I would also like to think that we have some small measure of influence with the ``industry barons'', as you call them. So the answer is an unequivocal yes.
I think the Office of Consumer Affairs is very well situated in this department so that when you are developing a policy you take into account the interests of all perspectives in the marketplace - not just industry but also consumers in the marketplace. We participate vigorously in those debates.
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The Chairman: Mr. Ianno.
Mr. Ianno: What I'd like to know is the delinquency rate for retailers versus the banks. Do you have that?
Mr. Waite: No, we don't have that data.
Mr. Solomon: I have it.
Mr. Ianno: Why is there a difference between the rates charged? Why is 16.5% above prime okay for retailers versus financial institutions, which do roughly 8% to 8.5%, whatever it is?
The Chairman: Do you have any comment on that issue?
Ms Watson: The delinquency figures are not available. We don't have them for the retailers.
Mr. Ianno: But my understanding, from the information we received when they first started studying this in 1987, is they recommended that 8.5% and 16.5% or whatever the actual number is was appropriate. How would they be able to make that determination? What is the difference between the retailer and the financial institution?
Ms Watson: Do you mean why did the committee that examined the issue of credit cards in 1987 decide 8.5% was the right level at which to cap the rate for financial institutions and 16.5% for the retailers?
Mr. Ianno: Right.
Ms Watson: I'm afraid I do not know the basis on which the committee made that determination. I would assume the types of factors they would have taken into account were such things as the cost of funds, the fact that retailers borrow their money from the banks and so have a higher cost of funds, perhaps -
Mr. Ianno: But you're not sure of that.
Ms Watson: I do not know how the committee arrived at that figure.
Mr. Ianno: What I'm disappointed about is if you don't know the answers to a lot of the fundamental questions we're asking, who does? If you're not supposed to have this information so that basically you know the difference between the retailers and the financial institutions, what good are the actual numbers, the statistics you're gathering?
It almost leads me to the point of asking what we need the Office of Consumer Affairs for if you're not somehow gathering information and then making recommendations on how to protect Canadians and my constituents, so that we as politicians and the minister can make determinations appropriately.
Ms Watson: No industry provides information on how profitable various segments of its little businesses are. Sears, for example, will not tell you it made so much on -
Mr. Ianno: Ms Watson, three years ago the banks told us they do not give us information on stats. They are now coming in quarterly and giving us stats according to their loans, their small businesses, etc.
It's taken three years now for us to come to this point, but it's possibly time this committee looks at considering asking financial institutions and retailers for figures on their revenues, percentages, and revenues on interest, so we can make intelligent decisions on what should be recommended to the minister and the government.
The Chairman: Tony, could I intervene and rephrase that?
One of the things we're looking for, as I said at the outset, is to move the yardsticks along. Are there pieces of the puzzle that are not available to you as a department that we should be highlighting in the work we do to change things?
As Tony has pointed out, we have changed the way the Canadian Bankers Association approaches us on loans to small businesses, and it's been a major step forward. Are there holes that we should be addressing in our recommendations to cause them to begin to give you the information you need to do the job we need?
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Ms Watson: On the last page of the presentation that was circulated to you we suggest what industry could do to better inform its customers and what information we feel would help us understand the situation a little bit better. We have talked, for example, of giving us annually the numbers of low-rate cards and standard bank cards so we can actually arrive at a good, weighted average of what the interest rate is and who pays - how many people are paying in what segment. We have relied on an Angus Reid poll -
Mr. Ianno: I sense we're addressing two different perspectives, and as long as the department is asking the industry to give information to the consumer, that satisfies its needs. I'm looking at a different perspective. How do we look at the industry to ensure Canadians are being protected? I gather here they're on a different road from what I think we should be on, and it's up to us to deal with it afterwards.
The Chairman: Thank you very much.
On that note, Ms Watson, if you want to perhaps indicate to us again where you think it could be helpful, we would be happy to pursue that in our final deliberations.
Mr. Lastewka, do you have a quick question? I'd like the members to be to the point now, because we're into second rounds.
Mr. Lastewka: My question is almost along the same lines as Mr. Ianno's.
As a committee, we have our own perception of what we think your department should be taking care of for the Canadian people, but the expectations of the Canadian people farther away are much higher. I think it's up to this committee to bridge that gap. That's why when Ms Brown asked the question concerning consumer affairs, before and now, you mentioned you thought you were well positioned and so forth. I suppose in your position I would say the same thing. But I'm not sure the consumers, the people out there, are getting their dollar's worth in what they expect you to be doing in protecting them.
That's why I asked earlier what your responsibilities are. I think we need to get a better definition of that, if we could.
The Chairman: Thank you. Mr. Regan.
Mr. Regan: In 1992 the committee asked the government to study any barriers to potential credit card issuers in Canada to enter into the field. The government responded that it was already studying both of these issues. What did the government determine from that study?
Mr. Waite: Essentially, there was a Competition Bureau investigation of Interac and the access to the Interac system. It culminated, I believe, last year and resulted in opening up that system to new players with some changes in rules that allowed charges for different fee levels by different Interac members.
Mr. Regan: I'm more interested in the third recommendation at that time - that the government commission a study to examine if there were any legal, structural, or other impediments that would constitute barriers to entry to potential credit card issuers in Canada. Let's leave Interac aside for the moment. The government said it was studying both these issues, so what did you find out about general impediments?
Mr. Waite: My understanding is that there are no particular barriers to new entrants in the credit card market at the moment. We've seen a number of new entrants come in. American Express and Canadian Tire have been launched, and there are a number of people waiting in the wings, such as GE Capital, Household Finance, and Capital One Financial Corporation from the U.S.
Mr. Regan: Thank you.
The Chairman: Mr. Shepherd.
Mr. Shepherd: It seems to me the debate in this committee is on two features, which are not exclusive. One is interest rates and one is access to capital.
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Are you an economist by trade?
Ms Watson: Yes.
Mr. Shepherd: On a simple supply and demand curve, by definition, interest rates will clearly come down as you restrict access. Do you agree with that?
Ms Watson: Do you mean that in the sense of only loaning to people who you know can well afford to pay? Is that what you're asking for credit cards?
Mr. Shepherd: Well, I have a suggestion that interest rates are high because there's an unlimited supply of capital generated by our financial institutions. It would also appear that there's an unlimited demand. The question is whether or not the demand is in fact at a healthy level for our country in a lot of fundamental ways. It isn't simple at all, but if we simply restricted access by increasing the benchmarks - a reasonable level of credit is x number of dollars based on your household assets - by definition, wouldn't we reduce interest rates?
Ms Watson: You're getting into an area that is really more philosophy than economics. You will change the intersection of supply and demand schedules.
Mr. Shepherd: But isn't that Economics 101 - the supply and demand curves?
Ms Watson: That's right, and you will certainly change them. But the question you are asking is what the level should be based on household income or household assets and so forth, whether there is too much, and what the level of available debt should be.
Mr. Shepherd: Right now, financial institutions are interpreting what the reasonable access level is, isn't that correct?
Ms Watson: Yes.
Mr. Shepherd: Should that be so?
Ms Watson: Again, we come back to the market - and I guess I am showing my bias as an economist here. If you have a market that is open, that is competitive, and in which you have good information, then consumers decide. Consumers are the people who are making these decisions. Banks base their lending practices on their own criteria and tell us they're not in business to lose money. But if you have good information and competitive markets, then I believe it is fitting for consumers to make informed choices.
Mr. Shepherd: It's not true though, is it? As you raise interest rates, you should reduce the supply. That isn't happening.
The Chairman: Could the witness make a very quick, final comment? I want to move on to Mr. Schmidt.
Ms Watson: You have a great variety of interest rates right now in the credit card market, and credit cards are only one aspect of the total consumer credit market. We mustn't lose sight of that: they're not the whole market. Even in credit cards, you go from 9.25% to 18.9%, and that's only one segment of the consumer credit market.
The Chairman: Thank you.
Mr. Schmidt, a final question, and then we'll wrap this up.
Mr. Schmidt: Thank you, Mr. Chairman.
I found this last exchange very interesting, because it relates very definitely to my question. It's very simple, but you do what you will with the answer.
Is the market working? You made the comment earlier that the market is working in the credit card credit market. I'm going to divide that market up into sectors now, and I'm going to ask you if the market is working in the retail credit card area.
The Chairman: Mr. Waite, do you want to respond?
Mr. Waite: I can answer that partially, I think.
There is certainly more competition in the retail area than there has been. At one time, major retailers used to accept only their own credit cards. Now they accept their competitors' credit cards. We know that nine out of ten people who have a retailer-issued credit card also have a Visa or MasterCard, so they do have the option. We looked at whether or not people who might find it more difficult to obtain credit - the lower-income people - were the 10% who didn't have a Visa or MasterCard, and we found that not to be the case. It's spread right across the income range. There appears to be choice and there is certainly competition in the marketplace.
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The other piece of information I can give you is that far more people pay off their retail credit cards than pay off their Visa cards or MasterCards. I think it's 62% as opposed to just over 50%. Another 15% actually pay half the balance, which means that the effective rate is reduced by half. So there are certainly strong indications that it's working.
Mr. Schmidt: From your answer then, those retail outlets that do not allow other credit cards to be used in their establishment would not have a market that is functioning.
Mr. Waite: There are other methods of payment, but there would certainly be less competition. They would be open to less competition, but I'm not aware of retailers who issue their own credit cards who do not accept other cards.
The Chairman: These are very interesting questions that we've opened up, and I think you can tell there's a lot of anxiety and a lot of interest from the members on all sides in pursuing this issue in the next few weeks.
Ms Watson, I'd like to thank you, and through you, your colleagues. The questioning has been sharp and to the point, and I think you appreciate the fact that we do want to move this along and we do want to come back with proposals that are realistic and that are supportive of protection of the consumer.
You've seen some of the ideas introduced already. If you have any further responses that you'd like to write to us about, we would be more than happy to hear from you. If you feel it is important for you to come back again we'd be happy to see you.
On behalf of the committee, thank you very much.
Ms Watson: Thank you.
I will forward the various pieces of information that you've asked for to the clerk, so you should get them in the next day or so.
The Chairman: And through the clerk we'll distribute them to members.
Would all the committee members please stay? There are other items to be dealt with. The first item will be in the public domain and then after that we move in camera to discuss the report.
I realize there's going to be a little bit of noise here, but I will put the motion on the table and then we'll discuss the thing.
It is moved by Mr. Lastewka that the third report of the Subcommittee on Agenda and Procedure of the Standing Committee on Industry be concurred in.
We met yesterday as a subcommittee of the steering committee and we've outlined the witnesses that we have arranged so far for the credit card study. You noticed that at today's meeting.
Next Tuesday we will have the Canadian Bankers Association here. On Wednesday, we will hear from the Consumers' Association of Canada and some other groups. On Thursday, the Retail Council of Canada will be here. I'm going to ask the clerk to tell us which room we are using because I think it's been changed for that.
The Clerk of the Committee: On February 11 and 12, we are using Room 253-D. Those meetings, up to February 13, will be televised.
The Chairman: Let me just point out that those meetings next week will be televised, so I would appreciate the cooperation of all members in being here on time.
After we finish that.... We have, as you know, received a reference from the House of Commons that we do the review of Bill C-91. That will start on Wednesday, February 19. We are required by the legislation to start the hearings in February, and we will begin with the appearance of Minister John Manley from Industry Canada. He will deal with his perspective on the review.
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Related to that, we have a press release to be sent out under the clerk's name, announcing this review and indicating that written submissions should be received by April 3. April 3 is the last parliamentary day before we take a two-week break, so we're giving potential contributors about six weeks to submit.
I would say to the members of the committee that there has been a high level of interest expressed in the public by various interested parties. This six-week window will give lots of time to those people who have already raised it with us, and I suspect a lot of the briefs are already written.
So there are no surprises in this. It's something that has been discussed widely, and I think this gives people enough time. That press release will be sent out today and will be circulated to members of the committee.
If members of the committee have witnesses that they would like the committee to consider, would you please submit those by March 3. We'll then meet as a steering committee, and if the list is too long or difficult, we'll talk about it then. I suspect we'll be able to accommodate people, though.
Also, committee members, in planning out your month of March, I would appreciate it if you did not get too booked up with other activities in case there is a long list of witnesses, because we'll have extra meetings to make sure that we cover everybody. I just give you that as a heads-up.
I'm sorry, Mr. Schmidt, you had a point.
Mr. Schmidt: It's just a question. Are these people who are going to be providing written submissions going to be given some guidance as to what the terms of reference of the review are?
The Chairman: I'd be very interested if committee members wanted us to be more specific, in which case the steering committee will meet either right before or right after Manley. At the opening point, however, I think you should show them the reference from the House, which indicates that the reference deals with those clauses of the Patent Act that are incorporated in Bill C-91. That is the reference, so it's....
I'm sorry. That is the reference in the act that causes the House order. The House order does not state what the terms of reference are. The act states the terms of reference. So if committee members would like it to be more specific than that - because it's very general - please give me an indication next week sometime, and then we'll have a discussion.
Mr. Schmidt: No, I think that would be adequate, Mr. Chairman, but I'm just wondering whether or not that ought to be quoted in your press release or in your notification to these people, in order that they understand what the parameters are.
The Chairman: That's very interesting, because all we say here is ``relating to Section 14 of the Patent Act''. We could put in ``See below'', and then actually write it out.
Mr. Schmidt: I think it would be advisable, because then it's very clear for everyone.
The Chairman: That's a very good point. Thank you, sir.
Ms Brown.
Ms Brown: Mr. Chairman, was I correct in hearing that all three of these meetings on credit card interest rates will be televised, or just Tuesday's and Thursday's?
The Chairman: All three.
Ms Brown: Okay, good.
In looking ahead, I'm a little bit concerned that the Canadian Bankers Association, and perhaps representatives from the major banks, will have a position that they have agreed upon - and probably the Retail Council too. Maybe I'm being optimistic, but they will probably be taking a defensive position at least on the parts that they can agree upon, not to mention the parts where they disagree.
On the other hand, there is the other side of the equation: the people who are worried about too much credit out there, about bankruptcies, and about the cost of credit from the various issuers of credit cards. First of all, you have a good selection there, and I thank you for that. I'm just wondering if we can really do them justice, though. They do not have their own association and their paid lobbyist to organize for them. We're going to have to sift and sort with them to arrive at the consensus that they would represent in the discussion. It seems to me that it's going to take a little bit longer on Wednesday.
I just put that up as a flag, because Democracy Watch will have certain points that it wants to make. It won't have had a whole bunch of meetings and a paid executive director to work with these other groups in order to put forward six strong points they all agree on. That's going to be up to us.
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This is the kind of thing some of us were hoping the Office of Consumer Affairs might have highlighted for us - how consumers could be better protected in this game of credit in Canada. We didn't get a whole lot of that out of it. Maybe that's not its role, but if it isn't we have to sort that out in our heads by eliciting these people's opinions on Wednesday afternoon and trying to figure out the areas where they all agree.
The Chairman: It's a very good point. I think we should make it clear we'll be there for three hours.
Ms Brown: Okay. Hopefully we'll finish sooner, but I think we should at least be open to the idea.
The Chairman: The officials have spent some time with these groups to help them and make sure that point of view is quite clearly presented. Some of them had a meeting here two weeks ago to begin the work on it.
Ms Brown: Good - to be coached.
The Chairman: Mr. Solomon.
Mr. Solomon: On the sequence, what is the thinking with respect to having the Canadian Bankers Association first and the consumers representatives second? Is there any reason for that?
The Chairman: We had it the other way around and then got caught with the budget. We phoned them back to see when a day was available to them. We had originally had them down for the Tuesday and then thought it was unfair because everybody would be distracted and they wouldn't get television or anything else. The logic of the legal commitment we have to make to get started on the other bill caused it to be that way. You're quite right. Our instinct was to do it the other way around but we just couldn't. We got caught that way.
Mr. Schmidt.
Mr. Schmidt: We have the Canadian Bankers Association, and that really includes all of the banks. There is a variation among them. I'm just wondering whether that is a sufficient voice on the issue.
I have the same type of question about the Retail Council of Canada. There's a tremendous difference between the large retail outlets that issue their own credit cards and the myriad of small retailers that use cards like Visa or MasterCard. All of them are subsumed under the title of Retail Council of Canada but there is a difference. Would we make a distinction there in terms of the witnesses as well?
The Chairman: I think the steering committee and perhaps the wider committee will have to huddle after they hear from the Bankers Association and decide whether or not it has a beginning. Hopefully by then we'll have a better idea how many people want to see us on Bill C-91 and then organize March accordingly.
We're not in a hurry here. We're just in a hurry to start outlining it to get a feel for it. The questions today were very direct on everybody, so I think there's lots of stuff we don't understand. I'm in no hurry to tell people we want to wrap it up next week. My point is to get started, get the major groups in and decide.
For the record, all the associations have asked me whether this will be their only appearance. I've been very careful not to preclude the committee from calling back an individual member to talk to specifically.
The other group we're in the process of contacting is the oil companies.
Mr. Schmidt: Yes, they have to come.
The Chairman: Mr. Solomon would like to hear from them too.
Mr. Solomon: Do you expect to schedule more general...?
The Chairman: That's right. They can bring the pump price too. I'm sorry, but it was my mistake in how I organized it. We'll get them as soon as we can.
Lastly, the opposition members have been asking for the Canadian Tourism Commission for a long time, so we've locked it in, and that was the day chosen. That's been a longstanding demand that goes back for almost a year now, so we'll finally get that out of the way. It's something the committee has agreed to do and it's squeezed in there and not in any particular order. But that's the date, so we'll stick by it and get it done.
Mr. Lastewka: You mentioned that next week the meetings will be for three hours. Can we make sure that on future reports like this we have the total times? It makes it easier for our schedulers and everybody else.
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I take it unless otherwise shown they're all three-hour meetings. The first one was two hours. We can tell the Bankers Association if you wish that they had better set aside three hours. I'm in your hands; if you want to do that, that's really fine with me.
Normally speaking, on Tuesday we run into votes by six o'clock anyway. Certainly the Consumers Association and those groups should be three hours, and the Retail Council of Canada. I'm in your hands, if you want us to tell them three hours or two hours. With the Canadian Bankers Association, you sort of feel you run out of steam the longer they can sit here. Is it agreed?
Som hon. members: Agreed.
The Chairman: We now move in camera to discuss the report on science and technology.
[Proceedings continue in camera]