May 6, 1965 (26th Parliament, 3rd Session)


Howard Charles Green

Mr. Green:

Mr. Chairman, I would like to take this opportunity to say a few words in respect of this resolution. I am particularly pleased to do so, not only because of the fact that I had the honour of being a member of the Banking and Commerce Committee during the last session, but particularly in respect of the work we have done to date on the Joint
May 6, 1965

Committee on Consumer Credit, of which I have the honour to be a joint chairman. I do not believe that Committee or any of the work of that Committee, or any of the aspects of credit as brought before that Committee, have been discussed before this House; and inasmuch as the question of banking is integrally involved in any question of consumer credit, I think it might not be inappropriate to discuss at this time on this resolution some of the things we have found before that Committee.
First of all I would point out those memorable and immortal words of Polonius in his precepts to his son, in Scene 3 of Act 1 of Hamlet. We all recall that Polonius said:
Neither a borrower nor a lender be: For loans oft loses both itself and friend, And borrowing dulls the edge of husbandry.
If such be the case, Mr. Chairman, then I have no doubt that Canadians have very few friends left, and they are indeed a very dull crew; because the statistics indicate that the extent of borrowing, and of consumer borrowing in particular, in the last few years has increased to a very, very great degree. Singularly enough, in the year immediately following the Second World War the total of consumer borrowing in Canada was something like half a billion dollars. In 1963, the last year for which we have authentic statistics, that borrowing had increased to the extent of some $5 billion. I think those figures indicate something of the importance of this question of borrowing and of consumer credit, which is wound up in the question of the Bank Act, and to its importance to our economy.
[DOT] (8:40 p.m.)
I might point out that during this period, at any time when there has been a regression in the quantum of consumer borrowing there has been a concomitant relapse in the economy. Such industries as the retail trade and the car industry, in all its various areas from manufacturing to sales, would certainly suffer immeasurably if the quantum of credit and the extension of credit over the years did not continue to grow and expand. It has been notable before our Committee that the many briefs which we heard from many institutions and representatives of those institutions have been largely presented by the producers of consumer credit, by those who sell consumer credit, rather than by the consumers of the credit, the borrowers themselves. Accordingly it may be that I have obtained a somewhat slanted view of this entire subject, having heard more from the producers than from the
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consumers. However, I would point out that in this entire area there are very grave problems, essential problems, problems which I suggest may affect the life of each Canadian, his home and his family, a great deal more possibly than some of the loftier topics which we sometimes discuss in this House, such as external affairs and other matters, which are possibly of greater moment but of less immediate concern to the average Canadian homeowner.
I would point out, Mr. Chairman, that the consumer of credit is in the position of being continually sold the idea of credit and the need for credit, and the fact that he should borrow day after day and hour after hour. By means of the media of communications with all their effectiveness today he is told that he can borrow, that he can buy anything he wants just by walking in the door. He is told to take it now, pay later. That is the philosophy to which he is subjected almost continually during his waking hours.
I think this is demonstrated to some degree by the statistics covering consumer credit, which I should like to read into the record of the House at this time. These figures are broken down between the various types of institutions which provide what we call consumer credit. The largest of these is the chartered banks, of course, with which we are concerned at the present time in this resolution. However, the growth of other types of institutions which provide consumer credit is also indicated by these statistics. I merely point out the statistics themselves and the indicated growth between the years 1955 and 1963.
Instalment finance companies in 1955 provided some $599 million worth of credit to the Canadian consumer; and in 1963 this had grown to $873 million. Consumer loan companies providing instalment credit provided $215 million worth in 1955 and $808 million in 1963. Chartered banks provided $351 million in 1955 and $1,432 million in 1963. From that ratio, Mr. Chairman, we can see that the chartered banks have invaded this field of consumer credit to the extent that they have shown the largest increase of any of these institutions in that area supplying consumer credit during that period. I think it was the hon. Member for Medicine Hat who in his address charged the chartered banks with failing to accept the needs of the consumer, and in the early days that was quite patently true. But they certainly have demonstrated, since they have decided to enter the field,

May 6. 1965
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that they have been very effective in gamering unto themselves a very good share of the market. To complete the statistics, credit unions and caisses populaires during this period grew from $151 million in 1955 to $640 million in 1963. The total growth during that period showed an increase in consumer credit of from $2,136 million in 1955 to $5,292 million in 1963.
I have placed these statistics on the record, Mr. Chairman, to indicate the very vast problem that exists and the very great growth in this area of consumer credit during that period, some very substantial proportion of which is taken up by the chartered banks in this country.
Also in connection with the evidence we have heard before the Consumer Credit Committee, the great need for legislation, not only specifically qua credit in respect to the consumer but for various other wider ambits of consumer legislation, has been demonstrated. This legislation is needed to protect the consumer as a consumer of credit as well as a consumer in other ways. I pointed out earlier that so few of the very able representations which we have heard emanated from the consumers themselves, and it is by the very nature of things that the producers, the sellers, are well organized and usually very capable financial institutions, whereas the consumer as such is an individual, to a very large degree unorganized, and to the same degree not able in a collective fashion to bring forth his views in any voluble or professional manner. Such organizations as the consumers organizations attempt to do this, but by and large, Mr. Chairman, I suggest that the consumer as such, in this corporate age in which we live, is very much left to the tender mercies of the well organized and well heeled collective bodies of our society. I suggest that his greatest and only protection is right here in this House in the consideration which the elected representatives must have for the consumer as such.
The grave difficulty in aiding the consumer in his problem as a consumer with respect of credit, as well as in other areas such as packaging and disclosure, and so on, is very plain under our constitution. The Minister quite properly pointed out in his statement to the House today the difficulty of embodying into the revisions to the Bank Act the lofty concepts of the Royal Commission regarding pervasive legislation which will cover banking in all its aspects. I think this same problem exists with regard to legis-
[Mr. Green.1
lating on behalf of the consumer for consumer credit and other things.
I think the area of banking and interest is very clearly within the ambit of federal legislation, and I think the revisions to the Bank Act will no doubt bring forth measures which will be of some help to the consumer of credit. But this is only one aspect of the entire problem. We have noted in our work in the Consumer Credit Committee that many of the provinces are very much concerned with these problems facing the consumer at the present time, and it is our great hope that this is one area where this new approach to confederation which the Prime Minister has ably brought forth, this idea of co-operative federalism, can be used between federal and provincial agencies so that the consumer of credit and the consumer, as a consumer in so many other ways, may be protected. I think co-operative federalism, joint legislation, overlapping legislation covering the entire constitutional field, is the area of great hope in this regard, o (8:50 p.m.)
I might also point out that one of the very grave problems in respect of consumer credit, as we have observed it, relates not only to usurious interest rates, to which earlier speakers have referred, to interest rates on short-term loans as high as 154 per cent, which is rather shocking. The only way these things can be prevented is, as I have said, by joint legislation.
The second grave problem in respect of consumer borrowing relates to the fact that most of the time it is the consumer who is paying these usurious rates who has very little protection, if any, by way of information regarding the rate of interest he must pay. There is no law, either provincial or federal, at this time which requires a disclosure of interest rates in simple annual terms so that a consumer of credit may know the rates he must pay, and may realize exactly what he is getting into.
I suggest with the greatest respect that it might be appropriate for the Federal Government in respect of the Bank Act to set an example for other lending institutions in this area, by amendments which would make it compulsory for chartered banks to show interest rates in terms of simple annual interest rates. I have in mind consumer loans in respect of which banks are now charging interest rates in excess of the 6 per cent rate provided for by the Bank Act, which is accomplished by monthly interest charges, costs of loans, and in other ways. People are
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paying more than 6 per cent on loans from chartered banks, and I respectfully suggest that it would be a singular example to the other and sometimes more usurious institutions if the Bank Act were amended so that under the Bank Act interest rates on loans made by chartered banks would have to show the simple annual terms of the interest rates. I hope the Minister will consider this respectful submission.
I would certainly commend the Minister, as I know all hon. Members on this side of the House will, for the forthright, clear and unequivocal position he has taken in respect of the ownership of shares of chartered banks by provincial governments. In this regard I find the position taken by the New Democratic Party to be a rather anomalous one. The hon. Member for Burnaby-Rich-mond and the hon. Member for Nanaimo-Cowichan-The Islands have taken the position that it is quite in order, and that no harm is done, if provinces own, and even control, federally chartered banks. On the other side of the New Democratic Party coin we have Members such as the hon. Member for Greenwood, who talk about the formula for revising the constitution which will create havoc, with the need for strict central fiscal powers. They suggest that powers to control the flow of the economy, and for other necessary economic measures, should be centred at the federal level. There seems to me to be a rather striking contradiction between these views.
I should like to relate a grade school anecdote which seems to be apropos of this striking contradiction between the positions taken by various Members of the New Democratic Party. I realize that the majority of the Members of that Party started their education at the university or postgraduate level, and probably did not go to the humble grade school at all, as the rest of us did. I hope these intellectually elevated gentlemen will forgive me for drawing this very humble anecdote to their attention. I think it has some bearing on this contradiction between the views taken by the various Members of that Party, who seem to adopt whatever stand looks good politically, on whatever measure comes before this House. Consistency is the least of their worries.
The anecdote I wish to relate is about the birds and the animals, and a strange creature known as a bat, which is neither bird nor animal. This bat would fly with the birds one day and run with the animals the
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next day. It was having a ball, going whichever way happened to be good on a particular day. Suddenly the birds and the animals got wise to the bat and realized that the bat was not one of them. That was the end of the bat.
Let me suggest to hon. Members of the N.D.P. that the Canadian elector is a pretty wise old bird. One day he will get wise to the N.D.P. bat, and that may be the end of that Party. Let me also suggest to those gentlemen that they get together and decide whether they are in favour of a strong federal fiscal authority, or for the control of the federal banks, which have played such an important part in the control of our economy, and certainly in the flow of money, by provincial governments. The position of that Party is anomalous, contradictory and typical of very many of the stands it has taken on various issues. It seems to me they adopt whatever is popular today, whatever will catch a few votes in British Columbia, or somewhere else, without worrying about adopting a consistent philosophy until some later date.
Again I commend the Minister for the strong stand that he has taken in this matter, and I should like to-

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