LEGISLATIVE ASSEMBLY OF ONTARIO

ASSEMBLÉE LÉGISLATIVE DE L'ONTARIO

Monday 9 June 2008 Lundi 9 juin 2008

PAYDAY LOANS ACT, 2008 /

Ms. Lisa MacLeod: I appreciate joining the debate today on behalf of the official opposition as the critic for government and consumer services.

I want to start off, however, by congratulating my colleague from Carleton-Mississippi Mills for his 31st anniversary in this place. Mr. Sterling and I both represent a very wonderful part of the city of Ottawa, the old Carleton county. I know in many of his terms he actually represented many of the folks that I now represent. On behalf of them, I would like to thank him for the many great years of service he's given, not only to Carleton county but to the new city of Ottawa. So thank you very much, Norm.

Applause.

Ms. Lisa MacLeod: I don't think he ever expected there would be so many Liberals applauding him over his 31-year career, but that's wonderful. He's a fine fellow.

It comes as no surprise that the official opposition will be supporting this legislation; we said so from the beginning. In fact, our criticisms of the bill were to improve it. I will outline them today, because I still think there is room for improvement on this piece of legislation. Having said that, the Conservative Party, in the form of the official opposition here today, will vote in favour of this legislation. It is because there has been a demonstrated niche, for whatever reason, in this country for payday loans.

I will touch briefly on the fact that I believe that we need greater consumer protections in this province. The last time we saw far-reaching consumer protections in this province was in 2002, when the member for Niagara West-G lanbrook was the minister of consumer protection. In fact, under the former Progressive Conservative government, there was actually a ministry dedicated to protecting consumers. The Liberal government eliminated the consumer and business services ministry and put the consumer protection responsibilities under the Ministry of Government Services.

When you look at some of the issues that we face as part of this legislation-or that we faced even last week under Tony Ruprecht's bill for protection against identity theft-these issues haven't been addressed. Instead, this piece of legislation is couched under "addressing poverty," but we all in this Legislature know that just putting caps or lending rates in place is not going to actually get at the root cause of poverty. This should have been a consumer protection bill; it should have been a fiscal or an economic bill. It should have dealt with the cycle of debt that people in Ontario get into, and it should have been firmly entrenched in the mandate of this legislation to protect consumers. I think that's where I have an issue. One of my colleagues just minutes ago asked me if this bill dealt at all with credit cards. No, it does not. It also does not deal with Internet payday loans. These are some of the key issues that we need to deal with. They have not been dealt with in this legislation, although I will say we will vote for it because it is a start.

When we were discussing the payday loan industry during second reading, I thought it was helpful to bring forward some research that I had done with the Library of Parliament, because I wanted to know a little bit more about the payday loan industry in this country and how it developed. It is easy at first blush to say this is usurious, this is criminal activity, but then you have to actually look back at why it developed. Through the Library of Parliament, I read a great dissertation by Andrew Kitching of the Law and Government Division and Sheena Starky of the Economics Division of the Library of Parliament. I think everyone here would agree that Canada's foremost research bureau is the Library of Parliament. I had a great opportunity when I was working on Parliament Hill to get research from them. They do wonderful and thoughtful things.

They did a paper entitled Payday Loan Companies in Canada: Determining the Public Interest. The objective and impartial findings of this research team concluded, " The payday loan industry presents an interesting situation for policy makers, where both the public interest and the best course of action are somewhat unclear." I think we struggled with that during committee hearings. They added an interesting observation in their conclusion: "Criminal prosecution, however, could eliminate the payday loan industry and, in the absence of increased servicing by traditional lenders," such as the banks, "leave some consumers without access to the credit or convenience they desire." I think that through the dissertation-I do have this paper available here if any of my colleagues would like to see it-it became very clear that there is a point in this debate where we have to consider access to credit and the convenience that consumers desire. I think that's why this piece of legislation missed the boat when it was decided it was going to be a poverty bill rather than a consumer protection bill, because, again, it doesn't deal with the root problems of poverty, which we all see, regardless of our constituency, in this great province.

That's an important point and it means that the debate on payday loans is actually about choice. It is there by demand. It is there for free, willing and able-thinking people in Ontario. As a credit counselling society once said, "We believe that consumers are better served in a healthy and competitive marketplace instead of a marketplace with fewer providers." That's why I'm happy that the minister has acknowledged that we're not trying to employ, but we're also not trying to put out of business, payday lenders, because, quite honestly, who we should be trying to put out of business are the dubious lenders out there, the people we have no control over, the people who are not operating in the light of day. We have no idea what they're doing and we certainly don't want to push vulnerable citizens into their hands.

I think that's where my struggle began when I was researching this piece of legislation. I think it's so important that we all support regulating the industry so that we do get those scammers out of the payday loan industry.

Bob Whitelaw, who was one of our deputants during the committee hearings, said there were 750 payday loan operators in Ontario offering small, short-term loans as an advance before an individual receives a paycheque, pension cheque, employment insurance payments or social assistance payments based on direct deposit. He acknowledged that the industry was growing and that one major company recently announced a strategic change to open a store in every community with a population of 7,500 rather than the current base of 40,000 or more. I think that's why, in communities right across this country, you're seeing more, more and more of these groups of stores.

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He asks, "Why do Canadians use payday loans rather than traditional credit products, such as lines of credit, overdraft protection and access ... on credit cards?" He makes the point that I think we're all trying to get at: "Simply put, there is no financial institution today that will provide small, convenient short-term loans, that type of product that responds to the increasing consumer acceptance and use of payday loans, except for the payday business."

When you further delve into that- it's something that the Library of Parliament also pointed to-p eople are using these more and more for convenience. I think that's why, more and more, we have to make sure that there are rules regulating the system so that only the people who are going to play by the rules are in the game. I think that's a very valid point.

As I move forward in terms of talking about some of the ongoing research, Environics clearly indicated in its recent poll that an increasing number of Canadians are living from paycheque to paycheque. I think that also speaks to the fact that we're in a cycle of debt. We're a credit card economy. A credit card economy means that there is a deeper root to that problem than just payday loans. I think it warrants a greater look by the minister and perhaps this finance minister as to why people are living from paycheque to paycheque in this province. Environics confirmed that more than one third of Canadians are living paycheque to paycheque, as they indicate that they are in some financial jeopardy if their pay is held back two or three days. Bob Whitelaw says that that's 33% of Canadians. I think we ought to be concerned by that.

I just would like to talk very briefly about some of the criticisms I do have of the bill, even as it stands. I believe that the bill has gone to a certain length. I think there were places where we could have improved the legislation. I think that, first and foremost, it's educating people about their own financial state. We need to be talking more about fiscal literacy, and I don't believe that it's been adequately addressed in this piece of legislation. Again, I think it strikes the fact that we're not talking about consumer protection here; we're not talking about the fact that there is a broad spectrum of people in this province using payday loans for various reasons and that we need to make sure they are doing what they should be doing.

I'll just go to Chris Robinson, who appeared before committee. He said that the payday lending education fund is "a waste of time and money." I'll continue to read: "The problem of lack of financial capacity or financial literacy is much broader than payday lending. The social problems that provide ready demand for payday loans, even at very high rates, are much deeper and more fundamental than a lack of understanding of payday lending. If we wish to reduce the harm from payday loans by education, we need to provide consumer financial education to cover all three areas of concern. An understanding of payday loans and avoidance or minimization of them would be a natural consequence for anyone who has the broader education."

My colleague from Whitby-Oshawa had indicated earlier that that is a concern of ours in the piece of legislation. We drew the comparison in the party that the Canadian Bankers Association is teaching younger Ontarians. One of the resolutions that I had actually put forward on this legislation was to encourage students in high schools to start learning more about their own fiscal literacy. Unfortunately, that was defeated by the Liberals.

I think that until we're ready to delve more deeply into the root causes of why people are actually going to payday loans-and that is poverty, but it's also that we've got a new generation of a credit card economy. People, when they want something, go and get it. It's not like the good old days when people used to save their pennies.

I remember, when I was a kid, saving my money for a trip. I used to put it into one of those big water bottles. In fact, that's what I'm starting to do with my own little girl right now. We go home and we have a little fund for her. We're trying to teach her fiscal responsibility, but my gosh, it's not happening anymore. We're going to have to start talking about those sorts of issues, and that's why I will always advocate for fiscal literacy courses at the high school level.

Interjection.

Ms. Lisa MacLeod: Well, my daughter's three, so I'd better not give her much more of an allowance. I'll be in the broke house before she's 31, before she's here as long as Norm's been in the Legislature.

Further, I just want to go on to another issue that I have with the piece of legislation, which is that caisses populaires and credit unions are still included in this legislation, despite being part of another regulatory framework through the Minister of Finance. So now we're going to doubly regulate credit unions and caisses populaires. I'm not sure how good that's going to be for business. Credit Union Central of Ontario provided me with some notes. I know they have written to the minister and have asked that credit unions and caisses populaires be specifically exempt from Bill 48.

When I put that resolution forward, it was defeated by the Liberals, of course, but I'd like to just point out some of the things they have written:

"Section 3 of the act states, ' This act does not apply to persons, entities or payday loans or classes of persons, entities or payday loans that are prescribed.'< /p>

"Currently, credit unions are exempt from the provisions of the Consumer Protection Act, including the provisions of the regulations thereunder dealing with payday loans. Compliance with that statute is enforced by the Ministry of Government and Consumer Services.

"The credit union system is concerned about the possibility of having two different ministries regulating different but related aspects of its business.

"We are of the view that it would be more efficient from the government's and taxpayer's point of view to have DICO and/or FSCO carry out all regulatory functions with respect to the operations of credit unions, rather than to assign this small part of its business to a different ministry.

"If credit unions will not receive an absolute exemption from the operation of the bill, then we are of the view that it would be preferable to add parallel provisions dealing with potential 'payday lending' by credit unions to the anticipated draft general regulations under the Credit Unions and Caisses Populaires Act (which haven't been released yet-b ut the new act passed in the 2007 budget bill), and amend the bill to deem compliance by credit unions with their own legislative and regulatory requirements with respect to payday lending to be in compliance with the provisions of the bill."

They conclude: "We feel the government, taxpayers and the credit union system are better off exempting credit unions from Bill 48, and provide parallel provisions to regulate potential payday lending by credit unions under our own regulatory regime."

I couldn't agree more, but this government has found, at every opportunity, a way to increase the regulatory burden on businesses right across this province. That disappoints me.

I'd like to go on further. I just want to talk briefly about the regulations, because this bill is going to be dealt with mainly by regulations. In fact, if we talk about the expert panel-the expert panel, I might add, that didn't include Chris Robinson or Bob Whitelaw, two of the foremost thinkers on payday loans-much of it is designated by regulation. I think that's what's concerning. Whether you're looking at the Ontario payday loan corporation, whether you're looking at the expert panel, a lot of this is left to the discretion of the minister, and in the interests of accountability, it ought not to be. It ought to have been dealt with in this piece of legislation, which it wasn't.

In fact, when you look at the Credit Unions and Caisses Populaires Act, that is now going to rely on more regulations at the minister's discretion. I might add, too, in terms of the 2002 all-encompassing piece of legislation I mentioned that the Progressive Conservative government brought in under the member for Niagara West-Glanbrook, many of the regulations have not been met yet. Whether it's the bereavement sector or the racing sector or whether it's used cars, this government has been slow to respond. I think that is a real concern when you're looking at the legislation before us right now. A lot of what we're going to see in terms of how this sector will be managed will be dealt with in regulations, will not be debated on the floor of this Legislature. I think that is very concerning to Ontarians.

I mentioned the expert panel and my concerns there. I think the final concern I have is that there is no Internet payday loan protection. I think that was something Bob Whitelaw succinctly pointed out during the debate. He said, " Bill 48 is silent on how to acknowledge and respond, through legislation and compliance, to the growth in Internet payday loan firms. My research, and I've shared this with the Senate," of Canada, I presume, "shows that there are 1,200 or more existing online payday firms."

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How can you offer consumer protection in this province against payday loans when anybody with a computer can now go ahead and get one? You're not regulating that and protecting consumers against Internet payday loans. You're either going to do this well, or you're not going to do it right. I think by ignoring the fact that we need it-and it was a resolution of mine, supported by my colleague in the third party, that was defeated yet again by the Liberals. I think that in the true interest of consumer protection, if we are prepared to regulate payday loan operators on the streets of this city of Toronto, the streets of my city of Ottawa and the streets of your city of Hamilton, then we'd better be regulating the folks right across this province and in other countries who are offering the same. In the interest of consumer protection, that is the right thing to do.

Bob Whitelaw continues: "A Web-based application form is all that's required. Considerable personal and bank account information is filled out online and then the payday loan is transferred into your account, and a few days later the funds are withdrawn to repay the loan. These payday Internet firms do not exist only in Canada, but throughout the United States and internationally. There are issues on personal identification, privacy etc. When I mention these Internet groups to the credit unions and banks, they are less than thrilled to know that their customers and clients are providing a tremendous amount of personal information online."

I think that when you look at the context of what Bob Whitelaw is saying to the committee, and now through my words into this chamber, he's got a really valid concern. I think it goes back to the Tony Ruprecht bill of last week talking about identity theft. When you're putting that much personal information on the Web-

Mrs. Christine Elliott: It's dangerous.

Ms. Lisa MacLeod: My colleague says that it's dangerous, especially for this type of money and this type of product. We had an opportunity, through clause-by-clause, to address that issue. The Liberals chose not to. As a result, I have real concerns that we are not adequately protecting Ontario's consumers.

I think that also means that we do need to bring forward more sweeping consumer protection changes throughout the province of Ontario. I think we need to deal with identity theft. I don't think it's new; I think that this has been a real concern. I look to my colleague Tony Ruprecht in bringing his bill forward four times. He's a former minister of the crown in the Liberal government, and he has had to bring this piece of legislation four times.

Mr. Peter Kormos: And a good minister, a darned good minister.

Ms. Lisa MacLeod: My colleague from Welland says that he was a good minister, so there you have it.

Mr. Peter Kormos: And how does his caucus treat him?

Ms. Lisa MacLeod: Well, they let him put in a bill. My colleague asks, "Why does his caucus treat him the way they do?" I don't know. It's interesting to note that the four times he's brought in this piece of legislation on identity theft and protecting people's credit scores, he was in government. Actually, this is the interesting part of that piece of legislation we debated last week: It was first brought in by Joe Cordiano, who's a former minister of the crown over there. It passed last week, but we're not going to see any protections there.

We have the minister before us right now, and if he were for the interests of greater consumer protection, he would consider dealing with Internet payday loans, he would deal with Internet fraud, he would deal with credit scores, and he would put forward a piece of legislation like no other in this country to protect Ontario's consumers. I think that is why we're all concerned, because we're not seeing that.

We're regulating an industry right now where there is a group called the Canadian Payday Loan Association, or CPLA. They have a certain code of conduct and best business practices. I know that many of the members here are very familiar with Stan Keyes, who's the president. He may not be of the same political persuasion as me, but I certainly respect him as a former federal Minister of Revenue. And he had a lot of colleagues that I know.

Mr. Peter Kormos: He didn't have to be a Liberal.

Ms. Lisa MacLeod: He didn't have to be a Liberal; no one does. Unfortunately, it happens.

Interjection.

Ms. Lisa MacLeod: I'm not sure about that, but I will say this: They've hired this organization, the CPLA-and this is where I think you have to make a distinction, and the struggle that I had is that you've lumped everybody in with the same. When you look at a group like the Canadian Payday Loan Association, they have their own ombudsman, who actually investigates what's going on out in the field. They have a guy named Sidney Peckford. He lives in Ottawa, in my community-I think he was born in Newfoundland-so of course he is quite a guy. He was talking briefly about the code of business practices that they employ and that he is responsible for enforcing, which they adopted back in 2004. It has 18 sections designed to protect consumers.

Essentially, that's what we're adopting here today, and I think we could have gone one step further, because it really isn't the organizations that belong to CPLA that we're trying to get at. We're trying to get at the pawn shops; we're trying to get at the folks who are charging usurious rates and who go unnoticed, who don't have a storefront; we're trying to get at the people who are actually engaging in criminal activity-not the folks who are trying to provide a niche in the marketplace. As we learned from the Library of Parliament, there is a need in this country-not that we agree with it or anything, but there is-and it's really about providing a service that people believe is needed there.

As of 2004, for example, the Library of Parliament says that "there were an estimated 1,200 payday loan stores in Canada, although the industry is growing rapidly and there is no easy or official means of tallying the participants.

"Moreover, no authoritative information is available on industry revenues or profits." One study does suggest, however, that companies may use the broker and insurance models to minimize their risk of being charged with exceeding the criminal rates in Canada.

Before I conclude, because I have a few more minutes left on the clock and I know that, because I generally agree and I did get my points of contention out, I do want to go right back to the identity theft bill, which I believe should have been debated in full as a government bill. I don't think it should have been brought in here as a private member's piece of legislation, and I can't believe that we were duped last week. The government came in here to try and dupe us.

Mr. Peter Kormos: That's powerful language.

Ms. Lisa MacLeod: Well, they came in here last week to try and tell us that they were doing something on consumer protection, and they chose not to. I might also add that I think there is a determination for change in the community. I think that when you're looking at a credit card economy and people are taking out credit cards in other people's names and we're looking at identity theft, that's a very serious issue that must be addressed.

In conclusion, I would just like to say that I support this bill. The official opposition will be supportive of this piece of legislation. I did lay out the issues of contention to us, such as fiscal literacy, which we're not doing enough about in this province and which I will continue to press on. I do believe that the caisses populaires and the credit unions should have been exempt from this piece of legislation just purely because they are already part of a regulatory framework with the finance minister.

I think that too much is in the regulations, and that is a scary thing when we're dealing with a piece of legislation designed to protect consumers and for these folks over here, designed to eliminate poverty. This bill, in their view, is to eliminate poverty, which I do not think, for one minute, it ever will. I think that it should have been a consumer protection piece of legislation.

I also believe that the expert panel is one that we'll have to watch-we'll have to see. The minister is able to reject the recommendations or not. The second thing is that, of course, we know that Mr. Chris Robinson was not included as an interviewee for this particular panel, and he is one of the foremost thinkers on this issue. And, of course, there's no mention of Internet payday loans. I don't know how you can have a consumer protection bill when you effectively eliminate one piece of the pie.

There we have it: There's what the official opposition believes. We will support this legislation, but we will continue to make sure that there are greater consumer protections in this province, and we will stand up for them here in this chamber and outside this chamber so that issues like identity theft, Internet payday loan scamming and other key issues that are very important to our constituents will be addressed.

Thank you, Madam Speaker, and I look forward to the debate.