Thank you very much, Mr. Chair and members of the committee, for the opportunity to meet with you today.

Let me begin by outlining some of the aggregate data regarding the scale of the problem of consumer debt in Canada and why excessive interest payments on that debt are contributing to the financial distress that so many households are experiencing.

Since interest rates began rising in Canada in March 2022, credit card debt has become the fastest-growing major source of new debt for Canadian households. As of August this year, Canadian households were carrying $109 billion in outstanding debt on credit cards issued by the chartered banks. Including broader measures of credit card debt, like non-bank cards, total credit card debt was higher, at $122 billion. Overall, non-mortgage consumer debt totalled $770 billion for the same month.

We all know that mortgage debt, of course, constitutes the largest share of total consumer debt in Canada, at $2.2 trillion, but credit card debt and other forms of non-mortgage debt are important contributors to the overall indebtedness of Canadian households, and since interest rates are higher on non-mortgage debt than on mortgages, the debt service burden is proportionately worse.

It seems that many Canadian households, hard pressed by the increase in mortgage interest rates, are increasingly turning to their credit cards to help cover monthly expenses.

Consumer interest payments on non-mortgage debt reached over $60 billion at an annualized rate as of the second quarter of this year. That's an increase of $25 billion per year, or over 70%, since interest rates started rising in early 2022. As a share of household disposable income, non-mortgage interest payments, including on credit cards, had increased by one full percentage point of disposable income, to 3.25%, by the second quarter.

Again, that is not as dramatic as the increase in mortgage interest costs, which more than doubled in the same time, but non-mortgage consumer debt charges have become a significant and secondary source of the financial stress facing Canadian households. This burden is more concentrated among lower-income Canadians, most of whom do not own a home and, therefore, do not face those higher mortgage interest charges.

Some of this trend in rising non-mortgage interest costs of course reflects macroeconomic developments, especially monetary policy, that is obviously beyond the purview of this committee, but that rapid growth in non-mortgage debt charges and their regressive distributional effects attest to the importance of enhancing transparency, fairness and choice for consumers, and thus I commend this committee for your inquiry.

I also commend some of the initial steps taken by the federal government in pursuit of those goals of transparency, fairness and choice, such as reducing the criminal rate of interest; strengthening enforcement of predatory lending practices and criminal interest; helping to negotiate reduced credit card fees for small business, as Mr. Kelly just reported; and exploring options to expand access to low-cost and no-cost banking services.

I think these measures need to go further. Specifically, I would recommend some of the following steps.

The first is strengthening responsible lending rules and enforcement of those rules for credit card lending and other forms of non-bank consumer lending, such as the various “buy now pay later” schemes that are popping up all over, to ensure that consumers are not provided access to more credit than is feasible for them given their incomes and interest rates.

The second is requiring all chartered banks—not just those that have agreed to do so—to provide access to low-cost and no-cost accounts, following that $4 monthly fee model, to a broader range of customers, including lower-income Canadians of all ages, not just the specified groups, such as young people and GIS recipients, that are currently covered.

I also think we should require chartered financial institutions to contribute proportionately to establishing, capitalizing and operating a new nationwide non-profit, small-value lending agency to provide short-term and emergency loans to low-income Canadians on a cost-recovery basis. There are some promising experiments in the non-profit sphere and in other countries to show that this would be a viable alternative to the terrible exploitation experienced through payday loan firms and other predatory lenders.

I would like to see the criminal interest rate reduced further for credit cards, retail loans and other non-mortgage lending, to 2% per month, or about 27% per year on an effective annual basis. We need to strengthen transparency in advertising rules for credit cards, retail loans, “buy now pay later” schemes and other non-mortgage lending.

Let me conclude, committee members, with a brief remark about the role of financial literacy in the broader effort to protect low-income Canadians against these practices. Coincidentally, today is the launch of Financial Literacy Month in Canada, sponsored by the FCAC and partner organizations. I'm a big believer in financial literacy, and I served for many years as a volunteer director of the Canadian Foundation for Economic Education. Certainly, consumers need to be fully informed about effective interest rates and other terms and fees in credit card loans, payday loans and other forms of expensive credit.

Frankly, though, we cannot count on financial literacy efforts to protect consumers against unfair practices. People are driven to participate in these schemes by desperation more than by lack of knowledge. Clearly, we need stronger regulations to limit unfair practices, rather than adopting a “borrower beware”, “blame the victim” or “inform yourself” approach. Therefore, stronger efforts to prevent Canadians from experiencing the sorts of financial distress and desperation that drive them to excessive consumer debt—including through predatory channels—are also critical for protecting Canadians against burdensome levels of unsecured personal debt.

Thank you again for having me. I look forward to the discussion.