1958-06-05

MINES, FORESTS AND WATERS MOTION FOR CONCURRENCE IN FIRST REPORT OF STANDING COMMITTEE

[Stage Direction]
Mr. J. W. Murphy (Lambion West) presented the first report of the standing committee on mines, forests and waters, and moved that the report be concurred in. '
Mr. G. J. Mcllrailh (Ottawa West):: Mr. Speaker, I am wondering whether the chairman of the committee has any reason for asking for leave of the house to present this motion without the usual notice. I had the benefit of listening to the assistant clerk read the report of the committee. If I heard it aright I would like to consider whether or not something should be said on part of it when the motion comes before the house.
I would therefore ask that the chairman of the committee let the motion stand for a day, unless he has some real reason for asking leave to have it dealt with today. If there is some reason for asking leave I would be glad to hear it.


Mr. Murphy:: Mr. Speaker, I see no reason why we cannot accept the hon. member's suggestion and let it stand for a day.


Mr. Speaker:: The notice will then be put on the order paper.
Motion stands.



FINANCE


Hon. Donald M. Fleming (Minister of Finance):: Mr. Speaker, I should like to table copies, in English and in French, of a report which I have received from the chairman of the tariff board. It relates to wool fabrics, and is the first of a series of reports to be made on the textile reference. Later reports in the series will cover other textile products. I am also tabling, pursuant to section 6 of the Tariff Board Act, a transcript of the evidence presented to the board at its public hearings.
Since I received this report very recently I have not yet had opportunity to make a
thorough study of its contents. I shall therefore not attempt to give the house at this time more than a general indication of its nature.
The report which I have just tabled opens with a recapitulation of the situation and trends that had been revealed by an earlier report on woollens which the board had made to the former government early in 1955. In brief, the situation in early 1955 was summarized as follows:
1.	For several years there had been evident a persistent decline in Canadian consumption of wool fabrics. This had resulted in a large reduction in Canadian production, and a smaller reduction in imports.
2.	There had become apparent an increasing consumer preference for relatively lightweight fabrics. Moreover, sales of blended fabrics had increased at the expense of allwool fabrics.
3.	As a result of the growing popularity of lightweight fabrics of which the cost per pound is relatively high, coupled with rising prices for wool fabrics generally, the 50 cents per pound ceiling which applies to the duty under the British preferential tariff on item 554b, which is the main tariff item relating to wool fabrics, had come to apply to most imports of British wool cloth, and the average rate of duty thereon had declined to less than 15 per cent ad valorem.
4.	In the years 1950 to 1953 inclusive, 12 Canadian woollen mills and 5 worsted mills had closed.
5.	Several of the firms remaining in business were in a precarious financial position.
With these comments on the conditions in 1955 the board then proceeds in its present report to examine the extent to which the foregoing situation and trends have since 1955 remained in evidence or have been changed or reversed. Its main findings can be summarized as follows:
1. The downward trend in the Canadian demand for woollens was reversed, at least temporarily, in 1955. However, while the total Canadian market has since expanded somewhat from the low point reached in 1954, the share of the market supplied by Canadian producers has declined. In 1956 and the first half of 1957 domestic production fell off and imports increased. In the first

Wool Fabrics-Tariff Board Report half of 1957 Canadian manufacturers supplied only 48 per cent of the Canadian market for wool cloth, as compared with 58 per cent in 1954.
2.	Recent style trends, particularly in women's wear, have been toward highly decorated fabrics of types which are largely imported from abroad. This has cut heavily into Canadian production of woollens and wool blends. The demand for Canadian worsteds has remained steadier.
3.	The trend to lightweight fabrics has continued. The 50 cents per pound ceiling on the duty under the British preferential tariff results in a very low amount of duty per square yard in respect of such fabrics.
4.	Since 1954 four more Canadian wool cloth mills have closed their doors, making a total of 21 since 1950. While some of their workers secured other jobs, the number of unemployed wool cloth workers increased throughout 1957.
5.	The financial position of most, but not all, of the remaining woollen mills improved somewhat between 1954 and 1956, but not sufficiently to restore financial stability in the industry. There was evidence of renewed decline in the industry's financial situation at the time the board completed its report.
On the basis of its analysis of the facts of the situation, which I have sketched only in bare outline, the tariff board concludes that if the Canadian wool cloth industry is to be maintained in a reasonable state of health, some increase in tariff protection is necessary. The board is of the opinion, moreover, that within limits an increase in customs duties would not prevent imports of wool cloths from continuing to cater to a large part of the requirements of the Canadian market. While the board concludes that some increase in tariff protection is necessary, it points out that increases in the tariff would pose problems for the Canadian clothing industry, and might result in higher prices of clothing to Canadian consumers.
With these considerations in mind the board recommends that item 554b, which covers the vast bulk of our imports of wool fabrics, be reworded, and that the specific duty per pound and the maximum duty per pound under the British preferential tariff be increased somewhat. In respect of fabrics weighing up to 12 ounces per square yard- that is to say, suitings and most other fabrics other than overcoatings-the recommended increase in the specific component of the compound duty is from 12 cents to 20 cents per pound, and the increase in the ceiling on the total duty is from 50 cents per pound to 60 cents per pound. In respect of cloths weighing over 12 ounces per square yard-that is
[Mr. Fleming (Eglinton) .1

to say, overcoatings-the recommended increase in the specific component of the compound duty is from 12 cents to 15 cents per pound, and the increase in the ceiling on the total duty is from 50 cents per pound to 55 cents per pound.
The board's recommendations would result, accordingly, in an increase of one-fifth -from about 15 per cent ad valorem to about 18 per cent-in the actual duties applicable to most United Kingdom worsteds and other suitings. On overcoatings the increase in the British preferential tariff would be from about 19 per cent to about 21 per cent ad valorem. The board did not recommend any change in the rates under the most favoured nation or general tariffs.
There were, in addition to item 554b, three minor wool fabric items included in the report. The board recommends that two of these, items 554 and 554a, be deleted from the tariff schedule, and that the third item, item 554c, be retained without change.
Both the British preferential and the most favoured nation rates for these wool items are bound against increase under the general agreement on tariffs and trade. On the occasion of the extension of the GATT tariff schedules in Geneva last November Canada reserved the right to renegotiate the tariff rates on these items in the light of the tariff board study then in progress.
I should like to assure the house, Mr. Speaker, that the foregoing recommendations made by the tariff board will be very carefully studied by the government.


Hon. L. B. Pearson (Leader of the Opposition):: Mr. Speaker, may I ask the minister just one question. Is the effect of the recommendation which he has just mentioned as coming from the tariff board to increase the rate of duty only against British imports in those commodities?


Donald Methuen Fleming: Yes. The board recommends an increase in the rates under the British preferential column but does not recommend an increase in the most favoured nation or general tariff rates.


Mr. W. M. Benidickson (Kenora-Rainy River):: Mr. Speaker, I listened attentively to the minister, and I assumed that as a result of this long enunciation in the end he probably was going to announce a new government policy even in advance of a budget statement. Is it not customary just simply to table a matter of this kind rather than to give it this kind of publicity?


Mr. Speaker:: Order. Where a ministerial statement of this kind is made the practice of the house has been for one spokesman from each party in the house to comment,

and for questions to be reserved until the question period. I think that is a good practice to follow.
[Later: ]
On the orders of the day:


Mr. L. D. Crestohl (Cartier):: Mr. Speaker, may I direct a question to the Minister of Finance. In the light of the statement he just read to the house, can the minister tell us whether the board or his department has made any calculation or estimate as to the approximate increase there will be in the cost of a gentleman's suit or a gentleman's overcoat if this policy is approved?


Donald Methuen Fleming: Mr. Speaker, I will have to refer my hon. friend to the report of the board. Copies of the report will be made available this afternoon. This reached the Department of Finance only very recently and it has not been possible to attempt anything in the nature of the sort of thing my hon. friend is asking at all.



THE BUDGET


[Stage Direction]
On the orders of the day:
Lester Bowles Pearson: Mr. Speaker, in a spirit of invincible optimism I should like to ask the Minister of Finance whether he can now give us any indication of the day when he will bring down his budget?


Donald Methuen Fleming: Mr. Speaker, nothing will give me greater pleasure than to satisfy the quite natural curiosity of my hon. friend. I can assure him that I am just as curious about the date as he is, and as soon as it is possible to make that announcement it will give me great pleasure to do so.



INDUSTRY


[Stage Direction]
On the orders of the day:
George James McIlraith: Mr. Speaker, I should like to direct a question to the Minister of Defence Production. My question is based on a Canadian Press dispatch appearing in this morning's Globe and Mail and in this morning's Montreal Gazette concerning the protest of two Republican members of congress to the United States government urging that a contract for radar installations be not let to Canadian companies although the Canadian companies submitted the lowest offers in competitive bidding. My
Inquiries of the Ministry question is, would the minister advise the house as to whether or not the Canadian government have taken any action concerning this matter? If not, is it their intention to do so?


Hon. Raymond O'Hurley (Minister of Defence Production):: Mr. Speaker, I wish to thank the hon. member for Ottawa West for giving me notice of this question. I received it just as I left my office to come into the house. I have read the articles in both papers. I think it is for the time being just a demand by the two senators to the defence, air and labour departments. If there are other developments I will report to the house.



TRANSPORT


[Stage Direction]
On the orders of the day:
Mr. D. M. Fisher (Port Arthur):: Mr. Speaker, I should like to direct a question to the Minister of Transport. Would the minister care to make a statement on the criticism of his department by a spokesman for the great lakes pilots association in connection with the use of Department of Transport facilities by one of the parties to the current dispute on the great lakes?


Hon. George H. Hees (Minister of Transport):: Mr. Speaker, I did not see the article in this morning's paper; it had been drawn to my attention just before I came into the house by the hon. member for Welland. I told him I was not aware of any such occurrence. I will have the matter checked and will report to the house as soon as possible.



EXTERNAL AFFAIRS


[Stage Direction]
On the orders of the day:
Mr. H. J. Robichaud (Gloucester):: I should like to direct a question to the Minister of Fisheries. Has the attention of the minister been drawn to the declaration of the minister of fisheries of Iceland extending the fishing limits of that country to 12 miles so far as foreign trawlers are concerned?


Hon. J. A. MacLean (Minister of Fisheries):: Mr. Speaker, this matter has not been drawn to my attention officially. I have seen a report in that connection in the press. It is a question that should be properly directed to my colleague the Secretary of State for External Affairs.

Inquiries of the Ministry


Hédard-J. Robichaud: May I ask the Secretary of State for External Affairs a supplementary question. Has the minister or the government given consideration-


Mr. Speaker:: Order. I have to consider whether this matter comes under the jurisdiction of any minister in this house. I understand the hon. member is asking about Iceland having taken a unilateral course in extending its territorial waters. I do not think that is the responsibility of any of the ministers here.


Hédard-J. Robichaud: Mr. Speaker, the purpose of my question is to find out if the government or the Secretary of State for External Affairs is giving consideration to doing the same thing in so far as Canada is concerned.


Hon. Sidney E. Smith (Secretary of State for External Affairs):: Mr. Speaker, in reply to that question I would say that no consideration has been given to such action.


DOMINION-PROVINCIAL RELATIONS INQUIRY AS TO CALLING OF CONFERENCE ON CONSERVATION
[Stage Direction]
On the orders of the day:
Mr. H. W. Herridge (Kootenay West):: Mr. Speaker, I wish to address a question to the Prime Minister. I apologize for the short notice occasioned by an unexpected interruption in my schedule. In view of the Prime Minister's reported interest in a dominion-provincial conference for the purpose of the establishment of nation-wide principles of soil, forest and water conservation and land use in Canada, would the Prime Minister inform the house of the government's intentions in this respect?


Right Hon. J. G. Diefenbaker (Prime Minister):: That matter will receive consideration in due course, Mr. Speaker. No further consideration has been given than to the extent to which reference has already been made.


URANIUM
[Stage Direction]
On the orders of the day:
Sidney Earle Smith: Mr. Speaker, on Wednesday of last week the Leader of the Opposition addressed a question to me which I took as notice, namely whether there are any negotiations under way with Japan or any other country concerning the sale of uranium and, if so, whether those negotiations are likely to be completed in the near future.


I regret the delay in answering this question occasioned by my absence from the house. We are not engaged in negotiations with Japan for the sale of uranium. I would report to the house, however, that I have been informed that Eldorado Mining and Refining Limited has completed commercial negotiations with the Federal Republic of Germany for the sale of uranium, and deliveries are now being made. Similar negotiations are also now proceeding with Switzerland for the sale of nuclear fuel elements and uranium oxide.


Lester Bowles Pearson: Did I understand my hon. friend to say that no such negotiations are being undertaken with Japan by Eldorado?


Sidney Earle Smith: My answer still stands. I said, I thought very clearly, that there are at present no negotiations with Japan.


SALT CODFISH-LOSS OF JAMAICAN MARKET
[Stage Direction]
On the orders of the day:
Hon. J. W. Pickersgill (Bonavista-Twil-lingate):: I should like to ask the Minister of Trade and Commerce what steps the government has taken to find an alternative market to the Jamaican market for salt codfish, which has been lost to Iceland. What steps are being taken to regain the Jamaican market for Canadian exports?


Hon. Gordon Churchill (Minister of Trade and Commerce):: The closest attention is being given to this problem. We are in consultation with the exporters of salt codfish, and I think it is quite possible that the market will be regained, in instances where it has been temporarily lost, and that in other cases the market will be enlarged.


COLOMBO PLAN
[Stage Direction]
On the orders of the day:
Mr. E. J. Broome (Vancouver South):: would like to address a question to the Minister of Trade and Commerce. Can the minister advise the house when the $3 million worth of fir ties authorized by the last parliament as Colombo plan aid for India are likely to go to tender, as an order of this size will be of tremendous help to the lumber industry of the west coast?


Gordon Minto Churchill: Mr. Speaker, there was some delay in getting specifications from India with regard to the supply of this material. This information has now been received and tenders will be called shortly. The contract calls for treated Douglas fir in some cases.



NATIONAL DEFENCE


[Stage Direction]
On the orders of the day:
Mr. Erhart Regier (Burnaby-Coquitlam):: Mr. Speaker, I should like to direct a question to the Minister of National Defence. In view of the exchange the other day between the Prime Minister and the Leader of the Opposition with respect to whether or not planes over Canadian skies are equipped with nuclear weapons, and the announcement by the Prime Minister that each and every flight carrying nuclear weapons must obtain special permission from the government of Canada, is the minister able to inform the house and the country what is the value to Canada of the so-called instant retaliation policy of having at all times as many as 1,000 planes in the air, as announced by NORAD and SAC authorities?


Hon. G. R. Pearkes (Minister of National Defence):: Mr. Speaker, I am not prepared to accept the statement by the hon. member that there is any definite number of planes in the air at any time. I have not seen that statement. Obviously co-operation with the United States contributes toward a deterrent which prevents war, and that is of value to Canada and the whole world.


Erhart Regier: Mr. Speaker, may I ask the minister if he would explain to the house what the purpose is in having a constant number of planes in the air if they are not equipped with the most modern weapons? Obviously they are so equipped.


Mr. Speaker:: The hon. member's question, it seems to me, is what I was afraid would follow his first question. His first question really asked for an opinion, and from the second question it appears to me that this is developing into an argument. However, I will permit the minister to answer if he wishes.



INVERNESS


[Stage Direction]
On the orders of the day:
Hédard-J. Robichaud: May I
direct a question to the Minister of Mines and Technical Surveys. Has the dominion coal board taken any steps to regain markets lost to the Inverness coal area as a result of the closing of the power plant operated by the province of Nova Scotia at Inverness?


Hon. Paul Comtois (Minister of Mines and Technical Surveys):: We are naturally considering the matter.
Interest Act


Hédard-J. Robichaud: May I ask a supplementary question that could be answered by either the Minister of Mines and Technical Surveys or the Minister of Northern Affairs and National Resources. Has the minister held any discussions with the government of Nova Scotia with a view to incorporating this Inverness plant into the maritime power program initiated last year?


Hon. Alvin Hamilton (Minister of Northern Affairs and National Resources):: I shall have to take that question as notice, Mr. Speaker.



BEAUCE, QUE.-STATEMENT AS TO FEDERAL ASSISTANCE

[Stage Direction]
On the orders of the day:
Hon. Howard C. Green (Minister of Public Works):: Yesterday the hon. member for Beauce asked me this question:
Mr. Speaker, has the Minister of Public Works received any request from the provincial government of Quebec seeking financial help for the people of Beauceville who suffered grievous losses last December because of the flooding of the river?
The answer to that question is no.
(Translation):



INQUIRY AS TO SYSTEM OF SIMULTANEOUS TRANSLATION

Mr. Samuel Boulanger (Drummond-Arthabaska):: Mr. Speaker, I should like to address a question to the Secretary of State. Can he tell us where matters stand as regards the installation of a simultaneous translation system in the House of Commons?


Hon. Henri Couriemanche (Secretary of State):: I understand that the leader
of the house will very shortly make a statement on the matter.
(Text):



INTEREST ACT


Mr. Hazen Argue (Assiniboia) moved: the second reading of Bill No. C-4, to amend the Interest Act.
He said: Mr. Speaker, the purpose of this bill is to place a limit of 12 per cent per year on the interest rates which may be charged in this country. The bill as it is drafted would control interest rates and charges of all kinds levied in any transaction whatever in

Interest Act
Canada except those otherwise already limited by parliament. The bill is in the following terms:
1. Section 2 of the Interest Act is repealed and the following substituted therefor:
"2. Except as otherwise provided by this or by any other act of parliament no person may stipulate, allow or exact on any contract or agreement whatsoever, a rate of interest in excess of twelve per cent per annum, whether it is called interest or is claimed as a discount, deduction from advance, commission, brokerage, chattel mortgage fees, or recording fees, or is claimed as fines, penalties or charges for inquiries, default or renewals or otherwise-"
And so on. There is a great problem in this country which is caused and aggravated by the very high interest rates charged by many business firms in their credit transactions. The bank interest rate is limited to 6 per cent and the rate on loans made by small loans companies is limited if they are for $1,500 or less, but generally speaking, outside of these two fields there is no law governing interest rates.
Small loans companies making loans in excess of $1,500 and companies providing instalment credit frequently charge rates which are fabulously high. An interest rate of 20 per cent is quite common. I know of instances where interest rates charged by so-called reputable firms have gone as high as 54 per cent per annum. I refer, to charges made by such large firms as Simpsons-Sears and Eaton's. In their so-called budget plans and instalment credit their rates vary anywhere from a minimum of approximately 10 per cent per annum up to a maximum of 54 per cent per annum on the smallest purchase.
We have had a great deal of discussion in this general field in recent years. A few years ago I introduced a bill similar to the one now being debated. That bill received a good deal of attention in this house and throughout the country. The mail which members received from people supporting that bill was substantial, and I think almost without exception the Canadian people believe that interest rates of 20, 25 and 30 per cent per annum are higher than should be allowed.
It might be said that people should not borrow money if the rates go up that high,
I remember in a previous session when I was discussing this subject a Liberal member said that as far as he was concerned it was perfectly all right for a company to charge 60 per cent if the borrower and the company agreed that that was a fair rate of interest.
I do not believe that is a reasonable attitude;
I think parliament itself should protect the borrower by providing a reasonable rate of interest.
I read in the press of a person who had obtained a loan from a small loans company

or a finance company for the purchase of an automobile, and the purchaser having been unable to pay one or two months' instalments the finance company had seized the automobile. Then it has attempted to collect the balance still owing after having sold the automobile at a fantastically low price-practically giving it away-and has hounded this man from one job to another, garnisheeing his wages and making it almost impossible for him to hold employment. It is up to parliament by regulation and by law to prevent this type of racketeering.


Mr. Woolliams:: May I ask the hon. member for Assiniboia a question? As the hon. member is from Saskatchewan, would he not agree that this question of seizure is a provincial matter; and if they endeavour to collect money after the article is seized, is that not also a provincial matter rather than a federal one?


Hazen Robert Argue: I would say to my learned friend that the example I was using was not an example in Saskatchewan. It was an example in the fair province of Ontario, so his question is not applicable.


Mr. Palletl:: The same thing applies in
Ontario.


Hazen Robert Argue: I would say this to the hon. member; that if people were not allowed to charge such fantastically high rates of interest we would not have this type of thing, not to the extent to which it has developed in recent years.
I do not think it can be successfully argued that a rate of interest should be in excess of 12 per cent per annum. As a matter of fact I think 12 per cent is itself rather high, but I have placed the ceiling in that amount in order to appeal to hon. members to do something about this problem. I have known of instances where a member has moved a motion, stating precisely what he thought might be done or should be done; that in a case like this, let us say, the limitation should be 6 per cent per annum. Then some hon. members will say, "Well, that is a little too low. If you had just gone a wee bit higher we would have supported it." So what I am asking in this bill is very moderate. This is a very modest provision, and it is certainly the minimum limitation that should be provided.
I realize, of course, that credit unions in our country, which operate without profit, do so in many cases with an interest rate of approximately 12 per cent per annum. Since credit unions are non-profit organizations I feel that it might not be wise, certainly at this time, to ask that these rates be reduced by law.

We have, as I have said, had some experience in this field, when the previous government presented a bill to the house to limit the rates of interest which might be charged by small loans companies in this country. Before that bill was made law the only limitation on interest rates under the Small Loans Act was a limitation to 2 per cent per month on loans up to $500. With the amendment that was passed by parliament in 1956 the limitation is 2 per cent per month on loans up to $300, 1 per cent per month on the unpaid balance from $300 to $1,000, and one-half of 1 per cent per month on the unpaid balance above $1,000 but less than $1,500. This reduces the effective rate to 1.48 per cent per month on loans of $1,000 and to 1.27 per cent per month on loans of $1,500.
These are, I think, very substantial interest rates, and they should be still further reduced. The small loans companies are allowed by the law of this country to charge any rates they see fit on loans in amounts greater than $1,500; and I am informed, I think reliably, that the small loans companies in Canada at this time are charging an interest rate in the neighbourhood of 2 per cent per month on loans in excess of $1,500. While we may think that parliament has already dealt substantially with the field of small loans, we find that these companies are still charging a high rate of interest. The small loans companies who are carrying on this kind of business use high pressure advertising. They use a great deal more advertising than do the banks, advertising on a so-called personal basis: "Come and see your pal in such and such a finance company office. Get a loan on a personal basis. Consolidate your debts. You won't have any more worries if you just come and see us."
I received an advertisement in the mail the other day, sent to my Ottawa address, which reads as follows: "We will lend you up to $3,000 to consolidate your debts". I do not know if this went to everybody, or if it just went to people to whom it might apply. I was almost tempted to take advantage of the offer. It said: "Why not call me and have a chat about it in a nice friendly atmosphere". Then followed "yours truly", and the name of the manager of a certain finance company in the city of Ottawa.
I am sure that a good many people who are in debt and who might perhaps find it advisable to consolidate their debts will be tempted to go to this company, get a loan, and pay an interest rate of 2 per cent per month or something very close to that amount. The history of loans made in this field shows that thousands upon thousands of Canadians, once they get into the clutches
Interest Act
of these small loans companies, these finance companies, seldom get out of them. One of my colleagues suggests that over half of them never do so. I maintain that it is a blot on democracy for our parliament to allow interest rates such as are being exacted today in many instances.
When the bill about which I spoke previously was before the banking and commerce committee there appeared before the committee, or sat in on its discussions, about 50 men who were representatives of small loans companies. The former member for Saskatoon called them "the men in grey suits". They had their witnesses before the committee, and these witnesses said that if the legislation before the committee was passed it would impose a great hardship on the small loans companies. They almost wept before that committee, and they got a lot of sympathy from members of the Conservative party and from some members of the Liberal party who served on that committee. Indeed they almost convinced me that if we passed this legislation which had been referred to us they would all be out of business and the poor people whom they had been helping out of the generosity of their hearts they claimed would be forced into the hands of loan sharks and vultures who would charge even higher rates.
However, the law has been on the statute books since that time, and the companies are not out of business; they are not doing less business, and they are not making less profit. They are making more profit.


An hon. Member:: Are they paying taxes?


Hazen Robert Argue: I should hope so. You had better discuss that with your Minister of National Revenue. Does the hon. member suggest that we should allow the ordinary working men and women of this country to pay interest rates of 20 or 30 per cent to these loan sharks so they can pay some money into the federal treasury by way of income tax? I hardly think that is a tenable proposition.
The profits made in 1956 by the small loans companies, the companies which report to the superintendent of insurance, totalled $5.4 million. In the following year they were up to $7.4 million, an increase of 37 per cent.
In the field of instalment credit to which this bill would apply, the bank of Canada statistical summary of April 1958 shows that on December 31, 1957 the total amount of finance company and retail dealer credit extended to consumers outstanding at that time was $1,974 million. In spite of the so-called tight money policy of which we have all heard this was some $64 million higher than the amount outstanding one year earlier.

Interest Act
A very large item under the heading of instalment finance companies amounted on December 31, 1957, to $779 million. Of this amount, $639 million was for the purchase of automobiles. On December 31, 1956, that is the year before, the outstanding amount of credit extended by instalment finance companies was $756 million.
I have looked over the contracts drawn up by a number of finance companies providing money for the purchase of automobiles, and their interest rates range between 18 per cent and 22 per cent. This bill as now drafted would reduce the charges that might be made by these companies. It would apply to the small loans companies on all loans they make in excess of $1,500. It would apply also to department store conditional sales contracts, which on December 31, 1957 amounted to $173 million, an increase from $27 million in 1951, six years earlier. It would apply to other department store credit outstanding in the amount of $89 million on December 31, 1957, up from $51 million on December 31, 1951. It would apply to other retail dealers' instalment credit, standing at $267 million compared with $96 million six years previously. It would apply to other retail dealers' charge accounts, standing at $304 million at the end of 1957 compared with $232 million six years previously.
The total outstanding credits in the fields I have mentioned amounted to $706 million on December 31, 1951, and had increased to $1,974 million by December 31, 1957, an increase during this period of $1,268 million or about 180 per cent. I am not in a position to say how much money the present proposals would save the people of Canada, but if we were to assume that it would lead to a saving of only 5 per cent on these various items I have listed it would amount to a saving of as much as $100 million a year.
I think the federal department of insurance, staffed by a group of able men, conscientious civil servants, have done an excellent job of enforcing the law of this country as it applies to small loans companies. I should like to see the law changed and the authority and responsibility of these people increased so they could use their talents to protect borrowers in this country, no matter what type of loan they might obtain or what type of credit they might receive.
Second mortgage financing is a field in which high rates of interest are charged. The other day the hon. member for Vancouver East referred to the extremely high rates that are being charged on second mortgages on homes that are being built or have been built. He listed some of these rates, which are to be found at page 149 of Hansard:

A person wants $3,000 and will pay a bonus of $1,000. He will sign a mortgage for $4,000 but only receive the $3,000. The net yield in this case works out at 151 per cent. One person wants $1,150, will sign a mortgage for $1,500, and the yield in this case works out to 181 per cent. . . . A person wants $600 to complete a small home. He will sign a mortgage for $750, and the yield works out at 25 per cent.
Surely an interest rate of 25 per cent should be illegal in our country. A person who needs $600 to complete a small home should not be saddled with a debt on which he must pay interest of 25 per cent. I do not think the legislation that I am suggesting will cripple the lending institutions. I do not think it is something that will curtail their business. In an expanding economy like that of Canada I doubt whether it would even curtail their profits to the point of reducing the total profits they now make, but it would certainly slow down their rate of profit and would stop them from gouging these profits from the ordinary Canadian.


Mr. McGee:: Would the hon. member
permit a question?


Hazen Robert Argue: Yes.


Frank Charles McGee: I am trying to follow the
pattern of the hon. member's argument. I heard him quote a figure of approximately $2 billion in total loans in a given year. Is that correct?


Hazen Robert Argue: It is correct. It is not just loans; it is outstanding credit of all kinds in this general field.


Frank Charles McGee: As to the profits which you
quoted from a newspaper, was it net profits you were quoting of $5 million?


Hazen Robert Argue: Yes; for small loans companies.


Frank Charles McGee: Is it fair to assume or to infer from your statement that the net profits being derived by these companies from operations in the lending of $2 billion is $5 million?


Hazen Robert Argue: Oh, no. Apparently I have not made myself clear. The profit figures I quoted are only the profits, according to an article in the most recent issue of the Financial Post, made by the small loans companies, and defined as those small loans companies that report to the superintendent of insurance.


William Moore Benidickson: But we are not debating
the Small Loans Act.


Hazen Robert Argue: I do not think I can answer
two questions at once. Hence those are not the total profits that accrue from the $1,974 million that I have referred to. This is all the credit, the total outstanding credit-not related to any individual company-that appears in the Bank of Canada statistical

summary for April, 1958, and points out the general size of the field to which this kind of legislation would apply.
My friend the hon. member for Kenora-Rainy River says we are not debating the small loans companies.


William Moore Benidickson: At the moment.


Hazen Robert Argue: That is partly correct, but this bill would affect small loans companies because it would prevent them from charging a rate of interest higher than 12 per cent on loans they make in excess of $1,500. It is true that it does not apply to the rates that are now governed by other statutes.


Mr. McCleave:: Are not small loans governed by other statutes?


Hazen Robert Argue: Yes; up to $1,500. But if you borrow $1,501 there is no law as to the rate they can charge. While I have not had any legal training, I am assured that this bill, in the way it has been drafted, would govern the rates that are charged by such small loans companies on loans of $1,501 and above that amount.


Frank Charles McGee: It is not my intention to interrupt the development of the hon. member's argument. I am simply trying to find out the gross amount in dollars and cents on which this $5 million represents a profit, in order to infer from the argument made just what the percentage is in other cases.


Hazen Robert Argue: I have not that report with me and I cannot offhand give the hon. member an answer to his question as to the rate of profit this involves or stipulates, but I can say that it is an extremely handsome rate.


Frank Charles McGee: Can the hon. member say what it is, approximately?


Hazen Robert Argue: No, I would not want to put on the record a figure that I could not substantiate. But I know that evidence before the banking and commerce committee showed that many of these companies have made rather fantastic and fabulous profits in recent years. What I was saying was this. In spite of the crocodile tears they shed because that legislation was being passed, nevertheless in the intervening years their profits have increased by 37 per cent.
Mr. Speaker, these very high interest charges that are now being made in the field of instalment credit are not being made, generally speaking, by the ordinary businessman in this country. They are not being made by the independent merchant who cannot operate in the field of instalment credit. As a matter of fact, instalment credit generally, together with the very high rates
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that are charged, make it most difficult for many ordinary businessmen to compete. I am suggesting that the passage of this bill would not only help the ordinary citizen of this country who must obtain credit-and I think that is the majority of our citizens- but would help the small independent businessman to compete in a normal way.
I remember that the former hon. member for Nanaimo Mr. Colin Cameron placed on record an instance that had been related to him, of a company that did not want to sell on a cash basis but wanted to sell everything on a credit basis, because by selling on a credit basis its very high interest charges made large profits for the company. We know the way in which this field is being promoted and encouraged by advertisements saying to come and buy a certain article with no down payment, or a dollar down and a dollar a week. This is not a saving for the ordinary people. This is a means used by these companies to promote large sales, expand their business and make for themselves an extremely large profit from the fabulous interest rates that are being charged.
Mr. Speaker, I move this bill, in the hope that it will receive a good deal of support from members in all parts of this house. I would hope that members of the Conservative party might support it. I would hope that members of the Liberal party might support it. I know the members of the C.C.F. party will support it. If the house is unable or unwilling to pass this bill at this time I would suggest that the bill or the subject matter of the bill be referred to a committee, perhaps the banking and commerce committee, in order that this whole matter may be looked into.
From the study I have made, from the evidence placed before the banking and commerce committee in 1956, I am convinced that in this general field there is a preponderance of evidence indicating that action should be taken to control these interest rates. I ask hon. members to look at this question not on a party basis but on the merits of the case itself. There should be a limit to interest rates. I do not think it would prevent credit in this field; I do not think it would curtail credit.
However, I do think the government should give consideration to sources of credit other than those that exist today. I would like to see the chartered banks develop the small loans field. The annual report of the Bank of Canada suggests that when banks have restricted loans it was very often the small borrower who suffered first. I should like to see a monetary policy in this country under which the people could obtain credit

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at a reasonable rate of interest. If the chartered banks are unwilling to develop the small loans field-and only one of the banks has been really active in this field over the years-I would suggest that the government might consider discussing the question with the credit unions of this country, to see whether some method cannot be worked out to have credit unions expand their activities and occupy at least a substantial part of the area that is not now occupied by the chartered banks.
Although I know the government is not inclined to believe in public ownership, I suggest this particular field, the field of chartered banks, is a place where a publicly owned bank could operate most effectively. We have had the publicly owned industrial development bank operating successfully in the field of larger loans. I would suggest that now is the time the government should consider a publicly owned series of chartered banks to provide more competition, if this be the only means of prodding and spurring the chartered banks of Canada into the small loans field at current bank interest rates.
In conclusion, Mr. Speaker, I suggest that in the interests of the ordinary Canadian this is a problem that should be considered by parliament. It should be acted upon at this time. If hon. members are unwilling to act on this question today I suggest that the whole matter be referred to a committee of this house, where I am confident action will be forthcoming; because the evidence that would be placed before that committee would leave parliament no other alternative.


Mr. Drysdale:: Would the hon. member permit a question? There is one thing that confuses me a little in your reasoning, in the sense that you say there should be a flat rate of 12 per cent. Yet you refer to Simpsons-Sears, and I notice from their previous reports they have apparently had-


Mr. Speaker:: Order. I do not want to interrupt the hon. member, but perhaps I should remind him that his remarks should be addressed to the chair and not the member who has the floor.


John Andrew W. Drysdale: Let me direct a question to the hon. member through you, Mr. Speaker. The hon. member said that in 1956 and 1957 Simpsons-Sears had charged an interest rate of 54 per cent, and that these rates ranged down to approximately 15 per cent. He referred to the Small Loans Act which suggests a rate of 2 per cent for $300, going down to 1-2 per cent. Well, in this particular legislation he has introduced he establishes the flat

rate of 12 per cent. It seems to me the hon. member is discriminating against anybody taking out a large loan, because there the proportion would be down to 3 per cent. I would appreciate the hon. member's comments on that.


Hazen Robert Argue: Perhaps I was misunderstood. The effect of this bill is to place a ceiling on the interest rates that may be charged. It in no way interferes with the right of a company or individual to extend credit at a lower rate. This is merely a measure to reduce all those rates that are today in excess of 12 per cent per year, and that is a very substantial field in itself.


John Andrew W. Drysdale: Will the hon. member permit a supplementary question? Since he has taken the premise that various loan companies are avaricious in nature, how does he assume there will be any rate below the 12 per cent? Although he has stated that he assumes 12 per cent is a reasonable amount, yet he says the finance companies have been making tremendous profits. He has not substantiated the statement with any ratio as to whether the percentage of profit is 10, 12 or 15. He has used such words as fantastic and fabulous, which mean absolutely nothing. How would the hon. member answer that?


Hazen Robert Argue: I suggest that the hon. member might make his speech in one entity instead of splitting it in two parts, as apparently he has now done.


John Andrew W. Drysdale: I do not think you answered the question.


Mr. Caron:: Can the hon. member clarify something for me with respect to the ninth line of the bill and the 12 per cent per annum? I find these words:
-whether It is called interest or is claimed as a discount, deduction from advance, commission, brokerage, chattel mortgage fees-
Does this mean that if the rate is set at 12 per cent a lawyer in other provinces, or a notary in the province of Quebec who obtains money for a client would not be entitled to his brokerage or his commission on that money?


Hazen Robert Argue: If I might explain, Mr. Speaker, this terminology is taken from the statutes now in effect in relation to other charges that may be made, and I do not think I am in a position to give a legal opinion on this question. The bill has been drafted by the law officers of the House of Commons. The purpose of this section is to prevent anyone from charging by some back door method or some back door entitlement something that is in fact an interest charge. I would say to my hon. friend that if what he suggests

is not an interest charge, if what he suggests is a proper charge in a transaction, he has nothing to fear. All I can say is that I have confidence in the officers who have assisted me in drafting this bill. It says what it is intended to do, to prevent interest charges being greater than 12 per cent.


Mr. Chown:: May I ask a question? How does this affect the mortgage bonuses being taken into the principle of the mortgage loans?


Hazen Robert Argue: This clause reads:
Except as otherwise provided by this or by any other act of parliament . . .
If there were another act of parliament limiting interest rates on second mortgages this would not apply, but since that is not the case this bill would limit interest on second mortgages to 12 per cent.


Gordon Campbell Chown: Mr
Speaker, perhaps the hon. member for Assini-boia would permit me on first rising in the house in the twenty-fourth parliament to offer a few felicitations. I did not have the opportunity during the twenty-third parliament to express to you how the high opinion of the dean of the Manitoba law school, for example, a good friend of yours, had been verified in the dignified way in which you took on your heavy responsibilities as the first officer of this house, or to say to you how delighted I was to find as your deputy such an outstanding member as the one who has now risen, with the congratulations of all of us, to his present cabinet post as Secretary of State (Mr. Courtemanche).
With regard to that elevation may I point out that a member of the Department of the Secretary of State with whom I had lunch yesterday deplored the fact that they had lost their fair lady to the Department of Citizenship and Immigration. It was a most genuine expression of affection for someone who had stepped into that department and for the first time in many years had given it a dignity, purpose, meaning and humanity that had not been experienced under previous ministers.


Mr. Speaker:: If the hon. member has
finished his felicitations perhaps he would permit me to thank him for my part of them and to express the hope that he is not setting a precedent for others in this debate. After all, this is a discussion of the principle of a bill to amend the Interest Act and those members who have brought it forward are entitled to have all the time available devoted to its discussion.


Mr. Martin (Essex East):: Mr. Speaker, may I say something not in defence of yourself but in appreciation of the position in which the
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hon. member finds himself in speaking for the first time. I can understand how it is possibly embarrassing for Your Honour to be continually receiving tributes that are so well deserved, but as one member of the house I should think under the circumstances the kind of action in which the hon. member is now engaged could be regarded by Your Honour as within the traditions of the house.


Mr. Speaker:: I, of course, am only here to give effect to the will of the house, and if that is its will, very well.


William Moore Benidickson: It was receiving unanimous consent.


Mr. Speaker:: However, may I say that I too appreciate the difficulty of members who did not have the opportunity to speak in the twenty-third parliament. The precedents indicate that when they make their maiden speeches in the next parliament they are not maiden speeches notwithstanding the fact they did not have an opportunity to speak before, and that therefore they are not entitled to the latitude which is extended in such cases. However, I think if we are guided by reason and discretion in these matters we will not have any trouble.


Gordon Campbell Chown: I want to express my appreciation, sir, to the hon. member for Essex East for rising to defend my opening remarks as far as they have gone. Perhaps I should reserve the rest of my bouquets until some other more appropriate occasion, possibly the budget debate.
We have had a bill presented to the house this afternoon which in my opinion endeavours to destroy a healthy enterprise generally supported across the entire nation by the Canadian people. Such action is completely in line with the history of the C.C.F. party or group or whatever they call themselves in their present situation. It is completely in line with their history and thinking on the subject of free enterprise throughout the years of their existence.
Although I do not think the condition is as widespread as the hon. member suggests, I have the greatest sympathy for members of the public who find themselves in financial difficulty and who, not having sufficient security to satisfy other lending agencies, find it necessary to take advantage of the services offered by these financial institutions.
I might point out that in our country there are no less than 150 finance houses of this nature having 550 branches, all of which, the hon. member suggests, are prospering to a degree which is working hardship on the general public. For that reason he picks a figure out of the air and suggests that a limit of 12 per cent be set on the interest

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they may charge. At the same time he points out that non-profit co-operative credit union organizations, not having the same overhead or administrative costs, find it necessary to charge as high as 12 per cent. I suggest that perhaps that is the reason he chose that figure.


Hazen Robert Argue: May I ask the hon. member a question? Is he aware that credit unions ordinarily pay a substantial rate of interest on money on deposit, much more than is paid by banks and similar depositaries? Does he not realize that credit unions are faced with the same kind of expenses as any other organization in the field of lending money, and that they also pay federal taxes?


Gordon Campbell Chown: The hon. member's point may be well taken, but the fact of the matter is that in order to make ends meet they have found it necessary to charge at times as much as 12 per cent per annum. Did the hon. member not make that statement in his remarks?


Hazen Robert Argue: Yes, some of them do. I think it is probably more prevalent in Ontario and Quebec and in the larger urban centres. The very large credit unions on the prairies charge rates equal to the normal bank rates. At those rates they make a substantial saving, or you might wish to call it a profit, the difference being that they return their profit to their customers.


Gordon Campbell Chown: Well, I can only suggest that in selecting 12 per cent the hon. member arrived at that figure because it is the maximum charged by an organization that he would support very strongly and, indeed, I would too. I welcome the news that they return a profit, and also return some revenue to the federal government.
But the fact of the matter is that credit is here to stay. Young people, unlike the older generation, have found that through the use of credit they can have immediate possession of things for which they pay over a period of time. It is often the case that these young people do not have sufficient assets or financial backing to make them a good risk for other lending institutions. This indicates that in order for the financial corporations involved in the bill to make provision for loss reserves, general overhead and advertising, which is admittedly very extensive, they must charge the interest rates they do on small loans where there is not good security and the loss ratio is reasonably substantial.


Hazen Robert Argue: May I ask the hon. member another question? Is he aware that according to the evidence given before the banking

and commerce committee the history of losses of small loans companies in this country is in the neighbourhood of .26 per cent, approximately one-quarter of one per cent?


Gordon Campbell Chown: I think that statement simply is a very good reason for the existence of these corporations-


Hazen Robert Argue: There is no risk.


Gordon Campbell Chown: -because people are willing to sign contracts and agreements of that nature.
There is another feature of this situation upon which I believe we were slightly misled by the hon. gentleman. I refer to the fact that the public, through any number of media, have been warned of the pitfalls of burdening themselves with too many of these contracts. The industry itself has put out a memorandum in which it outlines its endeavours to educate the public along lines which I shall outline from this document. The companies have tried to teach instalment buyers to first select a reliable place to make their purchases and select a reliable time-payment plan sponsor. Second, they advise the public to make sure they buy a good product that will give complete satisfaction. Next, they should compare the prices of the merchandise and compare credit prices to find out how much the service charges are going to be in addition to the price of the article. Then, they say, never sign a blank contract; read the contract before signing and make sure you get a copy. Fifth, put as large a down payment as you can possibly put on the article, and pay up the balance as quickly as you can.


Mr. Peters:: May I ask the hon. member from what he is quoting?


Gordon Campbell Chown: This is a memorandum prepared by the federated council of sales finance companies.


Mr. Martin (Timmins):: I wonder if the hon. member could tell us what circulation that memorandum has?


Gordon Campbell Chown: I am not able to answer that question. I merely picked this up from one of the other members in the house. Probably these reports were made at the time of the committee sittings which the hon. member attended in 1956.
The next bit of advice they give is not to have too much of their monthly income tied up in instalment obligations. Then they advise the public not to have too many instalment purchases going on at one time. Finally they say, if you are buying an automobile be sure to have proper insurance protection.

This is an outline of the educational program which these companies have undertaken and which, despite all the seductive advertising you read in the newspapers and hear through other media, the companies do bring to the customers. In the normal course of events these companies make an assessment of the customer's ability to repay the loan. They have at their disposal extensive services which will provide the information they require concerning the loan applicant, and if they find that any of these principles I have outlined have been contravened they will not grant the loan.
There is a situation where a borrower defaults. This again is in the area of public relations, because the alternatives open to the lending institution consist of a mortgage foreclosure; a lawsuit on a promissory note either against the principal or the endorser or both; foreclosure under a chattel mortgage or a real property mortgage; foreclosure under a conditional sales agreement, or seizure under a lien note or a chattel mortgage. In instances when any of these devices is used there is a resale of the article seized and as a rule, in the interests of public relations, these companies do not follow up with a lawsuit on the covenant of any contract if they have sustained a loss. They do this, as I said, in the interests of public relations, and because they do not want to be involved in expensive legal and court costs.
In many instances those people who have made purchases in excess of their financial ability automatically surrender the chattel concerned to these lending companies. They simply lose their equity. These are cases in which you can extend a great deal of sympathy, because usually there has been some sort of financial tragedy which has brought on the situation, and in their effort to play ball the person returns the chattel concerned.
There is another feature of this that I think bears consideration, and that is the availability of money. I should like to quote from the debate that took place on this bill last session. The hon. member for Davenport (Mr. Morton) said at page 3167 of Hansard for January 10:
In the annual commercial review of the Montreal Gazette, issued under date of January 11, 1958, there is an article containing the information that as of June 30, 1956, there was $2,315 million outstanding with respect to loans, which was a 19.6 per cent increase over the previous year and that by the following September there had been an increase of 17.3 per cent over the previous year. Then it goes on to show that in June 1957 the amount was $2,472 million which was a drop in the rate of increase in the amount of money borrowed.
It would appear from the table that the amount that is being borrowed is decreasing. That may be as a result of the present pause in the economy.
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I think that as of the end of this year, in the Financial Post of January 11, at page 25 it was estimated that the consumers will owe about $2.5 billion which is roughly the same amount as at the end of 1956. There is there shown almost the same amount being owed at this time of year as there was last year, instead of the usual increase there has been in the borrowing of our people.
The availability of money for small loans obviously does not interest our banking institutions, and for this reason these finance companies came into existence. They are providing employment for a great number of people across the land. We have heard endless comments from across the way since the opening of this session about unemployment. I believe the hon. member should have proven, by statistics, that the 12 per cent figure he recommends is capable of supporting those finance companies and keeping them on a profitable basis.
According to my figures the amount of money outstanding by way of consumer credit as of December, 1957, was $1,060 million. This would be the figure on which those companies realized the profit of $5.5 million referred to by the hon. member for Assiniboia.


Hazen Robert Argue: Not at all.


Gordon Campbell Chown: Well, I am not certain whether the figure is greater or smaller, but if the hon. member has the figure I think the house would be interested in hearing it. The information I have on this subject is that that was the amount of consumer credit outstanding as of December, 1957.


Hazen Robert Argue: I am not disputing the hon. member's figure. The total loan figure that he wants will be in the report of the superintendent of insurance in this field when it is made available. I made inquiries before coming down to the chamber but the report showing the total amount of loans has not yet been made public-the profits are available.


An hon. Member:: Is that figure available for previous years?


Hazen Robert Argue: Yes.


Gordon Campbell Chown: I do not think that any action on the part of this government should be taken without careful consideration by the private members in caucus or the Minister of Finance (Mr. Fleming), who is the minister responsible. I do not believe any measure should be brought into our legislative records without very careful study, and that is where I believe the whole argument of my hon. friend opposite falls down. He has not been able to show to this house the necessary detailed information to indicate that these

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financial corporations could be supported at an interest rate of 12 per cent and still realize a profit.


Hazen Robert Argue: The Bank of Commerce makes a profit on 10.43.


Gordon Campbell Chown: In the United States, for example, where automobiles are financed through banks, the banking institutions haye to charge an interest rate of 12 per cent in order to protect that type of investment. The indications in my community of Winnipeg South at least are that consumer buying is on the increase and may I mention as an example a wire received from the Winnipeg chamber of commerce stating that Manitoba retail sales for the week ending December 28 last were 28.1 per cent over the same week in 1956 and the week ending January 4 last showed an increase of 22.6 per cent over the same week in the previous year. My reason for reading these figures into the record is to indicate that in this time of recession every encouragement should be given to retail buying, whether on a credit or a cash basis. In my community, as indicated by the figures I have quoted, buying is on the increase and I feel no matter what one did in this particular field in connection with restrictions on interest rates, even if they were removed entirely as they exist at the present time, nothing would change in so far as credit and cash buying is concerned.
Every customer must stand on his own feet so far as his financial situation is concerned and he is only taken on as a risk if his general financial status will support that risk. I would suggest that this curtailing and this controlling of the economy by federal legislation is one of the worst things we could possibly do at this particular time and in our particular economic state.
As I said before, no one has more sympathy or compassion than I have for an individual who gets over-involved in these financial contracts at high rates of interest and then finds himself in trouble and unable to meet his obligations. But, as my hon. friend has pointed out, that is not the case in this particular instance. In many instances people go into this kind of situation with eyes open, fully cognizant of their responsibilities and the contents of the contracts they sign. There would be no sense in staying in this business enterprise if there was not a very high level of public relations, and I feel that in their own interests the finance corporations concerned have established such a high level of public relations by way of advertising and an educational program.
Another point mentioned by my friend concerns the problem of loan sharks and the

fact that if you curtail the operations of any enterprise or, in this case, curtail even further the operations of this particular enterprise, the loan shark, as we know him, will come out from under the rocks and people who are determined to raise money by means of a loan will go ahead and get one on an even more incautious basis. I am perfectly satisfied, as is my hon. friend, that there are many people-not corporations but private persons,-who are operating this kind of business on the side right across the country. It is that type of person against whom I would want to legislate if it were possible to ferret them out and in some fashion prosecute them for taking the life-blood out of people by way of shockingly high rates of interest and terribly stringent terms for borrowing.
Finally, I would recommend most strongly that this premature effort, if it is an effort at all in terms of what has been given to us by way of support for giving this bill passage through this house, should not be given that support this afternoon and, indeed, would record my stand as a vote against the bill in its present form.


Mr. C. W. Carter (Burin-Burgeo):: Mr. Speaker, on the second reading of any bill we are mainly concerned with the general principle of it, and the general principle of this bill is that a ceiling should be placed on interest rates levied by small loans companies. Whether that ceiling should be 12 per cent or 3 per cent or 15 per cent does not in any way interfere with or detract from the general principle. Actually, interest rates are supposed to be based upon the amount of risk involved, and apparently they should vary with the amount of such risk. We do know that in many cases the risk is very small in comparison with the interest rates charged, but there may be other cases where the risk would justify a high rate of interest. I do not think it is possible for us to form any clear-cut opinion as to just where the line should be drawn.
While I wish to indicate my personal support for the principle of this bill, I should also like to support the suggestion made by the mover, the hon. member for Assiniboia (Mr. Argue) that this bill be sent to a committee with power to send for persons and papers so that we may have more definite information about the size of the problem to be tackled and how far this measure may go toward the solution.
I think this course should be taken for several reasons. The first is, that it is the duty of this parliament to protect its citizens from people who may wish to take advantage of their temporary misfortunes in order to secure money in the form of interest which

would not otherwise be obtainable. I know from my personal experience that some protection is necessary.
I am familiar with a case in my own riding where a poor fisherman saved up his money and bought a truck. I am not sure what the down payment was, but it amounted to well over $1,000-all he could save. He invested this money be'cause he had an opportunity to use the truck on a road building program in his neighbourhood. The truck arrived, but when he came to use it he found it had some mechanical defect and, since there was no garage in his community able to repair it, he had to send it back to the garage from which he had bought it. All this took several weeks, because, probably he had been trying to find out what the trouble was himself, and then he had to wait for transportation. Finally he shipped the truck out and the next thing he knew, after waiting two or three weeks for this truck to come back, he received a notice that it had been repossessed. Thus this man was deprived unjustly of his savings.
I repeat that in cases such as this there is a need for protection. I should like to see a committee investigate such cases, and some of the other cases which the hon. member for Assiniboia put on record this afternoon. I think we should know exactly what is the extent of this problem.
Another reason why I think it would be worth while to study this matter in committee, is that we might have some idea of the impact of this legislation on the pattern of our economy. We all know that consumer spending has a great deal to do with the state of our economy. At the present time we are suffering from a recession because consumer spending has to a large extent fallen off. To some extent consumer spending has dwindled because of credit and instalment buying; we have reached the point where consumers have mortgaged their earnings up to two or three years into the future. This, I think, is a serious situation and it is one which we must take carefully into consideration in any studies we may make of the actions we should take if we are going to do everything possible to avoid a recurrence of depressions or recessions in the future.
The third and final reason why I believe this subject should be dealt with in committee is because of the effect of such legislation as this on small business houses as compared with large firms who are able to provide extensive instalment and credit buying facilities. We all know that the health of our economy in a free enterprise system such as ours depends on the number of small businesses, and anything we can do to protect
57071-3-55i
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them and reduce the gap between the disadvantages under which they have to work as compared with the larger institutions should be done.
For these reasons, Mr. Speaker, I hope this bill will receive serious consideration and that it will be sent to a committee where we can look into the matter more fully than would ever be possible in this chamber.


Mr. M. D. Morton (Davenport):: Mr. Speaker, I rise this afternoon to speak on this bill primarily to put on record certain statistics which may be of assistance to hon. members in dealing with this most important matter.
This is, of course, by no means a new question. Discussion as to whether interest should be charged, or what rates should be charged, has been going on since the early days of the bible. The subject has been discussed in this country at great length both before confederation and since. It appears that in the United States, in 1909, there was an investigation conducted as a result of which that country's present set of regulations was established. In 1936, in this country, after a great deal of study by those interested in government, and as a result of the report from the standing committee on banking and commerce, the present Small Loans Act came into effect in 1938 or 1939. There are now on the statute books, as we all know, the Small Loans Act, which was amended in 1956, the Pawnbrokers Act, and the Interest Act.
The bill now under discussion attempts to deal primarily with the field where loans are in excess of $1,500, and covers such subject matter as loans under contract, mortgages, chattel mortgages and conditional sales agreements which at present are not subject to a limit with regard to the amount of interest which may be charged.
In discussing these questions one should ask oneself: what is the problem involved. Our attention has, naturally, been directed to the plight of those people who have been unfortunate enough to run into debt and get into the clutches of certain unscrupulous loan sharks. But perhaps the matter goes beyond that question. In a well-meaning attempt to limit the amount of interest to be charged we might also interfere with our currency which is the life blood of our economy. I think the problem is how can one limit the interest to be charged without affecting the availability of money to those who legitimately require money, and without unduly interfering with those who legitimately wish to lend money at reasonable rates of interest. Certain comments were made at that time as to the effect of these amendments on the economy by Devon Smith, the financial editor of the Telegram.

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in his column "Its Your Business", and headed "Bootleg Money May be Poison". He said this:
In an economy where people are allowed to use their credit in order to plan and develop a satisfactory way of life this sort of regulation-
He is referring to the amendments that had been made.
-looks like a brotherly protection from the seats of the mighty.
And so it would be if a mandate from the people could reasonably be construed as a mandate from nature, including human nature.
The net result of the change appears to be a marked increase in the number of people who have fallen into the hands of unregulated lenders- loan sharks-and second mortgage lenders.
Then he says this:
The reason is not hard to find. It is simply that many finance companies cannot afford to make loans at these rates.
Then he goes on to say this:
The larger acceptance companies have to pay 52 per cent to the banks for the money they need and \ of one per cent a month adds up to only 6 per cent a year; so that they are expected to lend at a mark-up of only \ of one per cent, hardly enough to cover the cost of service.
Further on down in this article he says this:
Others who need financing in the important range between $1,000 and $1,500 are having to borrow over $1,500 in order to make a deal that is acceptable to the better class of personal lender.
Still others, less sophisticated and afraid of the size of debt rather than the terms of debt, are accepting the offers of kind benefactors who ask nothing but what amounts to 50 per cent or more interest.
It works like this. The kindly rescuer offers to tide you over with a loan against a second mortgage on your home. Of course the interest is a bit high-maybe 12 per cent-but the thing can be paid off over three years and there is ample, friendly assurance that the whole deal can be renewed.
The rub is that there is a discount; you agree to pay back $2,000 but you get only $1,300. So you really pay not 12 per cent or $240 a year on $2,000 but nearly 18j per cent on $1,300.
In addition there is the $700 you pay back but never get; that is more than 50 per cent interest by another name over the three years.
Considering the interest you're paying chances are you'll have to renew at the end of three years. So you renew say $1,500 you didn't get paid off, with a discount of one-third again.
You're then in debt for $2,350 after three years of paying high interest on a $1,300 loan.
I presume that is the type of thing that the present bill is designed to prevent. Yet it is the result of limitations of the prior act.
Of course, the illustration I think is one that points up the question of regulation versus free enterprise. How far can we regulate in a free enterprise society without having to go to the full extent of complete control? It is a conflict between those who believe that by controlling our economic life 
by legislation they can legislate away all the evils. But we cannot legislate human conduct, motives or morals. To the extent which the abuses and the injustices arise from human conduct, motives and morals such as greed and need, legislation alone cannot solve the problem. The implications are such that if money is not available then many of the firms that depend on this credit will be unable to sell their present consumer goods and that will also have an effect on the economy. It has a twofold effect of slowing up the economy if the money supply is lessened and it also drives those who are in great need into the hands of the loan sharks. In order to give some idea as to the importance of consumer credit in our economy, Mr. Speaker, if you will bear with me I should like to quote a few figures. The hon. member for Assiniboia (Mr. Argue) has already quoted some figures from the Bank of Canada report, 1957. At page 33 it states as follows:
In 1957 the net increase in credit extended to consumers by finance companies and retail dealers amounted to $66 million compared to $281 million in 1956.
That shows that the rate of increase of consumer credit is decreasing.
Of this increase in credit in 1957, $26 million was supplied by instalment finance companies, $12 million by small loan companies, $19 million by department stores, and $9 million by other retailer dealers. Except for home improvement loans which continued to rise, chartered bank personal loans declined over the year.
In the table on that same page it shows that as at the end of December, 1957, the balance outstanding in millions of dollars of loans as follows:
Instalment finance companies, $782 million; small loans companies, $368 million; department stores, $263 million; other retail dealers, $563 million; Total finance companies and retail dealers, $1,976 million.
In comparison we are given these figures for the chartered banks; loans outstanding for the same period fully secured by marketable bonds, $257 million; home improvement loans, $48 million; others, $421 million; Quebec savings banks, $13 million; life insurance companies, policy loans, $292 million.
At this stage they did not have the figures that were outstanding in respect of credit unions. That gives a fairly comprehensive picture of the consumer credit out at that time. On page 34, under the heading "Instalment Finance Companies", it goes on to say this:
The net amount of credit provided by instalment finance companies for retail financing rose by $24 million in 1957 compared to $244 million in 1956.

There was quite a drop in the rate of increase in that field.
The total amount of retail paper purchased in 1957 was less than the previous year by $73 million or 6 per cent while repayments increased by $147 million or 15 per cent. The net increase in credit outstanding on consumers' goods in 1957 amounted to $26 million compared to an increase of $157 million in 1956 . . .
The hon. member for Winnipeg South (Mr. Chown) has already set out the figures that were shown in the Montreal Gazette which I quoted last year, showing that consumer credit, although in figures there was an increase over the year before, the rate of increase had declined.
Also there are some interesting figures supplied in the report of the superintendent of insurance for Canada with respect to small loans companies and money lenders for the year 1956. As the hon. member for Assini-boia said, the recent edition is not yet ready. This edition shows that in 1956 small loans to the number of 683,898, amounting to $148,829,708, were made, which was a decrease of 51,355 from the year 1955, and a decrease of $13,878,721. The gross profit of the small loans companies in 1956 was $4,761,085, being $1,105,447 less than in 1955.
Again, I should like to quote from the Canadian Statistical Review of April, 1958, at page seven of the introduction, based on returns of 4,700 inquiries made in 1956:
Thirty per cent of all families and individuals reported that they owed instalment debt to stores and sales finance companies and 25 per cent reported charge accounts. Charge account debt was much smaller than instalment debt, the average for those reporting debt being $126 compared with $461 for instalment debt. The largest percentage of families and individuals having instalment debt was found in the income group $3,000 to $4,000. The frequency of bank debt increased with income. For those whose incomes were under $1,000, the proportion indebted to banks was negligible. But at the other end of the income scale, over $10,000, about 22 per cent were so indebted and where bank debt was owed the average debt was about $8,300. Only about 10 per cent of all the families and individuals had a bank debt.
As is to be expected, both the frequency and the size of mortgage diminished with age. Fifty-three per cent of all home owners had no mortgage but only 27 per cent of those under 40 were in this situation, which compares with 86 per cent of those over 65. Those of the younger home owners who were indebted had an average debt of $5,634 while the older home owners had an average debt of $3,182.
The frequency of home-ownership increased as income rose. About 55 per cent of all families and individuals owned their own homes, the proportion rising from 41 per cent for those whose incomes were under $1,000 to 86 per cent of those at the top of the income scale. However, those in the lowest income brackets were more often free of mortgages than those of the minimum and upper income group, presumably because they included more older people who had had time to pay off indebtedness. Only 45 per cent of those
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wit.r incomes over $10,000 had no mortgage indebtedness, but 86 per cent of those with incomes of less than $1,000 were in this situation. Mortgage indebtedness was most common in the income group $4,000 to $5,000.
That gives us a fairly comprehensive idea of the effect of lending in our economy. As to the occupation of those obtaining the loans, let me give an idea of how it affects a crosssection of our economy. I am going to quote from the brief presented to the banking and commerce committee of the House of Commons by the Canadian consumer loan association in 1956. On page 12 of that report we find a breakdown of the classification of the various borrowers as of the end of 1954. Under the heading "Loans classified by occupation of borrowers" we find the following: craftsmen, foremen and kindred workers, 30.21 per cent of the loans raised or outstanding at that time; operatives and kindred workers, 21.60 per cent; clerical and kindred workers, 10.57 per cent; labourers, excluding farm, 8.82 per cent; service workers, 5.03 per cent; sales persons, 3.99 per cent; protective service workers, 3.86 per cent; members of armed forces, 3.81 per cent; proprietors, managers, and officials, excluding farm, 3.46 per cent; professional and semiprofessional workers, 2.84 per cent; pensions or independent incomes, 2.62 per cent; farmers and farm managers, 2.22 per cent; school teachers, .64 per cent; farm labourers and foremen, .23 per cent; occupation not reported, .10 per cent.
It is also interesting to see the purpose of those loans, as set out on page 13 of the same report. To consolidate overdue bills tops the list, amounting to 21.79 per cent; medical, dental and hospital bills, 12.90 per cent, and so on down the line.
Then, on page 14 of the same report, table 7, we see that the bulk of the loans are obtained by those who earn $200.01 to $300 a month, consisting of 46.20 per cent of the total loans made. The second largest group consists of those who receive $100.01 to $200 a month, being a percentage of 22.74. The third largest group are those who made $300.01 to $400, consisting of 18.49 per cent of the loans. The average monthly income of borrowers was $270; the average loan was $224; the average required monthy payment, including principal and interest, amounted to $18 55; the average per cent of borrower's income required for monthly payment amounted to 6.9 per cent.
With that background, let us look at the problems that cause those borrowers to get into difficulties. We have noted that the main reason for obtaining a loan is to consolidate overdue bills. That means that over a period

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of years many people, as a result of misfortune, sickness, accident, death in the family or perhaps mismanagement of their funds, have found themselves in debt and have had to consolidate their debts by borrowing from these companies. Straight medical and hospital bills have been the reason for borrowing in the case of 12.9 per cent. Taking the various factors involved in maintaining a home, rent or mortgage payments, we find that nearly 30 per cent of the moneys borrowed was for the upkeep of homes. In addition, people out of work naturally get into difficulties and fall behind in their payments. Therefore they go to these companies when they cannot turn to friends for a loan.
Many have mortgages on their homes of such a size that they cannot secure additional mortgage money. Therefore if they do not have the kind of security that would enable them to get a loan from a lending institution such as a bank they must turn to these loan companies. If they cannot get sufficient money from a loan company or cannot obtain a loan they are then in desperate straits and fall into the hands of the loan sharks. Therefore it is important that a legitimate type of institution should be available in order that such people may obtain loans.
Last year I referred to a situation that I know is found in the Toronto area and I imagine in other metropolitan centres. It has to do with second and third mortgages and the situation will have to be faced. Because of the high rents that many young and middle aged couples have to pay they find it more economical at the present time to buy homes. They may not know too much about mortgages and so have bought homes not only with two mortgages but in some cases three. Some of these mortgages come due in two, three or four years. Perhaps these people were misled by the agent concerned or just did not realize that at the end of that period these mortgages could not be renewed without paying a sizeable bonus equal to, if not greater than the amount of principal they have paid since taking over the house. The result is they find themselves deeper and deeper in debt.
Many of these people have had to give up their homes. Many have had to sell and try to get out the best way they could. Some have just handed their homes over to the second or third mortgagee, as the case may be, and have tried to get a release from their covenant, if any. This problem is going to increase within the next two or three years because a great number of people have been enticed to buy homes under such conditions. The principle of the bill now before us would be a protection to these people in such cases.

I should like to put on the record some figures as to the costs and profits of these loan companies. I have here the report of the superintendent of insurance for Canada dealing with small loans companies and money lenders for the year ended December 31, 1956. Perhaps it might be interesting to take the four large loan companies and compare the balances of loans outstanding with the amount of money they have to borrow. As found on page 13 of the report, we see that in the case of Beneficial Finance Company balances of small loans amounted to $17,754,341. Balances of large loans amounted to $61,548,152 and balances of conditional sales	agreements and	other	contracts
amounted to $2,062,339.
On the other hand, they borrowed $57,463,530 and had to pay taxes amounting to $1,715,836. Interest paid on borrowed money for small loans amounted to $712,139 and $1,843,077 for other loans. Their gross profit for the year before taxes was $1,061,238 on small loans and $4,770,997 on other loans. One could give similar figures for the other three companies and show the profit that is made by them.
In a brief prepared by Household Finance Corporation of Canada for study by the council for social service of the Anglican synod of Nova Scotia and Prince Edward Island the corporation put forward its argument as to the rate of interest and the problems they encounter in lending money. On page 6 of the brief I find the following:
An institution which could profitably make loans of say $12,000 at 6 per cent per annum would find that it could not profitably make loans of say $200 at the same rate. This follows because it would require 60 times the amount of time and effort to lend $12,000 in $200 loans as would be required to lend the same amount in one loan. Obviously the small loans must be at a much higher rate.
The banking and commerce committee of the 1938 House of Commons whose report formed the basis for the Small Loans Act, recognized this fact and expressed it in the following words:
"Quite obviously the purchase of a block of 12-year Canadian government bonds requires little expenditure for investigation and none for supervision; investments in 50 farm mortgages for varied periods entail considerable cost both for investigation and supervision; while the investigation of 1,000 applications to effect loans to 500 people for a few months with meticulous supervision becomes expensive business when expressed as a percentage rate of $100 on a monthly basis".
Now, on page 8 and 9 of that brief, there
is the following:
The rates in force in Canada at the present time were stated previously in the section entitled "Small Loans Act". In Order to show what these rates mean as applied to particular loan sizes the following examples are cited;

Interest Act
Amount of Loan	Rates (Small Loans Act)	Rate per Month	Rate per Annum	Lenders Gross Revenue per $100 loaned per year$ 300	2%	2%	24 %	$13.48$ 500	2% to $300 1%, $301-$500	*1.81%	21.72%	$12.15$1,000	2% to $300 1%, $301-$1,000	*1.48%	17.76%	$ 9.87$1,500	2% to $300 1%, $301-81,000 i%, $1,000-$1,500	*1.27%	15.24%	$ 8.44
* Average rate when loan is paid according to contract.
It would perhaps be interesting also to show the comparison of yields of the finance companies with other industries. On page 9 of the appendix to the brief submitted to the banking and commerce committee by the Canadian consumer loan association, which is an appendix made up by Price Waterhouse & Company, there is a statement showing a comparison of the yield of loan companies at that time, and then an estimate of what they expected they would get after the Small Loans Act was passed. This statement shows profits, before deducting interest on borrowed money and income taxes, expressed as a percentage of total assets, less liabilities other than borrowed money. Page 9 shows net profit, less dividends on preference stock expressed as a percentage of total assets, less liabilities including borrowed money and preference stock, that is net assets attributed to the common shares of small loans companies. It breaks down the subsidiary companies, and there are six of them, and their net profit was 25.3 per cent before the act was passed. It was estimated that their yield would be 16.36 per cent after the act had been passed. There were 59 Canadian independent companies and their profits were 9.87 per cent and it was estimated the profits would be 5.41 per cent after the act had been passed.
These yields are then compared with three banks which had a yield of 6.30 per cent; eight public utility and transportation companies which had a yield of 5.56 per cent; ten steel and construction companies with a yield of 14.32 per cent; six companies dealing in foodstuffs with a yield of 10.09 per cent; three companies dealing in beverages with a yield of 10.06 per cent; five newsprint and forest products companies with a yield of 17.17 per cent; nine petroleum companies with a yield of 11.93 per cent; thirteen base metal companies with a yield of 15.98 per cent; two
gold mines with a yield of 12.19 per cent; and seven miscellaneous companies with a yield of 14.01 per cent.


Mr. Speaker:: I am sorry to interrupt the hon. member, but I must advise him that his time has expired.


Erhart Regier: Mr. Speaker, I wish to congratulate the hon. member for Davenport (Mr. Morton), who has just taken his seat, upon the very sympathetic and analytical approach he has taken to this problem. I wish also to express my entire agreement with the views expressed by the hon. member for Burin-Burgeo (Mr. Carter) when he said the bill should be sent to a committee of this house. We, in our group, feel that the bill is a good one. However, we would be very happy indeed if a government supporter were to move that the bill be referred to a committee because we feel that any investigation the bill might undergo in the community would only help our cause.
Before I leave the hon. member for Davenport, I should like to express my appreciation for the many statistics he has supplied. I noted that he quoted at some length from the report on small loans companies for the year ending December 31, 1956. The hon. member quoted the percentages of net earnings. A great deal depends on how you approach these matters. I noticed he used the example of the Beneficial Finance Company. I remember quite well that that company was once known as the Personal Finance Company. However, perhaps they felt that, in their dealings they were rather impersonal and it would be advisable to have the name changed to the Beneficial Finance Company. I noticed that there is an actual paid-up capital of $1 million. I see that their net earnings after income tax, listed on page 15 of the report- this is on small loans- were $562,376, and on business other than small loans amounted to $2,528,858.

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In other words, there was a net return in excess of $3 million on a paid-up investment, that is on all the money the owners of the company actually ever risked, of $1 million. They had a net return, after income taxes, of over $3 million. Now if the hon. member is referring, when he gives percentages, to the volume of capital employed that of course entirely changes the picture and the net earnings in excess of 300 per cent would then be considerably reduced. However, may I remind the house that the company is an incorporated company and therefore those who have invested the million dollars are in no way personally risking any of this extra capital which they employed. I might say that most of the capital which they employed belongs, on the whole, to the common people of Canada who have life insurance savings, and who have deposits in our chartered banks. These two sources provide the main supply of working capital for these finance companies.
Before I begin to speak about my main theme I wish to pay tribute not to you, Mr. Speaker, for I hope the excellence of my argument will in itself pay tribute to you as Speaker of this house, but to our esteemed civil servant, the superintendent of insurance, Mr. K. R. MacGregor, and those officials associated with him.


Some hon. Members:: Hear, hear.


Erhart Regier: Here is a civil servant who, indeed, if he were able to do so and if he were not limited in the expression of his personal convictions by his office, could write a book based on his observations which would be of great value to the people of Canada and to this parliament in particular. A great tribute is due to this civil servant who, I believe, has been able, by the careful and conscientious carrying out of his responsibilities, to see to it that many of the excesses about which we are complaining in speaking on this bill have not been much, much worse than they actually are.
In approaching this subject, I mean to present an ethical argument in favour of the bill as well as an economic argument. We accept in this house the principle that one of the functions of government and of this House of Commons is to adopt legislation which will serve in some measure to protect the average Canadian citizen. There are a great number of precedents in support of this theory. We have federal laws limiting the activities of Canadian chartered banks in the interest of the general public; we have in our provincial statutes limitations upon the activities of credit unions; and we have federal legislation designed to protect the public in their dealings with insurance companies and so forth. I am fully aware that

we cannot legislate on human conduct or morals, to use the words of the hon. member for Davenport. However, I have always been convinced that one of the reasons for the very existence of this house is to do what we can to protect the average citizen from those of his fellows who would take advantage of him, were there not legislation in effect to prevent such circumstances.
We have had evidence presented to us on other occasions that over 50 per cent of these people who get into the clutches of professional money lenders-and I now have reference to loan companies in particular-never in their lifetimes are able to get out of those clutches. The member for Davenport has put on the record along with the member for Assiniboia (Mr. Argue) the fantastic amount of the debt owing by individual householders in this country.
Now this world of ours, made up as it is of many types of human beings, includes those people who are engaged in production and I think we all recognize that this group of people supplies the basic needs of the human race. Because of the division of labour which has come about as a result of modern development we now have a large class of people whom we might put in the service category; those who teach in our schools, members of the civil service, the man who shines our shoes and the barber who gives us a haircut, the filling station operator and so on; people whom we excuse today from the process of production because we recognize the advantage of this division of labour and prefer to let them have a share of our goods in order that we might have them render their individual services to us, making it easier for us to carry on our productive enterprises.
Unfortunately, however, since the beginning of time there has been another breed of man, an entirely different breed. There have been people who have never appreciated the ancient biblical edict that man must earn his livelihood by the sweat of his brow, but have always adopted the philosophy that they would earn their bread by the sweat of another man's brow. They have always felt it was perfectly all right that they should claw their way to success over the backs of their fellow men.
In Britain during the war I understand there were regulations in effect whereby the spivs were made to work in some useful enterprise. We ought not to have any use in a modern Christian civilization for the drones, the leeches, the parasites and those who would wax rich by taking advantage of the misfortunes of their fellow men. We have all transgressed in our lifetime but

there are two types of transgression, and I think by far the worst type which can be committed is that which violates the greatest command of the greatest teacher of them all, that we should love our fellow man as we love ourselves.
In the history of the early Christian church the practice of usury was sufficient cause for a member of that church to be expelled. I would ask: where are our modern religious teachers in the western world today? Many there are who regret much of the cynicism towards organized religion which is evolving in the west and I would say that much of that cynicism has its origin in the failure of the Christian world to condemn in no uncertain terms some of the evils which have been allowed to take root in our society.
This whole practice of excessive interest rates used to be regarded with a great deal of suspicion, even in the days when you and I, Mr. Speaker, were younger. I remember the horror expressed in my home community when it was discovered that one mortgage company had been charging 18 per cent interest. Now, however, we have reached the stage, as the member for Vancouver East (Mr. Winch) placed on record the other day, where this racketeering at the expense of our fellow men has become well-organized and has indeed almost gained a degree of respectability in our society.
I believe all of us in this house respect one great Canadian poet of the past, Robert W. Service. He had this to say, and he was referring to an interest rate of only 5 per cent. I wonder what he would have written if he had realized that some of the rates today, as I mean to place on record later, run as high as 235 per cent. But, referring to 5 per cent, he had this to say:
Because I have ten thousand pounds X sit upon my stern,
And leave my living tranquilly for other folks to earn.
And later, he goes on:
So get ten thousand pounds, my friend, in any way you can
And leave your future welfare to the noble Working Man.
. . . And though around you painful signs of industry you view,
Why should you work when you can make your money work for you?
And, Mr, Speaker, when I see the Tory party appealing to labour in this country as the great friend of the working man, I should like to remind them of what Mr. Service had to say on that score when he wrote:
So I'll get down upon my knees and bless the Working Man,
Who offers me a life of ease through all my mortal span;
Whose loins are lean to make me fat, who slaves to keep me free,
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Who dies before his prime to let me round the
century;
Whose wife and children toil in turn until their
strength is spent,
That I may live in idleness upon my Fiveper-Cent.
Enough of that.


Some hon. Members:: Hear, hear.


Hazen Robert Argue: Listen to the 5 percenters.


Erhart Regier: The risks run by these companies are very low indeed. I believe one of the hon. members who spoke before me in this debate placed on record that the losses amounted to only .26 per cent of the amount of money involved. I believe that even at the height of the depression in the hungry thirties department stores in the United States had to report that their losses were no greater than .9 of 1 per cent.
I turn now to the economic reasons why the house should give favourable consideration to the bill introduced by the hon. member for Assiniboia. Every cent, every dollar paid in interest, carrying charges, call them what you will, reduces the purchasing power of the people, and at the present time when we are so worried about how to obtain full employment, how to find markets and how to enable our people to buy some of the goods which Canadians are able to produce, I think anything which reduces the purchasing power of our people should be very carefully examined.
I had occasion last year to run into a case where a man purchased an automobile. He was short by the sum of $1600 which he proposed to repay in monthly payments slightly in excess of $70 over a two-year period. He was a smart man and he went to the bank, and the bank supplied him with the necessary funds at a total charge, including all costs, of $138. Had he not gone to the bank this man would have had to pay a finance company, according to the dealer, a gross sum of $404. In other words, this man, by going to a reputable financial institution, saved himself the sum of $266.
I wish more Canadians would place a little more reliance on the established and respected financial institutions of our country when they need credit facilities. If they did so a lot of their grief might be avoided. Most of them, I know, do not go to their banks; they do not go to the credit unions, and they do not go to their friends and relatives. They sneak off to patronize some of these shady operators instead. In this case, $266 of purchasing power was saved, or enough money to pay grocery bills for that man's family for nine weeks at least.


Mr. Chambers:: Would the hon. member permit a question? I am not sure there may not

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be some misunderstanding. Is it not true that the banks are forbidden to accept an automobile as collateral for a loan, in which case the hon. member's friend must have had some other security?


Erhart Regier: If the hon. member had been in the house a few years ago he would recall that we amended the Bank Act in order to allow the chartered banks of Canada to accept chattel mortgages, and that includes motor cars, as a security. I know that traditionally, according to banking practice, banks were not allowed to accept such security, and the hon. member is absolutely right there. However, as long ago as 1955 the chartered banks were given this right. Unfortunately, not enough of their customers have appealed to them for loans of this type.


Mr. Nesbiit:: I wonder if the hon. member would permit a further question. I have been listening to his speech with considerable interest, as I have to some of the other remarks made by previous speakers this afternoon and the question I am trying to settle in my mind is this: if the interest rate were to be reduced, as the bill provides, to 12 per cent, what would be the consequences? Credit unions, of which there are a great number in my constituency-I believe that more than 50 per cent of the people in my constituency belong to credit unions-have found that 1 per cent per month on the unpaid balance, or 12 per cent per annum, is the minimum on which they can operate, and it must be remembered that most credit unions discharge their functions without employing paid managers; it is largely voluntary work. Since they do not have any overhead charges to meet, how can the loan companies-


Hazen Robert Argue: Couldn't you get on the
Speaker's list?


Wallace Bickford (Wally) Nesbitt: -who have people to employ and salaries to pay, operate at the same rate as the credit unions?


Erhart Regier: Interest Act
Mr. Egan Chambers (St. Lawrence-Si.
George!: Mr. Speaker, I have a good deal of sympathy for the motives of the hon. member for Assiniboia (Mr. Argue) in presenting his bill, not any political motives he may have but for what he has said and what others have said in the house this afternoon regarding the protection of people, and particularly those in the lower income groups, from execessive charges when they need money. I have not so much sympathy for the bill as it appears. In the first place, I think the wording of the bill, with great respect to those who drew it up, is not in such a form as to accomplish completely the purpose the hon. member has in mind. Secondly, I question whether sufficient consideration had been given before an arbitrary figure such as 12 per cent was chosen as the maximum amount of interest chargeable in those instances.
A great deal has been said about referring this matter to a committee of the house, and I would hope that at some time a proper study of all the relative information being gathered could be undertaken. Whether actually at this session of parliament, with the very heavy schedule that has been placed before us in the speech from the throne, there is the time to undertake this study is certainly questionable and not for me to say.
Let me leave aside for a moment the matter of further consideration and speak on the bill as it appears before us. This bill deals with a very sensitive area of our economy. Some hon. members will recall that tinkering with credit can be very dangerous. The major group that would be affected by this bill is the finance companies which lend money particularly for the purchase of goods. Those loans can be broken down into a number of groups. First of all there are retail loans. Those are loans which are made when an individual wishes to buy an automobile or perhaps some other item of durable goods such as a washing machine or a refrigerator that he feels he needs.
A differentiation should be made between a person who needs to make such a purchase on credit and someone who goes to get a loan under the Small Loans Act. We have some legislation controlling the amount of interest that may be charged for loans. The principal difference between a man going for a loan and a man who wants to finance a purchase is this. Very often the man who wants a loan is in an emergency situation. As someone has pointed out he may have unexpected hospital expenses, an accident or death in the family, or something of that kind and he must have the money. Consequently, if usurious interest is charged he

may be forced by the circumstances to accept the contract and pay that interest rate. Therefore, it is right and proper that parliament has seen fit to limit the interest rate on those small loans. On the other hand, a person making a purchase is seldom in necessitous circumstances. He wants to buy something and as a general rule he has some money to put up.
Mention has been made of the no-down payment, the $1 down payment and so on. These things certainly exist. They do not exist in the majority of loans made under those financing arrangements. In most instances a reasonable down payment is required, therefore you have a man going in with some money in his pocket who is not forced to borrow money. He is not forced to buy an automobile or a refrigerator but he decides that he wants to. That being the case he has the right to shop around.
There is one thing that has not been brought up since I have been in the house, namely the fact that there are a great number of companies in this business. I believe in round numbers the figure is 150. Various retailers who want to extend credit to their customers are approached by numbers of those finance companies and the facilities of those companies are offered to them. Let us remember that today we are in a buyer's market. People are looking at the price tag and they are looking at the price tag whether they are paying cash or undertaking a contract to pay so much a month.
If we have in a town two automobile dealers, for instance, each selling the same type of automobile or a similar type of automobile, whether new or used, and one of those dealers can offer a financing plan with a lower cost than that of his competitor he is going to sell more automobiles. Therefore, the automobile dealers are looking for plans with a lower cost. At the same time the finance companies, competing as they are among themselves, are looking for business and they know that if they can offer loans to the customers or the clients of this automobile dealer at a lower cost they will get that automobile dealer's business. Therefore, it is in their interest to lower their charges to the point where they can make a reasonable return on their money but at the same time get a greater volume of business. I think this way of the operation of a free enterprise system should not be overlooked.
I mention the areas in which those finance companies operate, namely retail and wholesale. Within the retail area a rough division would be automobiles and durable goods. In the Bank of Canada statistical summary for

April, 1958, which has been referred to previously this afternoon, the paper purchased, as they call it, was broken down as between passenger cars and others. We note that the passenger cars-I am talking of the consumer goods field now-represent $730 million and the others, which I assume to mean consumer goods of the durable type, $157 million. Those figures refer to the calendar year 1957.
There has been a great deal of talk in this house about unemployment, which certainly exists, and I think it is generally recognized that on the North American continent the condition of the automobile industry has a tremendous effect on our entire economy. There has been a series of questions and answers back and forth between the hon. member for Essex East (Mr. Martin) and the government about certain statistics on the sale of automobiles. I think every member of the house feels that anything that could be done to relieve the unemployment existing in the automobile industry and put men in Windsor, Oshawa and other centres engaged in automobile manufacturing back to work would be a good thing.
I question very seriously whether we would be wise at this particular time to attack or change without great study a credit facility that in 1957 lent $730 million for the purchase of passenger cars. Bearing in mind, as I said before, that in practically all these sales there is a down payment, sometimes in the form of a used car turn-in, and the value of the automobiles purchased is certainly greater than the total of the loans. Without having any exact statistics in front of me I would imagine that at least $1 billion worth of automobiles were sold through the existence of this type of financial contract.
I think hon. members would be wise to consider very carefully whether at this stage in our economic history and with the unemployment we have any change should be made. As we know, the unemployment in the automobile industry overlaps into all sorts of secondary industries and overlaps otherwise through lack of purchasing power on the part of the workers laid off in the automobile industry or who are working reduced time. The previous speaker, the hon. member for Burnaby-Coquitlam .(Mr. Regier), expressed such great feeling for the working man or, as he described him, the poor man of this country-that is his phrase, not mine-but I was surprised that the hon. member had not thought of the adverse effect that the bill in its present form would have on men working in the automobile industry and, for that matter, in other industries such as major appliances which depend to a great extent at the present time for their retail sales on this type of financing.
Interest Act
It has not been demonstrated to me this afternoon that an alternative supply of credit is available to finance these sales nor has it been demonstrated to me that the finance companies at present in the business could continue if the bill were passed. I want to emphasize again that I think the principle of some control of what interest may be charged in cases of this sort is a good one but I also think that some protection exists under the operation of the free enterprise system in the fact that persons who seek this type of credit are not as a rule in a situation of emergency and also there is bargaining in the market.
There is another point I should like to make with regard to the way the bill is drawn. It seeks to repeal section 2 of the Interest Act and substitute the following therefor:
Except as otherwise provided by this or by any other act of parliament no person may stipulate, allow or exact on any contract or agreement whatsoever, a rate of interest in excess of 12 per cent per annum, whether it is called interest or is claimed ^ as a discount, deduction from advance, commission, brokerage, chattel mortgage fees, or recording fees, or is claimed as fines, penalties or charges for inquiries, defaults or renewals or otherwise, and whether paid to or charged by the: lender or paid to or charged by any other person and whether fixed and determined by the loan contract itself-


Mr. Speaker:: Order. I interrupt the hon. member to remind him that debate on second reading is a debate on the principle of the bill and it is not in order to discuss the clauses of the bill except in so far as it is necessary to do so to deal with the principle. The hon. member might guide himself by that. There is only one clause in the bill and he may go ahead if it is necessary to read the clause to deal with the principle.


Egan Chambers: Thank you, Mr. Speaker. It may be that I am getting into too much detail. I am afraid I should have asked your guidance before. I was going to ask how the bill as it is now worded would prevent people from charging less interest and raising their prices. It seems to me that this would be possible in selling automobiles and, as I pointed out, the sale of automobiles would probably be most greatly affected. There is a so-called list price but, as most people who have bought automobiles lately know, dealers are not insisting on the list price. If you go in and make a reasonable offer somewhere below that price you will probably be able to buy the car. If, on the other hand, the interest rate were controlled the dealers could set any price up to and including the list price and in effect include any additional charges in the sale price that the bill would hope to-get away from.

The Royal Assent
For fear I am getting away from the principle of the bill I will leave that particular subject, but I will say that if you apply this principle to the retailing of durable goods I think you would put the small store that as a rule sells its paper to these companies, thus enabling itself to provide credit, at a disadvantage vis-a-vis the large corporation which extends its own credit arrangements with loans from the bank. While the intention of the bill may be clear, we do not have fixed prices under the law. There is no law compelling the retailer to sell at this or that price and it would be difficult to prove in a court that there was an arbitrary price and a lower interest rate. I think in that respect the wording of the bill is weak.
There is another quarrel I have with the idea of setting an arbitrary percentage figure of 12 per cent. Mention has been made of the Small Loans Act.


Murdo William Martin: Would the hon.
member permit a question? I think he has referred three times now to an arbitrary figure of 12 per cent. I should like the hon. member to tell me where he got the impression that it was an arbitrary figure of 12 per cent.


Mr. Speaker:: I wonder whether the hon. member would reserve his question and allow me to interrupt now.



THE ROYAL ASSENT

Mr. Speaker:: I have the honour to inform the house that I have received the following communication:
Ottawa, June 5, 1958
Sir:
I have the honour to inform you that the Honourable Patrick Kerwin, Chief Justice of Canada, acting as Deputy of His Excellency the Governor General, will proceed to the Senate chamber today, the 5th June, at 5.45 p.m., for the purpose of giving the royal assent to a certain bill.
1 have the honour to be, sir,
Your obedient servant,
J. F. Delaute
Secretary to the Governor General (Administrative)
A message was delivered by Major C. R. Lamoureux, Gentleman Usher of the Black Rod, as follows:
Mr. Speaker, the Honourable the Deputy Governor General desires the immediate attendance of this honourable house in the chamber of the honourable the Senate.
Accordingly, Mr. Speaker with the house went up to the Senate chamber.
And being returned:
Mr. Speaker informed the house that the Deputy Governor General had been pleased

to give, in Her Majesty's name, the royal assent to the following bill:
An act for granting to Her Majesty certain sums of money for the public service of the financial year ending the 31st March, 1959.
At six o'clock the house took recess.


[Stage Direction]
AFTER RECESS

The house resumed at eight o'clock.


[Stage Direction]
The house resumed consideration of the motion of Mr. Argue for the second reading of Bill No. C-4, to amend the Interest Act.
Egan Chambers: Mr. Speaker, when the house was called to the other place I had just been asked a question by the hon. member for Timmins and before I sit down I will answer that question, but I have one or two other points to make, and perhaps I can make those now on the chance that the hon. member may return to the house before I am through.
I am in agreement with the idea of a study being made of the interest rates that should be charged in this type of business, but I do not feel that at this time the bill proposed would be in the best interests of the country.
I see that the hon. member for Timmins is back in his place. Before we rose, he asked me what I meant by referring to the figure of 12 per cent as arbitrary. I find that figure to be arbitrary in two ways. In the first place, why is it 12 per cent and not 11 per cent or 13 per cent? The hon. member who moved the bill has not persuaded me that a great deal of study or investigation went into the setting of this figure. Why does he feel that this particular percentage would allow money to be advanced with an adequate return, without an exorbitant profit, to the people involved, allowing them sufficient profit to keep in business and to keep this credit available for those who need it?
Another, and more important, consideration is that this figure ignores the fact that before the Small Loans Act was passed a good deal of investigation was carried out with regard to a graduated figure. It is obvious that a company which is financing purchases in the fields under discussion has certain charges which are more or less fixed; an investigation has to be made of the applicant's credit, there is the administrative task of setting up the loan, the cost of stationery, stenographers and so on. In addition, some reserve has to

be made for collection if that should become difficult, and these costs, it seems to me, must be more or less fixed, without regard to the size of the loan. I imagine it would cost as much to investigate a credit situation where the amount involved is a $100 as it would when the amount was $500.
When the hon. member for Burnaby-Coquitlam mentioned the very large interest figure he did, it was not, I think, really an interest rate which was involved there. There was a charge in respect of administrative costs in setting up the loan which would normally have been spread over the entire period of the loan, but in this case, where the loan ended in one month, as I understand it did, those charges-administration, credit investment and so on-had to be carried within that period. I admit that the figures quoted by the hon. member seem to be well beyond what is reasonable in the case.
If you are going to include, by definition, as interest all those charges such as credit investigation,-and that, I understand, is what this bill proopses to do-then it must be realized that the percentage of such charges in relation to a small loan must be larger than in relation to a large one. I know from my own experience as an insurance broker that it costs us as much in office administration to set up an insurance policy on which the premium might be $7.60, say, as it does to set up one on which the premium might be $100. I think this principle is recognized in the Small Loans Act, and I think it should be recognized in any bill such as we are now discussing.
I have nothing further to say. I believe I have made my position clear. I should like to congratulate the hon. member for Assini-boia for having once again directed the attention of the house to this very important subject. As I said earlier, I appreciate the motives which moved him, but I regret I am not able to support the bill because I do not feel that it would fulfil what he is trying to accomplish. However, I would support on some future occasion, when those responsible for these things think the time is appropriate, a thorough investigation of this type of credit facility in order to determine whether it is necessary to set limits upon interest rates and, if so, what those limits should be.
I have one further word to say. The hon. member for Burnaby-Coquitlam spoke before me, and I am afraid I cannot pay him the same compliment as I paid the hon. member for Assiniboia. He represents what I call the socialist doctrine of the assumption of the monopoly of virtue, and I should like to assure him that if I oppose this bill it is not,
Interest Act
as he seems to assume, because I am in the interest-earning class. I make my living, and I am interested in the welfare of Canadians who make their living, and that is why I am in this house. If I am obliged to oppose this bill it is because I do not believe it is in the interest of the people of Canada at this time.


Mr. Jacques Flynn (Quebec South):: Mr. Speaker, since I took my seat in this house I have been wondering whether, without a prepared text, I could successfully discuss any problem in English. I have decided to make the experiment tonight.
I believe that the aim of this bill is good, inasmuch as it seeks to suppress usurious rates of interest. I think the hon. member for Assiniboia (Mr. Argue) has good intentions and good motives, but I am not sure that the bill as presented would have the results he expects. I doubt that placing a ceiling of 12 per cent or any other arbitrary figure on the permissible rate of interest would achieve the end which he has in mind.
Credit, as we know it today, has not been long in existence. If we were to go back only some 50 years I think we should find that in those days only the wealthier people or the merchants were able to secure credit. Nobody could borrow to buy consumer goods. Nobody could borrow to buy automobiles, a house or ordinary things necessary for the ordinary life. When we think of the Bankruptcy Act, which is the law that was devised because of the progress of credit, we find that that act was applicable only to merchants for the very good reason that the average citizen could not find any credit. However, over the last 25 years credit has become an important business. Whereas, I would say, 50 years ago there were only a few people who could borrow and there were only a few institutions that were lending money, we now have several institutions that offer credit to the people in general.
If I take the figures given by the sponsor of the bill, we now have about $2 billion in circulation in this business of credit. As I think he mentioned in the debate which took place in 1956 on his proposed bill to amend the Small Loans Act, this figure of $2 billion had doubled in four years, something which shows that we are in a new field of economic activity with respect to credit as we know it today. The question which arises is this. Would the bill as drafted correct the situation which he has outlined? As I said before, I am not sure because many of the cases to which hon. members have referred-especially those who are in favour of this bill- are not cases of usurious rates of interest but rather cases of fraud. I was thinking of the

Interest Act
case cited by the hon. member for Burnaby-Coquitlam (Mr. Regier). He mentioned the case of a person who purchased an automobile and who was obliged to pay several hundred dollars interest on a loan of $350. I think this is a case where the law was violated. If I understand the situation rightly, according to the law as it stands now loans under $500 cannot be made at a rate of interest higher than 12 per cent.


Erhart Regier: Mr. Speaker, I am sure the hon. member would not want to get his statistics wrong. It was not an interest rate of several hundred dollars; it was an interest rate of 235 per cent.


Jacques Flynn: Yes. The hon. member mentioned 235 per cent.


Erhart Regier: Yes. I should also point out that it was a conditional sales agreement.


Mr. Deputy Speaker:: Order. The hon. member may ask the hon. member who has the floor whether he will permit him to answer his question but he may not enter into a debate with him while the hon. member is speaking.


Jacques Flynn: I understand the remarks of the hon. member. He mentioned the rate of interest of 235 per cent. But as I said, it seems to me that, under the existing laws the highest rate of interest than can be charged on a loan of less than $500 is 12 per cent unless it comes under the Small Loans Act, in which case the rate can be 24 per cent per annum. If I am correct, if the case did not come under the Small Loans Act, it came under the Money-Lenders Act, chapter 181 of the Revised Statutes of Canada, which act provides a ceiling of 12 per cent on loans below $500.
As I say, there are many cases in which the trouble is not the rate of interest but fraud; and the civil laws or the common law applicable in each province would, to my mind, cover those cases and recourse can be had to the ordinary civil remedies for such situations.
As far as the best known institutions of lending are concerned, credit is well regulated, as all hon. members know. For instance, the banks have regulations applying to the interest they can charge. There are also other lending institutions like the companies coming under the Small Loans Act, which companies are regulated by the act pertaining to them and which provides a maximum rate of interest of 24 per cent on very small loans, that is to say loans under $350.
In our statutes there are also other acts which regulate interest. An example is the Farm Improvement Loans Act which provides a ceiling of 5 J per cent interest. Similar

provisions are also to be found in the Fisheries Improvement Loans Act. In the National Housing Act the rate of interest is fixed by order in council and is not to exceed an interest rate of more than a certain percentage above the rate on government long-term bonds. Generally speaking, I would say that the recognized institutions of credit are regulated by the present provisions of the law. I would say that the effect of the bill which is now before the house would be to regulate loans of more than $500 by professional lenders or loans of more than $1,500 by small loan companies. Of course this is a field which is to my mind, extremely restricted, if we look at it from the viewpoint of the average citizen or if we want to look at it from the viewpoint of our friends of the C.C.F. with regard to the low wage earner.
It is difficult to find many cases in which a low wage earner would have to borrow sums greater than $1,500 or $500. If these people who must borrow have not been able to secure a loan from the bank, from any cooperative of the kind which was mentioned this afternoon in the debate; in fact, from the recognized credit institutions, it seems to me that they have a difficult case. If we were to put on a ceiling-I mean as long as the Small Loans Act is not amended-which would provide a lower rate of interest than the one provided in the Small Loans Act, these people would not be able to find a lender. What I mean is this. It seems to me that there would be the chance of creating a black market there. Of course, in our society of free enterprise it seems to me that there are some cases in which what would appear to be a usurious rate would not be a usurious rate because of the special circumstances applying to it.
Possibly the problem which the hon. member for Assiniboia (Mr. Argue) has in mind could be solved in this way. Maybe there could be a rule of equity which could apply to credit in some cases where definitely there has been exaggeration by the lender or where a lender may have taken advantage of a particular situation. I am quite confident that even the sponsor of the bill does not believe that this bill would obtain the result he is seeking to obtain, even if it were adopted. I am quite sure that his intention was to have a debate, and up to this point-excluding the one at present speaking-I think the contributions have been very good and helpful to the situation.
However, it seems to me that you cannot solve that problem simply by saying that there will be a ceiling of 12 per cent on all loans.
I am thinking in particular of business transactions where somebody, for instance,

will make an arrangement with someone who is willing to lend some money but where the lender would want to participate in the profit resulting from the operations of the company or of the organization and would be justified, according to the circumstances, in asking as high as 50 per cent interest. In some cases I think 50 per cent would not be a usurious rate. Of course, I know that in some cases there are abuses. But here again I think the cases which we have to complain about and which everybody-especially those who have had cases like the ones we have in our law offices-wants to correct are really cases of fraud and are really cases in which we must have recourse to the courts.
For the reasons which I have mentioned I do not think that the bill would have the desired result. Much as I sympathize with the purposes of the sponsor of the bill in desiring to correct a situation which we all want to correct, I do not think the present bill would have this result. Therefore I cannot support it.


Murdo William Martin: First of all, Mr. Speaker, I should like to congratulate the hon. member for Quebec South (Mr. Flynn) for his ability to present his arguments in this debate in a language other than his mother tongue. I envy him his ability. While I cannot agree with his arguments, still I should like to congratulate him on his ability in presenting them.
There is not too much more that I can say in this matter in addition to what has been said by my colleagues the hon. member for Assiniboia (Mr. Argue) and the hon. member for Burnaby-Coquitlam (Mr. Regier). However, there are a few remarks that I should like to make. I can assure you that my remarks on this bill will be extremely brief.
First of all, I should like to deal with some remarks made by the hon. member for Winnipeg South (Mr. Chown). I was interested in the stand he took which was to the effect that this bill could in fact destroy what he termed as a healthy enterprise. In fact, the whole tenor of his remarks was to the effect that it would severely interfere with free enterprise. I could not help being reminded of a poem by Mr. J. D. Ketchum. I should like at this time to place on Hansard a couple of verses of that poem. The poem is entitled "Hymn to the Glory of Free Enterprise". The first verse and the last verse are the two that I should like to read. I think they are extremely appropriate, having regard to the remarks of the hon. member. They are as follows:
Interest Act
Of freedom this and freedom that the drooling leftist chatters,
But freedom for Free Enterprise is all that really matters;
This freedom was ordained by God; upon it rest all others,
For man's divinest impulse is to over-reach his brothers;
And so to this celestial urge we make our offering votive;
Behind all human greatness lies the noble Profit Motive.
Then hail we now Free Enterprise,
Extol and give it praise!
In it the world's salvation lies,
Without it every freedom dies;
O glorious Free Enterprise-
The enterprise that pays! . . .
Free Enterprise does not, of course, mean actual competition,
And cutting prices-God forbid! That's treason and sedition.
A "Gentlemen's Agreement" is the best of all devices
To stabilize our dividends, our markets and our prices.
For taking risks we've little love; we set our whole affection
On something like monopoly, with adequate protection.
Then hail we now Free Enterprise,
Extol and give it praise!
In it the world's salvation lies,
Without it every freedom dies;
O glorious Free Enterprise,
0	Wonderful Free Enterprise,
O marvellous Free Enterprise-
The enterprise that pays!


Mr. Walker:: Is my hon, friend the author of those words? Is he reading a quotation or is he quoting his own composition?


Murdo William Martin: Possibly the hon. gentleman did not hear me, but I said it was a poem by Mr. J. D. Ketchum.
I was also interested in other remarks of the hon. member for Winnipeg South (Mr. Chown) who said that interest rates are high and in some instances they were justified because of the fact that the companies have to build up reserves against losses. He mentioned that those corporations take great risks. Further on in his remarks he quoted from a publication which warned the public about the perils of getting too deeply into debt. He said that these very matters were used by those business companies to warn people who came in for loans. Certainly, if the high standards that he outlined were set in all cases there would not be any risks because of the fact that a great many people could not meet those standards and consequently would not be able to obtain the loans.
1	was also interested in a remark of the hon. member for St. Lawrence-St. George (Mr. Chambers). It appeared to me that his main argument seemed to be that we could

Interest Act
not hope to maintain high sales of automobiles and other products if we interfered in any way with high rates of interest. In my opinion this is a very strange argument indeed. When one realizes that the figures placed on the record today show that there is roughly $2 billion credit in this field at the present time and that at six per cent the interest on $2 billion is $120 million a year, one can see that every one per cent we can shave off the interest rates will save the people of this country $20 million and thus add that amount to their purchasing power. At today's costs this is enough money to build 2,000 houses; enough, in fact, to buy the groceries for 1 million families for the period of one week. It was also pointed out that these companies have over 500 branch offices throughout the country and the point was made that they provide employment. I admit frankly that they may provide employment for some but in the case of a good many other people they provide "destroyment" rather than employment.
Some facts have been put on the record today about credit unions. I had the privilege of serving as treasurer-manager of a credit union from the time it started until it reached its first quarter million dollars in loans. In that length of time the loss to the credit union from uncollected debts was less than $100. I have had discussions with employees of various finance companies and I understand from them that their losses are very little higher in proportion. I have had no opportunity to verify their statements but that is what I was told.
The figure of 12 per cent mentioned in the bill as a maximum is in fact the maximum that credit unions are permited to charge their members under the law. It is not an arbitrary figure or a minimum figure; it is the maximum. They can charge less but they cannot charge more. May I say that even on that basis the credit union I was privileged to serve, in addition to providing life insurance not only on the loans but on the savings, paid in every year of the four years I was with the organization an average dividend of 5 per cent on savings and a 15 per cent rebate on interest. Therefore hon. members can very easily see that the interest rate paid by the members of the union was considerably less than 12 per cent a year.
As I understand it, the bill is intended to try to correct not only high interest charges but various other costs and charges that are made. Two or three years ago I had to do with a case where a man had purchased a car. After making allowance for his trade-in and the cash he had there was a balance of $700. He was told he would be able to finance
[Mr. Martin (Timmins) .1
the balance with monthly payments of approximately $35. Unfortunately, the man did not have too good an education and he was quite a trusting soul. He did not ask for any details. When his contract came back one week later he found that the $700 had increased to approximately $1,035.
His wife came to me with the contract asking for an explanation but I could not give one. I went to the local office of the company and after three hours of very hard work I was able to extract a breakdown of the various costs involved. Strange to say, the interest rate in this particular case was only 8 per cent but insurance charges had been added and such insurance as I had never seen before. I think the best example of all was an insurance policy they had sold him, without, of course, telling him so, which provided that if at any time he was on a trip and ran short of funds he could drop into any branch office of the company and obtain $100 for one month without interest. They sold him this insurance policy under which they would lend him money and charged him interest on the premium for that money in a way that he would not know anything about.
There was also a $10,000 life insurance policy in case he was killed driving the car before it was fully paid for. Again he knew nothing about it and there was not much danger of there being a claim against the policy. There was a happy ending to this case. When I had all the facts and figures gathered together I informed the company that I was going over to the local newspaper to purchase a half-page advertisement in order to inform the public about what was going on. I may say their public relations department took over immediately. We were able to settle the matter through a loan at the bank with no charge whatsoever.
I had another case very recently, just about two months ago, involving a man with four children a Korean veteran who had been out of work for four months. He came to me with a letter from a finance company saying that if payment was not made by four o'clock the next afternoon his furniture would be seized. I got in touch with the manager of the finance company and told him of the letter I had. I also informed him that I was delighted to have it because I was a little short of material for my television broadcast the next night. Again the public relations department took over. The man was told that as soon as he had any money he could come in any time and pay any amount he wanted to and he was assured there would be no further trouble caused by them.
The party with which I am associated has for years made its stand very clear on these

matters. We have been accused of wanting to control this and to control that. I would say that certain controls are not only sensible but very necessary. No one in this country seems to object to speed controls on our highways; why should there be no speed controls on our financial highways? The only reason I can see for imposing speed controls on . the highway is to control those who would endanger the lives and well-being of our citizens. I would say that the same principle applies with regard to finance and this control is needed to preserve the credit of the citizens of this country.
In closing I would like to mention a subject which has been referred to before and that is advertising by these various finance companies. I would say that the aim of advertising by these finance companies and general business combine to entice people to buy what they do not need with money they do not have. I should like to add my voice to those who have advocated that this particular bill be referred to a committee where it could be given the proper study and the necessary action taken.


Eldon Mattison Woolliams: Mr. Speaker, I am very happy to have this opportunity of taking part in this debate, and particularly happy that the sponsor of this bill is the hon. member for Assiniboia (Mr. Argue). In his opening remarks he mentioned that he had no legal training, but I might say that he graduated from the same university that I did in Saskatoon. I should like to pay him the compliment of saying that although he may not have been trained in the law he made a very good job of presenting the facts with reference to this bill. I hope that if I were asked to speak on the subject in which he graduated from university namely agriculture, I might do as well.
There have been a lot of remarks made during this debate about credit and interest. It does seem to me that we have wandered a long way from the point, and if the house will bear with me I should like to read section 2 of the Interest Act. I should like to say at the outset, as I will say at the conclusion that this question of interest is not an easy question because there are a number of federal statutes that govern the matter. Let us take a look at section 2 of the Interest Act which reads:
Except as otherwise provided by this or by any other act of the parliament of Canada, any person may stipulate for, allow and exact, on any contract or agreement whatsoever, any rate of interest or discount that is agreed upon.
Then, there are three other sections of the Interest Act which have some bearing. As the lawyers of this house will know, when
Interest Act
we are discussing any particular statute all the sections must sometimes be read together in order to understand the full impact of the law. We have section 3 which states:
Except as to liabilities existing immediately before the seventh day of July, 1900, whenever any interest is payable by the agreement of parties or by law, and no rate is fixed by such agreement or by law, the rate of interest shall be five per cent per annum.
Then, section 4 must be considered:
Except as to mortgages on real estate, whenever any interest is-
This also includes agreements for sale, and I shall have something to say about that later. The hon. member for Assiniboia had a lot to say about discounting agreements for sale and mortgages, but the rate of interest is generally set by terms in the agreement itself. If there is no term then the interest is set at five per cent. When we look at one of these problems there is a tendency to exaggerate the effects and we fail to look into the heart of the problem.
I should like to say, now that I have covered these particular sections of the Interest Act, that my sympathy lies in the same direction as that of the hon. member for Assiniboia, as well as other members who have- spoken. No one in this house, on whatever side of the house he may be, whether he is on the Conservative side, in the Liberal party or the C.C.F., wants to see outrageous rates of interest charged.
If one reads through the pages of Hansard since the time the first act came into existence to control rates of interest in this country he will see that members of all parties in this coifntry were in favour of controlling interest rates. But in what manner are we going to do it? Can it be done in this fashion as proposed in the amendment? Before dealing with the amendment, may I say that the person who drafted it must have checked very carefully with another act, the Small Loans Act, which covers the situation.
While I am speaking about that, what are the acts of parliament which control interest rates? First of all, there is the Interest Act itself. Secondly, there is the Small Loans Act, and I will have something to say about that later. Then we have the Bankruptcy Act and the Money-Lenders Act which latter act is still in full force and effect according to the index of public statutes. There is no mention of the repeal of that act and unless one checks the Small Loans Act one would think the Money-Lenders Act is still in existence.
These three or four acts must all be considered before any change is made in the rate of interest as suggested in the amendment. When one looks at all these statutes governing the rate of interest, one is reminded of

Interest Act
a visit Robert Browning paid to Elizabeth Barrett. She was ill in bed and asked Mr. Browning if he would mind explaining one of his poems. He said, certainly, and she said it was beautiful language but she could not understand it. After he had read his own poem he said, "When I composed that only God and I knew what it meant, and now only God understands it." I say that without profanity, and that is the situation in considering the control of the rate of interest in Canada.
At the outset I should like to say this problem is a rather serious one. It is involved, and because it is involved I should like to see a parliamentary committee set up to study the whole picture with the end in view of enabling a lawyer or layman to pick up one statute and find the law regarding the control of interest.
Now, let us look at the amendment for a few moments. I think I should repeat it; it reads:
Except as otherwise provided by this or by any other act of parliament no person may stipulate, allow or exact on any contract or agreement whatsoever, a rate of interest in excess of twelve per cent per annum-
I should like to digress there for a few moments. If I understood the hon. member for Assiniboia, he had in mind establishing a ceiling of 12 per cent on loans. As I shall endeavour to show in the short time allotted to me, when you consider all the statutes of Canada there could not be a ceiling established at 12 per cent for the interest rate on most loans as other acts govern the situation. In that way the amendment would not solve the problem the hon. member for Assiniboia outlined. Then, the amendment goes on:
-whether it is called interest or is claimed as a discount, deduction from advance, commission, brokerage, chattel mortgage fees, or recording fees, or is claimed as fines, penalties or charges for inquiries, defaults or renewals or otherwise, and whether paid to or charged by the lender or paid to or charged by any other person, and whether fixed and determined by the loan contract itself, or in whole or in part by any other collateral contract or document by which the charges, if any, imposed under the contract or the terms of the repayment of the loan are effectively varied.
First of all, this amendment excludes those acts of parliament like the Small Loans Act, the Bankruptcy Act and the Money-Lenders Act. All those acts are excluded, and if they are excluded whatever those acts say about the rate of interest that governs, even if the amendment were passed in this house tonight.
I repeat, therefore, that the amendment does not solve the problem that the hon. member for Assiniboia hoped it would solve. There is no question about it, when the amendment was drawn up it was drawn up on the basis 
of the Small Loans Act. The Small Loans Act came into force in 1939 and I think one of the finest addresses on that subject was made by a man to whom I would like to pay a high tribute in this regard, although his political philosophy differs from mine. He set out the situation fully. That man was Mr. Ilsley, who was speaking at the time this bill was brought in and at that time was minister of national revenue. He set out the very same situation which existed when the Small Loans Act came into being in the Money-Lenders Act, which stated briefly that any loan under $500 should bear no greater rate of interest than 12 per cent. There were those in this country and in the United States, including some companies, who were circumventing the law. How were they doing it? Although the rate of interest was set out at 12 per cent they were making additional charges such as brokerage charges, commission, discount charges and other charges, and as a result the interest rate actually worked up to 30 or 35 per cent as outlined by Mr. Ilsley in Hansard April of 1939.
So therefore the Small Loans Act came into being and very carefully set out that all these charges should be included in the cost of the loan. In other words, they switched from the rate of interest chargeable to the cost of the loan, which included all charges. However, even today the Small Loans Act, as amended in 1956-I think this should be on the record-sets out that the cost of the loan, which may be up to $1,500, shall not exceed an aggregate of 2 per cent per month on the first $300, 1 per cent per month on that part from $300 to $1,000 and 1 per cent per month on any remainder of unpaid principal balance exceeding $1,000. In other words, you are paying a different rate of interest on the first $300, on the next $700 and on the balance, but that rate of interest is defined as the cost of the loan and it includes all costs. There is one exception. In this latter connection I have examples of where this section of the said act has been circumvented, such as where they have insured the loan and where there is some question as to whether the Small Loans Act in fact and in law did cure in every regard the situation it set out to cure.
Coming back to the amendment moved by my hon. friend from Assiniboia (Mr. Argue), the terms and conditions set out in the Small Loans Act were recommended in an amendment to the Interest Act. Let us go back to the Interest Act for a few moments. My hon. friend spoke of agreements for sale, chattel mortgages and second mortgages and there has been a great deal said by my friends from the C.C.F. party with respect to charges

and discounts on second mortgages. I believe when the C.C.F. party first started in the province of Saskatchewan. Even before the Douglas government was elected, there were statutes put on the books of that province, and this is why I asked the question I asked of the member for Assiniboia, namely did he not think the point he raised was a provincial matter. He was speaking at the time of seizure of automobiles and in that province once an automobile is seized, that is the end of the debt. That wipes it out. It is the same with land; if land is foreclosed or an agreement for sale cancelled, once that has been done it wipes out the debt and there is no action on the personal convenant.
I believe the situation is the same in Alberta and in perhaps in some other western provinces, so that when my hon. friend said they chased these people all over the map for the balance owing on a car in that province I maintain this is not the case and it probably is not the case in many other provinces although I do not know because I am not a member of the bar in other provinces. However, in the two western provinces, Saskatchewan and Alberta, that ends the debt. At any rate, even under the amendment the terms and conditions of agreements for sale and mortgages will not be covered. After all, when you consider that second mortgages are taken at high rates of discount and that if the first mortgage is foreclosed the second mortgage is wiped out, you must appreciate that a person taking the responsibility of giving a second mortgage is accepting a tremendous risk. This explains to some extent why the interest and discount rates are so high on second mortgages or assignments of agreements for sale.
I repeat that section 4 as it stands in the Interest Act is the section which covers agreements for sale and mortgages and therefore the amendment would not cure the condition my friend is complaining about with respect to discounts and high rates of interest on second mortgages.
This is an involved subject and we have four statutes which I have outlined and I therefore think it should be studied by a parliamentary committee so that whatever change is made will be properly made in order that the condition which is a concern of my friends in the C.C.F. party may be cured according to the proper terms of the law. I believe I know what my friend from Assiniboia was trying to do. He was not actually trying to change the rate of interest but to put loans on a cost basis as under the Small Loans Act. The gap of which he spoke in relation to the amendment is that amount of money over $1,500. If the amount
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of money is $1,501, then it falls under the Interest Act and not under the Small Loans Act, and I want to repeat, in reference to an agreement for sale or a mortgage the situation would not be cured because it is covered by another section of the Interest Act.
My hon. friend from Assiniboia then came to another subject about which I would like to say a few words. He mentioned that companies like Eaton's, and a number of others of which I did not take note were charging high rates of interest because there was no control over them. Most of the things which are purchased from Eaton's by the ordinary man or woman are certainly under the amount of $1,500, and therefore the Small Loans Act controls the amount of interest they must pay for the credit they desire if such is a loan within the definition of the act in question. The situation is the same in many other places of business, and therefore I suggest it was slightly exaggerated. It would only be agreements of sale or mortgages on land and probably large purchases like automobiles and pianos which would be left within the scope of the amendment.
As my hon. friend from Quebec South (Mr. Flynn) said, small loans are covered by the Small Loans Act. There are many, many things we must consider, including the question of whether the cost of the loan is too high but I would like to have before me details as to how many of these loans are made and how much profit is reaped from them. I would like to mention that at one time one of our banks-the Canadian Bank of Commerce-was quite heavily in the field of small loans and then something occurred- the Liberal government brought in the tight money policy. At that time it was impossible for the small businessman or the wage earner to get a loan from the bank; in fact, loans were practically all "on demand" notes, and the banks took the most unusual steps at that time of increasing their rates of interest, and of writing to various people who had already borrowed money, saying, "Your interest rate will now be increased by 1 per cent or 4 of 1 per cent", depending on whether or not the loan was secured. My clients came into my office and said, "How can this happen, when I signed a note for a certain amount of money at a certain rate?" These notes were on demand, and if you did not consent to the increased rate of interest then the bank would simply demand the note be paid, so you renewed your note at the bank in question. I know that this is a fact

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from personal knowledge because I had a note at the bank at that time, and it happened to me.
I wish to draw to the attention of the house this fact that at the time the tight money policy was brought in by the Liberal government the banks lending money claimed they had had notice from the Bank of Canada not to make any further loans, even on gilt-edged securities like dominion bonds.
What happened as a result? All wage earners, hundreds of small businessmen, were driven to make their loans through these financial companies about which my good friends in the C.C.F. group have been complaining about this afternoon and this evening. That is the result of the tight money policy. It is interesting to note that one of the western Liberals had this to say in reference to the banks in 1939 when he was speaking on the subject of small loans, and he was in the house at the time when the tight credit policy was developed. He said this in April in 1939:
From my place in the House of Commons I feel impelled to say this: If the banks are not prepared to live up to the obligations resting upon them as a result of the special privileges they have been given by the people of Canada, as set out in the Bank Act and in the Bank of Canada Act, then if it is my privilege to sit in this house when the banks come for a renewal of their charters I will say to those that have not entered this field and supplied credit to poor people who are credit worthy, "You have not discharged your responsibility to the Canadian people and do not deserve a renewal of your charter."
That was said by Mr. Tucker, who was one of those who supported the tight money policy which drove the average man away from the banks where they were unable to get loans and into the hands of the finance companies. Speaking about the banks, I think we should do everything possible to encourage borrowing from the chartered banks of Canada. After all, many of the banks, particularly the Bank of Commerce, are now in the small loans business, and lend at prescribed rates of interest, and I think everything should be done to encourage them. That is why I have referred to this question of the tight money policy.
What do I recommend should be done? I do not want to repeat all that has been said this afternoon about the interest rates charged. We do know that there are loan sharks in the business, as they were at the time the Small Loans Act was brought in. I am one who believes that the people who borrow money should be able to borrow it at a fair rate of interest, and that the people who lend the money should get a fair return on their investment. We must take into consideration that the cost of dealing with small sums of

money cost more than dealing with considerably larger sums. Moreover, when security is taken on automobiles and television sets and things of that kind it is often found that their value is not sufficient to repay the amount owing, with the result that the finance companies lose money. But we must bring about an equitable situation where people can get money at a fair rate and those lending money get a fair return on their investment.
That is why I suggest that a parliamentary committee should study the acts which refer to interest rates; study the Interest Act, the Small Loans Act and the Bankruptcy Act to see whether the legislation cannot be streamlined. It was only by accident that I found today that the Money-Lenders Act had been repealed, and that it had been repealed by amendment made to another act, namely the Small Loans Act. That was not in the index to the statutes, and anyone could make this mistake in checking the law in this regard. If we could have one act setting out the law on all these points with amendments made to simplify the situation, it would make consideration of this question much easier.
As I have indicated, I am in great sympathy with the hon. gentleman who moved this bill, but at the present time I would be reluctant to support the bill until the whole thing had been further studied because, I repeat, in the light of the work I have put in on it, looking up the other sections of the Interest Act, referring to the other acts and so on, the amendment does not solve the situation at all. For that reason I repeat that a parliamentary committee should be set up to study the whole situation with the idea in mind, perhaps, of preparing a consolidated act so we would know where we stand on the subject. That would mean consolidating the law in relation to interest charges.
In the field of agreements for sale and mortgages, another difficulty is immediately raised because the Interest Act itself is not too clear on this matter. Even the decisions of the courts on section 4 and section 5 of the Interest Act do not make clear what is meant by those sections. These sections could possibly be redrafted in order to make the situation less open to doubt.
As to the amendment proposed by the bill, my good friends in the C.C.F. group maintain that they want this sort of thing controlled. If the amendment proposed in the bill went through, then section 5, of the Small Loans Act which provides that certain licences shall be issued-licences which ensure the control of the very thing which the C.C.F. group wants to control-would

become inapplicable. Here is what section 5 of the Small Loans Act says:
5 (1) No person shall transact the business of a money-lender unless such person has first obtained from the minister a licence; but this section does not apply to a money-lender the cost of whose loans does not in any case exceed an amount equivalent to one per cent per month on the unpaid principal balance thereof.
Thus if the amendment went through tonight those people affected by the said section 5 would not have to apply for licences; they would not come under the jurisdiction of the superintendent of insurance and there would be no control over them at all.
Before I close, I should like to answer a few questions which have been raised by members of the C.C.F. party. I should say something about the question of seizure. Too often people who go out electioneering make statements such as we have heard this afternoon. There is a division in the federal law, under our federal system which determines those things which come under federal authority and those things which come under provincial authority. And when it comes to seizure of goods my good friends know as well as I do that this is a provincial matter and not a matter for this parliament to consider. I would remind them, particularly the hon. member for Assiniboia, because he is the only one left of the C.C.F. in Saskatchewan, where I used to live, that those acts which protect people against seizure and against foreclosure were brought in by the Conservative and the Liberal party of Saskatchewan and not by the C.C.F. party of Saskatchewan; they were on the statute books at the time Tommy Douglas took over.
The hon. member for Assiniboia maintains we should have state-owned banks. We have a lot of good examples of state-owned institutions in Saskatchewan; a woollen factory, a box factory, a fish board, a lumber board and so on, and every one of those crown corporations lost money. Finally, the socialists of Saskatchewan, after they had become capitalists themselves, realized that the things did not pay, and wound them up and went back to the old way of doing things. I think the classic example of a state-owned bank is in the province of Alberta, where I now live, namely the treasury branches, which have cost the taxpayers of Alberta a lot of money, while the chartered banks which stand beside them or on opposite corners can show a profit because the incentive is there, and when the incentive is there the people in the business make sure that that business pays.
I think I have now covered most of the field I wished to cover in my argument. I feel, looking back over the record of Hansard
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throughout the years that always on both sides of the house there have been hon. members who feel sympathy for a man and his family who get into trouble through sickness or through no fault of their own. No party in this house has any monopoly in the humanities; we all share the sympathy which is felt for such people, and we all try to do the right thing for the average Canadian. The proof of the pudding, as was said previously in this house by the Minister of Finance, is in the eating, because the people of Canada must have believed that on various occasions the national parties work for the average man.
For instance, on this occasion they gave us a good majority, whereas on other occasions they gave the other national party, the Liberal party, a good majority. So they must have felt at times that both national parties have feelings for the humanities as well as members of the C.C.F. party who like to get on the record in so many speeches, making these crocodile tears flow. Sometimes that magic does not work. The Social Credit party had better stories. Of course the tears were bigger and better. You know what happened to them. My good friends in the corner, please take note.


Douglas Mason Fisher: May I ask my hon. friend a question? Was the hon. member suggesting earlier, in the factual part of his speech, that agreements for purchase such as one would make with a firm like Eaton's or Simpsons-Sears come under the Small Loans Act? That is the inference I took. I wonder whether he believed that.


Eldon Mattison Woolliams: What I said was this. I said that loans

and there is a difference-that are less than $1,500 come under the Small Loans Act.


Mr. Winch:: You had better go to school.


Eldon Mattison Woolliams: I am not talking about conditional sales agreements because, again, I would remind hon. members that that is a provincial matter.


An hon. Member:: They do not know the difference.


Mr. A. D. Hales (Wellington South):: I am
very happy, Mr. Speaker, to have the opportunity to take part in this debate because I am one of those who believe in the free enterprise system of business. I am also a member of a party which I believe at all times has fought for the rights of free enterprise and for business in general. I should like to compliment my friend the hon. member for Assiniboia (Mr. Argue) on his honest endeavour in presenting his bill this afternoon. I am sorry he is not in the house this

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evening. I can see only three members of the C.C.F. here at the present time. If they were really sincere in introducing or promoting a bill to amend this act I would have thought they would be here in full force this evening.


Harold Edward Winch: There are more behind the
curtain.


An hon. Member:: They are hiding behind the curtain.


Alfred Dryden Hales: I am also rather amazed at
the silence of the official opposition on this question that is before the house. We have had the privilege of hearing from only one, or two, at the most, members of the official opposition. However, I know the hon. member for Assiniboia is quite sincere in his presentation. Whether or not this legislation is passed, I think he and the members of this house will have this assurance. They will know that any of those people in the lending business who are not carrying on their business in a legitimate way will at least realize that the eyes of the government are watching their particular actions.
I could not help noting some of the comments that came from that corner over there to Mr. Speaker's left. I think our good friend the hon. member for Burnaby-Coquitlam (Mr. Regier) used some extremely exaggerated cases. I feel that the case of the party he mentioned who paid 235 per cent was possibly an exaggerated one. I know he has the facts to substantiate it and so on. However, I think that is one case in many, possibly one in a thousand. I think the party who entered into that agreement had the privilege and the opportunity to read the contract which he entered into. Had he asked the rates that would be charged if he paid his account a month before it was due I think he would likely have been told the whole circumstances. He spoke of the excellent credit facilities of the credit union in that same riding. It is a wonder to me that more people do not make use of the facilities of the credit union.
With respect to the 12 per cent that has been suggested as the ceiling, I feel that the hon. member for Burnaby-Coquitlam (Mr. Regier) refuted that figure when he said that the credit unions charged nine per cent and paid their managers salaries as high as or higher than the salaries of chartered banks and paid union wages to the members who worked in that organization. Therefore, I have not had proven to me during this debate that 12 per cent is the proper figure to be used. I think exaggerated cases were brought out this afternoon. We should not be asked to legislate for every little deal which should

be looked into. I do not think we should legislate to take care of all of us. If one is willing to borrow and one is willing to lend on terms which are agreeable and understandable to both parties why should we be asked to legislate in that regard in a free enterprise business?
If there are such profits in this lending business as our good friends in the C.C.F. have claimed there are, then it will not be very long before many more people are in the lending business than there are today. The more we have in it the more competition there will be and the lower the interest rates will become. My colleague, the hon. member for St. Lawrence-St. George (Mr. Chambers), this afternoon gave a very definite explanation of how free enterprise works in the lending business, and I think what he said will turn out to be quite true.
Money is a commodity, the same as anything else; money is bought and sold. Credit is being used today more and more. It seems that the obtaining of credit has become a way of life with us and 1 do not suppose it will be changed very greatly. I do not need to list the many ways in which credit is used today. It is used in practically every form of business, even in the fields of luxury where people are using credit today for trips to the old land, and so on. Nevertheless, there has been a demand for those firms which lend money and people are taking advantage of their existence and are using the facilities they have. I suppose in the ridings of all hon. members there are a number of these lending institutions and there are many people who are using the services which they render. I think I can substantiate this by indicating the great increase in small loans since 1952. In 1952 roughly $9,378,835 was lent in small loans and in 1956 that figure had practically doubled. Therefore, this small loans business is increasing. It has doubled itself in the last five years. It would not have achieved this increase in business if the companies were not giving a service to the public which makes use of it.
In all businesses, whether they be large or small, whether they be lending businesses or whatever they may be, there are three basic elements or principles on which they must all function. First of all, there must be capital invested which can be usefully employed to earn a profit. There must be a fair wage for dollars employed. Second, there must be a product or service involved which can be marketed on which profit is created through its turnover. Third, there must be a business skill based on education, knowledge and talent for which a charge

can be fairly made. Therefore, the lending business is no different from any other business in that respect.
This question of what amount should be charged, whether it should be eight per cent, nine per cent, 10 per cent or 12 per cent is indeed a very large one. This whole act requires considerable study and attention by this house and I for one feel that it should go to a committee of the house for further thought and consideration. It seems to me that if we choose this 12 per cent figure we may find ourselves in the position, by putting a ceiling of 12 per cent on the loan, that that would be the figure that would be charged in all cases, even though the loan could be made at a lower rate. We can recall what happened in the days of ceilings under the wartime prices and trade board. Very seldom could you buy an article that was sold under the ceiling price. Therefore, if 12 per cent was set I think we would find that that would be the rate that would be charged on all occasions and not a lower one.
The answer to this is to allow this very highly competitive business to function within the framework of free enterprise. I think that if it is designed not only for the borrower but also for the lender it will take care of itself and operate on a sound basis. We must admit that Canadian lending companies must compete against highly efficient United States businesses. United States lenders borrow much of the necessary funds in the United States at lower rates than those in Canada, and so Canadian companies are kept in a very competitive position in that way.
This bill has been discussed on other occasions and I fully believe the problem is not quite as serious as it has been presented to us this afternoon. I was interested in reading that the personal instalment loan field in Canada enjoyed one of the lowest rates in the world. The common rate in the United States is three per cent monthly on outstanding balances up to $150. Then it is usually two and one-half per cent per month. In England the rate of four per cent per month is recognized as fair. United States experience has shown that if rates are set too low, legitimate lenders are forced out of the business. The net result is that borrowers are forced to deal with unlawful lenders who charge exorbitant rates.
In conclusion, I say this business is not unlike others, and if it is left to operate in the field of free enterprise and a little public relations and education work are undertaken these problems will right themselves in due time. I am afraid I will not be able to support the motion at this time under the existing conditions, especially in view
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of the fact that it has not been proven to me which is the right amount of interest to charge. I would much prefer to see the bill go before a parliamentary committee for further and more serious and lengthy study than we have been able to give it today.


William Moore Benidickson: Mr. Speaker, this is a subject that has been discussed in the house in most of the sessions of recent years. I have been impressed by hearing from all sides of the house in the afternoon and in the evening debate that there would be a desirability of having this particular bill referred to a committee of the house. I think that has merit. I think that action has to be taken with respect to that desire. I think it is very desirable because in the past-


Mr. Monleith (Perth):: Did the hon. member always think that way?


William Moore Benidickson: Yes. The Minister of National Health and Welfare (Mr. Monteith) will remember that I had a considerable part to play in having the small loans bill amendments referred to a committee of the house and as a result very substantial improvements in that act resulted. I also wish to draw to the attention of my interrogator the fact that the banking and commerce committee of 1936 and 1938 did very worth-while work in this field and I am going to suggest to the house that they could do so again.
The decisions that have to be taken in amending a statute of this kind cannot properly be taken without an opportunity such as is afforded by committee discussion which provides an opportunity for all interested people in the country to present their views and have members of all parties present and all points of view presented. I just wish to refer to the worth-while report that resulted from a previous parliamentary discussion of this subject. I refer to page 424 of the report of the standing committee on banking and commerce which in 1938 was studying this question of interest rates. They had this to say, which I think is something which should be kept very much in mind at the moment:
Throughout its inquiry your committee's objective has been to secure the best procurable rate for the borrower.
They went on to say:
Obviously the state can intervene advantageously over interest rates only within a limited field: for naturally a legislative rate at which money is not obtainable is of doubtful benefit to necessitous people.
This is the thing which we shall have to consider with respect to this bill which has received a great deal of endorsation in principle in the debate here today. On that

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basis and in order that it should receive the kind of consideration that would justify a proper amendment, I would like to move, seconded by the hon. member for Hull (Mr. Caron):
That the bill be not now read a second time but that the subject matter thereof be referred to the standing committee on banking and commerce.


Ernest James Broome: Mr. Speaker, speaking directly to the amendment I should like to make a few general remarks first. All hon. members of this parliament, as in previous parliaments, have the interests of the borrower close to their hearts. The hon. member for Kenora-Rainy River (Mr. Benidickson) read an excerpt from the report of the parliamentary committee of 1938 in which it was stated that throughout the inquiry the committee's objective had been to secure the best procurable rate for the borrower.
Actually this whole matter goes back as far as 1777 when the first act limiting interest rates to six per cent was placed on the statute books at the time of George III. Various modifications have been made through the years, such as that brought about in 1897 by Sir Oliver Mowat limiting interest rates to eight per cent. But all of these amendments had to do with interest rates applicable in the case of borrowers with collateral security. At no time did the ordinary needs of the person who wanted to borrow without collateral engage the interest of parliament. It was only in 1906 that that need was met by the MoneyLenders Act wherein the rate was set at 20 per cent per annum. The really major job on interest rates was done, of course, by the banking and commerce committee of 1956 to which my hon. friend referred. In 1956, just about two years ago, over 679 pages of testimony were taken by the committee. The committee brought in amendments to the Small Loans Act. As I have said, the problem had been debated year after year by previous committees trying to achieve a suitable solution.
It is not an easy problem. There are people who have to have credit but cannot go to the banks. They have not the collateral. They are not the type of risk in which the bank is really interested. They may have private reasons why they do not want to go to a bank, but in any event where this need occurs this means was found to satisfy it. Of course, the history is that usury took place and fantastic rates were charged. Loan sharks were rampant in the field and the borrower was penalized to the point where 
it was necessary for the government to step in and protect his interests.
But it was also necessary that this be done in such a way as not to dry up the sources of capital necessary to make loans available to the persons who wanted them. I should like to draw the attention of the hon. member for Assiniboia (Mr. Argue) to this booklet which I am sure he received in the last few weeks. It is the report of the superintendent of insurance on the operation of small loans companies and money lenders. In his report the superintendent of insurance has this to say on page 6 about the trend of business:
In my reports for 1954 and 1955, I referred to the cessation of expansion of business in recent years in the field of loans regulated by the act, being loans made in amounts not exceeding $500 (herein referred to as "small loans") and to the rapid expansion of business in the more profitable unregulated field of loans over $500 (herein referred to as "large loans").
Then he proceeds to set out the effect of this in a table. My hon. friend knows that prior to the changes made in 1956 the rate of interest was pretty well two per cent per month and that loans in excess of $500 were not regulated. As a result of the studies of the banking and commerce committee in 1956 an amendment was made to the Small Loans Act raising the ceiling from $500 to $1,500 and a progressive set of interest rates was established under which the borrower paid two per cent on the first $300, one per cent on the next $700 and half of one per cent on the last $500.
The effects of these changes in interest rates have not yet been reflected in the report of the superintendent of insurance because his report deals only with business done up to the end of 1956. Therefore there are no facts or statistics on the basis of which the hon. member for Assiniboia or any other member of the house can intelligently set a rate at which interest should be paid. We do not know. We have nothing to go on. It seems to me the height of folly not to take the time required, in view of the fact that the act was only changed in 1956, to see what the result has been so that an intelligent assessment can be made as to the level to which interest rates can be driven down and still provide a reasonable profit for the companies involved in the business because if we take away the profit motive there is no capital left. Certainly I do not think the hon. member for Assiniboia wants to legislate loans out of existence so that only the person whose credit is good at a bank can borrow money. This is what the superintendent of

insurance has to say about the changes that were made, as found on page 7 of his report:
As mentioned in my report last year, amendments to the Small Loans Act in 1956 extended the scope of the act so that it would apply to loans up to and including $1,500 and prescribed a new scale of maximum permissible charges, but these amendments applied only to loans made after December 31, 1956. Consequently, the data included in this report continue to reflect the results of operations on the same bases as in previous years.
I suggest that those are the important words in the report. The report continues:
The report covering business transacted during 1957 will be the first to show the effects of the amendments. However, the full effects thereof will not be evident until all loans made on the former bases have been entirely repaid.
Therefore all of the figures we have heard, all of the references to profits and all the rest of it are all based on a set of circumstances which no longer exist. But even if we take the set of circumstances that existed in 1955 and 1956 and the same figures that the hon. member for Assiniboia has been quoting, what do we find? At the bottom of page six of the report we find that in 1954 total loans were $164 million and the total profit after income taxes was roughly $6,900,000. In 1955, loans climbed to $197 million and profits by some $70,000. In 1956, loans climbed to almost $250 million and profits climbed in the neighbourhood of $800,000 to $7,740,000.
Leaving out of the argument the effect on the economy if you withdrew $249 million of credit, in my opinion the increase in loans when compared to the increase in profits is at least in proper relationship. I do not say that these profits are not excessive. They could well be excessive, but one must recall that these figures do not reflect the changes made in the act in 1956.


William Moore Benidickson: May I suggest to the hon. member that he is, of course, referring to the report of the superintendent of insurance with respect to the Small Loans Act, and that is not the statute that is under amendment tonight. It is the Interest Act that we are discussing.


Ernest James Broome: With due respect to the hon. member, I may say that when the hon. member for Assiniboia introduced this bill he related it very clearly and closely to the Small Loans Act. This same relationship has been continued throughout the debate tonight. It is impossible to divorce this bill from the other bill, because they both deal with the same field.


William Moore Benidickson: Deal with the amendment.
Interest Act


Ernest James Broome: I am entirely in order in what I am doing and in what I have said. If I may continue, there is no doubt about it, if we try to establish the rate too low then we do not help the borrower. We merely bring these illegal operators into the field to whom the hon. member for Assiniboia referred earlier. He mentioned a home owner who needed $600 to complete his home, I believe that was the figure. The home owner advertised in the newspaper that he would sign a note for $800 or $900 if someone would lend him the $600. People who require capital will go to almost any length to get that capital.
I am reminded of an incident that occurred when I was electioneering. I called at a house and the lady said to me, "Mr. Broome, if there is one thing you should do it is to try to stop instalment buying; it has just about ruined my family." We discussed the problem for some time, and at the end of the discussion this woman came to the conclusion that we could not stop instalment buying, but she was not going to be the sort of person who put down a dollar, paid a dollar a week and, in the end, paid twice as much as she should have for the article.
I think our friends in the C.C.F. have the idea that you can legislate common sense into people's heads; that you can legislate people into doing things the C.C.F. believes they should do or that you can legislate capital into doing the things the C.C.F. thinks it should do. Legislation is simply not effective when you try to force people into a pattern into which they do not want to go. I say, with all due deference, that there is merit in this bill, but we do not know what the rate should be. We should wait until we have more facts and figures on which to base a decision.


William Moore Benidickson: Find that out in the
committee.


Ernest James Broome: In the United States the Russell Sage Foundation, which is a charitable foundation, has spent literally hundreds of thousands of dollars in attempting to make the small loans field in that country a legitimate field of business enterprise. They brought out what they called a uniform law governing small loans which they wanted adopted by all the states of the union. The rate recommended in that uniform law was 24 per cent and many states have adopted it, but Wisconsin has a rate of 2J per cent on the first $100; 2 per cent on the second $100 and lj per cent on the third $100. I believe a great deal of credit is due the previous administration for having established the rate in 1956. I think perhaps our legislation is now as far-reaching and as socially conscious

Interest Act
as any in the western world. A great deal of credit is due to the previous administration.
At the same time, if one reads the evidence here one finds that support for that measure came from all sides of the house. The hon. member for Assiniboia was a member of that committee, as was the hon. member for Kamloops (Mr. Fulton); the hon. member for Eglinton (Mr. Fleming) and I believe the hon. member for Kenora-Rainy River. They were all working towards the same end, something reasonable, something just, something that would work. In connection with this amendment I would suggest, therefore, that we are seeking to duplicate the work which was done in 1956 before we have had time to assess the results of that work. I suggest that it is certainly not an amendment which would serve any useful purpose at this time. As my good friend says, it is a little premature.
I should like to mention credit unions which, as has been pointed out, charge a 12 per cent rate. I am a member of a credit union, in fact I helped to found one. These credit unions do work on the basis of one per cent per month. They have no income tax to pay and they are non-profit organizations. Usually the members of a credit union have one or more specific things in common. The credit union usually has a rather detailed knowledge of the individual members of the union, so there is slight credit risk. Even at that, the rate is still one per cent per month. I do agree that there is a free insurance feature and in many cases there is a percentage rebate to the borrower on the money he has paid into the credit union. However, even under the most favourable circumstances the rate does not drop below nine per cent.
In so far as the chartered banks are concerned, they are limited to six per cent under the Bank Act. As a result of other legitimate charges, the average rate charged by the Bank of Commerce, which has gone further into the small loans field than any other bank, is 10.46 per cent. Are you going to contend that the bank is making a fantastic profit? I suggest the bank is making what it would consider to be a normal profit on that type of business. A bank is rather careful about taking risks. I believe those people in the small loans field take a greater risk and therefore have a higher cost of doing business. I suggest that from every conceivable point of view; from the history of this type of legislation, from a study of the people and institutions presently in the field, and an analysis of the report of our own civil service, there is no justification 
at this time for considering the amendment because we could not give an intelligent decision.


John Andrew W. Drysdale: Mr. Speaker, I rise to speak to the amendment and to a certain extent to speak at the very kind invitation of the hon. member for Assiniboia (Mr. Argue). Earlier this afternoon when I was seeking from the hon. member some information he suggested I could perhaps speak at a later time-


Hazen Robert Argue: But not at this time.


John Andrew W. Drysdale: -so I thought at his very kind request I should perhaps take the opportunity to enlighten him on a few points about which he had been unable to help me.
I would first of all like to say that I agree with the objective of this bill but I do feel the hon. member, in spite of his altruistic motives, would succeed in having the very thing happen which he does not wish to happen. In moving the amendment the hon. member has run in and picked out a mythical rate of 12 per cent, and I notice that although he has been advancing similar motions- according to my knowledge of the records, in March of 1957 and again in January, 1958- he has been unable during all that period to furnish a basis for the necessity of a 12 per cent rate of interest. He has apparently given no consideration to the effect of such a rate of interest on the availability of money. I would like very briefly to refer him to an article appearing in the Financial Post on August 18, 1956, but would first mention that the hon. member has suggested that a bank rate of 6 per cent would be appropriate. In this article it states that the Bank of Commerce on a loan of $100 actually gives the borrower some $94, and that although the theoretical rate of interest is 6 per cent the true rate is some 10J per cent.
I would ask what is the objective of this rate of interest and how does the bank look at it; what do they think about this rate of interest? I am informed that the Bank of Commerce looks at these as a loss leader and they take the attitude that they will put this service out to the borrower in the hope of eventually getting his business. As a matter of fact, they estimate that some 75 per cent of the people who borrow money continue to do business with that particular bank, but I would emphasize to the hon. member for Assiniboia that they still consider this a loss leader and the interest involved is some 10J per cent, which is very close to his theoretical 12 per cent.


Hazen Robert Argue: I would like to ask a question of the hon. member. Is he suggesting that the

Bank of Commerce does not make a profit in this particular department?


John Andrew W. Drysdale: I would like to tell the hon. member that the banks look on this particular kind of loan as a nuisance and the main reason they want them is as an attraction for bank business in the long run.


Hazen Robert Argue: I would like to ask a second question: is the hon. member aware that at this rate the Bank of Commerce has in fact made a profit and that under this amendment to the act they could make an even greater profit?


John Andrew W. Drysdale: The matter I would like to raise is one which the hon. member for As-siniboia appears to have neglected, and that is that if a person is doing business with a bank and that bank agrees to lend him money, it is generally in the circumstance as most people discover when they go to borrow money from a bank that if they do not need the money the bank will go ahead and lend it to them. In other words, they are preferred customers, and that is one factor which I think the hon. member for Assiniboia has not taken into consideration.
Now in the very same article to which I have referred, reference is made to the extensive profits which these finance companies make. On August 11, 1956 the Financial Post mentions an independent survey of some 58 of the members of a financial organization with respect to what the effect on them would be of the forthcoming Small Loans Act. This independent body said that ten members were going to operate at a loss, 20 would earn less than 6 per cent on their equity and 12 would earn between 6 and 10 per cent. The hon. member has gone to great lengths in both his earlier speeches to refer to the fabulous and tremendous profits these organizations are making. I have scrutinized the position and I have been unable to find any figures to indicate that this is the fact. We have instead the situation which is quite easy to understand, where the more altruistic aspects of the matter are mentioned, and we
Business of the House
picture some poor individual being shoved out on the street, hounded by the finance companies, but, as a practising lawyer, I have seen some of these individuals and when it comes to a choice between the race track, the bottle and the finance company, you can imagine which runs in third place.
The Canadian consumer loan association, as a matter of fact, has said that 20 per cent of these borrowers need some special attention. In other words, if the borrower in the first place was a good credit risk then he would not have to go-


Some hon. Members:: Guillotine.
On motion of Mr. Drysdale the debate was adjourned.



BUSINESS OF THE HOUSE

John Cameron Pallett: I wonder if I could ask what the business of the house will be tomorrow?


Paul Joseph James Martin: Mr. Speaker-*


Howard Charles Green: Oh, you are too late.


Paul Joseph James Martin: May I say to the
Minister of Public Works (Mr. Green) that we welcome this new recruit to the Liberal party.


Howard Charles Green: If you had a few more recruits like that one you might be worth something.


Paul Joseph James Martin: My hon. friend will of course realize that it is not numbers that count, it is quality.


Mr. Fulton:: Yes, we have been painfully aware of that in the last few days.


Howard Charles Green: Tomorrow we will commence with the estimates of the Department of Public Works and then when they are finished we will take the resolution concerning the Department of Transport Act, the second reading of the Penitentiary Act and then the resolution concerning the Cape Breton Highlands national park.


[Stage Direction]
At ten o'clock the house adjourned, without question put, pursuant to standing order.
[Stage Direction]
Friday, June 6, 1958