1959-02-12

[Stage Direction]
First report of standing committee on miscellaneous private bills-Mr. McCleave.
First report of standing committee on mines, forests and waters-Mr. Murphy.
First and second reports of standing committee on estimates-Mr. Smith (Calgary South).
First report of standing committee on banking and commerce-Mr. Cathers.

[Stage Direction]
Mr. H. O. White (Middlesex East) presented the first report of the standing committee on external affairs and moved that the report be concurred in.
Hon. Lionel Chevrier (Laurier):: Mr. Speaker, I wonder if I could ask the house leader to allow this motion to stand over until the motion which my hon. friend has the intention of moving is brought before the house. I ask this as a matter of courtesy.


Mr. Speaker:: Does the hon. member agree to allow this motion to stand?


Mr. While:: Yes, Mr. Speaker.
Motion stands.



CANADIAN PACIFIC RAILWAY


Mr. A. D. McPhillips (Vicloria, B.C.):: Mr. Speaker, at the conclusion of the routine business I beg leave to move the adjournment of the house for the purpose of discussing a definite matter of urgent public importance, namely:
That the cessation of steamship services on the 26th instant from Vancouver on the mainland of Canada to Victoria, the capital city of British Columbia, a service that has existed since the admission of British Columbia into confederation, will constitute a calamity in national transportation, endanger the safety of the naval base at Esquimalt, the Pacific drydock and the safety of persons, property and commerce now existing.


Mr. Speaker:: The urgent matter of public importance which the hon. member for Victoria, British Columbia, raises and for which he asks leave to move the adjournment of
66968-9-GOJ
the house to discuss has been mentioned earlier. As I recall the reply of the Minister of Transport (Mr. Hees), it was to the effect that he could find no responsibility, legal or constitutional, resting on the federal government to maintain the service in question. With that answer in mind and the possibility of debate that has existed, my first thought about this motion is that it would scarcely qualify, but I do not wish to decide too hastily. If any hon. member could give me some assistance as to the urgency of debating this matter today, having regard to the fact that there was opportunity to discuss almost any subject matter last Monday and Tuesday, after this issue arose, I would appreciate it. I think it unlikely that I can accept the motion, but I am withholding my judgment for the moment at least.


Mr. Harold E. Winch (Vancouver East):: Mr. Speaker, I would like to add one word on your request for assistance as to whether or not this is a motion of urgency. I would submit, sir, that it most certainly is one of urgency, because the declaration of Canadian Pacific Steamships is that service between the cities of Vancouver, Victoria and Seattle is to end on the 25th day of this month, and that notice is being given to lay off 200 employees.
I know that you, sir, do not come from British Columbia, but I also know that you are interested in every part of our country. I can assure you that the maintenance of a steamship service between Vancouver and Victoria is of the utmost importance and significance to the province of British Columbia. It is something which has been in effect for a great many years and although there may-I only say "may", sir

be a question of the legal or constitutional responsibility of the federal government, it is and has always been accepted as a part of the transportation system of Canada, and there was an undertaking under the terms of British Columbia coming into confederation that there would be maintained a complete system of transportation.


Mr. Speaker:: If I may interrupt the hon. member, I am not disagreeing that this is an urgent matter but I need to be persuaded that we should interrupt other proceedings now to debate this matter. I admit that it is an urgent matter, particularly to those people concerned locally, but the urgency of debate is the problem I have to deal with

British Columbia Ferry Service because here we have private members' day and bills to be debated in their regular order, and I am asked to suspend that order and allow discussion on this matter, not to arrive at any conclusion but just for the purpose of having a debate. I really do not know that I should do that.


Hon. Howard C. Green (Minister of Public Works):: Mr. Speaker, if I may say a word, there is no doubt that the question which has been raised is of great concern to people on the west coast, and naturally no one is more concerned over it than I am as a member from the city of Vancouver. However, in view of the fact that the service is not under the jurisdiction of the federal government or of the board of transport commissioners and really is just the same as a service from A to B anywhere in Canada, I suggest that surely it is not in order to adjourn the house to discuss the question of whether	or	not that service should	be suspended.	If	it can be done	in this case, thenit can be done in the case of any other service by ship between any two ports in Canada. For this reason, Your Honour, I submit	that the motion should	not be
accepted.
Hon.	L. B. Pearson	(Leader	of the
Opposition): Mr. Speaker, the house will remember that the other day I brought this matter up on the orders of the day and asked the government a question concerning it. At that time the Minister of Transport indicated in his reply that it was not a matter of urgency, in the sense that an alternative service was being provided by which people in Victoria could take a bus to Nanaimo and cross from Nanaimo to Vancouver. But surely, Mr. Speaker, not only is it a matter of urgency

and all the information I have received in the last few days would indicate that it is-but it is also one a discussion of which at this particular time might help to prevent the interruption of this service on February 25.
The minister says this is just an ordinary matter in the sense that it is a dispute about the service from point A to point B, but I suggest it is more than that. I suggest that not only might a discussion of the matter at this time and the stand taken by the government prevent interruption of the service, but there is also the question of whether or not there is a legal obligation on the government to prevent the service being interrupted. That matter has been raised and we have not yet had an authoritative opinion. Therefore I suggest that not only is the question one of urgency but it is one that might be assisted by a discussion

at this time so the service will not be interrupted on February 25.


Right Hon. J. G. Diefenbaker (Prime Minister):: Mr. Speaker, ordinarily I do not intervene in matters such as this, but in accordance with my responsibility as Prime Minister it is necessary for me on occasion to place before Your Honour the situation as it is. Speaking for the moment of the argument of the Leader of the Opposition that there is a legal responsibility, and I am not for a moment accepting it or entering into any controversy in that connection, then recourse to the courts is the proper course to follow by way of an application for a writ of mandamus. If there is a legal responsibility that is the course to follow. The Minister of Transport says there is neither constitutional nor legal responsibility. Certainly there is no administrative responsibility. I would refer Your Honour to Beauchesne, 4th edition, paragraph 100, which reads as follows:
The definite matter of urgent public importance for the discussion of which a member may ask leave to move the adjournment of the house under standing order 26 must involve the administrative responsibility of the government.
The hon. gentleman is properly exercised over the situation, as are other members from the coast, and I am not indicating in any way that he has not raised a very serious matter. Citation 100 in Beauchesne's fourth edition makes it very clear that administrative responsibility on the part of the government would be the only circumstance under which a motion such as this could be entertained. Whatever the legal situation may be, there is no administrative responsibility. Though I fully realize and understand the point of view of the hon. gentleman, the rules would not permit adjournment for this purpose.


Harold Edward Winch: You intervened when there was a strike there.


Mr. Pearson:: In order to keep the record straight may I refer to page 805 of Hansard for February 9, where the Minister of Transport was dealing with this matter of legal and constitutional responsibility. He said he would not wish his statement to be taken as final and categorical, but he expressed a tentative opinion. Perhaps the Minister of Justice, who comes from British Columbia, would be able to give us more than a tentative opinion on this matter.


Hon. George H. Hees (Minister of Transpori):: We have still been unable to find any responsibility whatever for this matter.


Lionel Chevrier: I just want to intervene for one moment in answer to what has been said by the Prime Minister.

He has read from Beauchesne, dealing with the urgency of debate, the point upon which you have asked for assistance. He has urged that in order for the house to adjourn its normal proceedings to deal with a matter of urgent public importance the matter must involve the administrative responsibility of the government; that is what Beauchesne says in his fourth edition.
I say that the British North America Act, clearly and in formal language, places the responsibility for navigation and shipping with the federal government. If the responsibility for navigation and shipping lies with the federal government, then there is a responsibility on the government, unless that responsibility is delegated otherwise. There is a responsibility under the British North America Act, but the minister has stated yesterday and again today that there is no legal responsibility. While I accept the minister's statement because of his person, I do not accept the legal implication of the responsible minister's statement. After all, he is giving a legal opinion. I think the house should be allowed to debate this from an urgency standpoint to ascertain whether or not there is this legal liability, and let the Minister of Justice tell us what the position is from the point of view of any agreement that might have been made between the federal government and British Columbia in so far as the service is concerned.
I say, therefore, that until these two points have been determined it would seem to me that there is urgency of debate, and the motion should be allowed.


Mr. Frank Howard (Skeena):: I realize this is a question of attempting to determine the urgency of debate. Before we embark upon that, I would submit that-


Mr. Speaker:: That is all I wish to hear; I think the matter must be determined from that point of view.


Frank Howard: That is quite true, and I am going to argue along that line. As I said, I should like to make a preliminary remark. The Prime Minister and the Minister of Public Works were not dealing with that subject matter at all but were attempting to becloud the issue on jurisdiction and responsibility. We all know that shipping on the west coast comes directly under the jurisdiction of the Department of Transport in so far as steamship inspection is concerned. So far as labour matters are concerned, they come within the jurisdiction of the federal government, so administration wise the arguments of the Prime Minister and the Minister of Public Works are not valid.
British Columbia Ferry Service
On Monday last the announcement appeared in the newspapers of British Columbia that the coast steamship service was going to discontinue operating the line between Vancouver island and Victoria. It was on that day that the question was asked on the orders of the day. On Monday we had a supply motion and an amendment, which of course was fairly well confined with regard to the matter it covered and was not disposed of until after 8.15 on Tuesday evening.
Therefore the opportunity for debate was confined to probably an hour on Tuesday evening at the outside, at which time other matters were raised. If the hon. member for Victoria (B.C.) and others who have a direct interest in this matter had had an opportunity to raise it, they would have done so. There is no fault to be attached to them. It is just that if they did try to bring this matter up they undoubtedly did not catch the eye of the chair in order to raise it. We have not had a chance to do so. I think in that light we should favourably consider the urgency of debate, this being the first opportunity.


Howard Charles Green: On that point, Mr. Speaker-


Mr. Speaker:: I think the Minister of Public Works will find it unnecessary to labour that point when he hears my view. I do not determine this matter entirely on the question of whether or not it is an administrative responsibility of the government. Of course it has been said that it is not, and there is a disposition to argue that point. If it is not, the quotation from Beauchesne seems to be clear. If a private company like the Canadian Pacific Railway Company discontinues its service and it is not a service operated by the government of Canada or a service the operation of which is the responsibility of any government agency or crown corporation, it is not a fit subject for this motion.
However, I prefer to deal with the matter on the basis of urgency of debate. This rule should be invoked only in exceptional cases, as hon. members will appreciate. Otherwise at the beginning of each day we could interrupt the business appearing on the order paper by finding in some part of the country something which is undoubtedly urgent and of public importance to the people there; and in that way we would destroy the effectiveness of orderly debate. I therefore feel that we should interrupt the course of debate only if the matter is one which cannot be discussed otherwise.
Let me point out this fact. Although the Leader of the Opposition urged that there was urgency to discuss this matter, he had an opportunity on Monday to make a motion with respect to this matter, and again on

Inquiries of the Ministry Tuesday if his first amendment had been disposed of. The same statement applies to other members of the house. The supply motion is broad enough, even though the first amendment related to a dominion-provincial conference, for one to suggest that this matter might be the subject of a conference between the federal government and the province of British Columbia in order to see how this service might be restored.


Some hon. Members:: Oh, oh.


Mr. Speaker:: In any event, the matter could have been raised after the amendment and the subamendment were disposed of. There will be opportunities to raise it again. Therefore in my view we should not interrupt today's proceedings further in order to discuss this matter.
[Later: ]
On the orders of the day:


Mr. E. J. Broome (Vancouver South):: Mr. Speaker, I should like to direct a question to the Minister of Transport, and since I have not given him notice he may take this as notice. Has any request been received for, or is any consideration being given to, the transfer of C.N.R. ships to the Vancouver-Victoria run?


George Harris Hees: No, Mr. Speaker.



NATIONAL DEFENCE


[Stage Direction]
On the orders of the day:
Lester Bowles Pearson: Mr. Speaker, I should like to ask the Minister of National Defence whether he cares to comment on the report that two-thirds of the cost of Bomarc squadrons to be stationed in Canada will be borne by the United States.


Hon. G. R. Pearkes (Minister of National Defence):: Mr. Speaker, a series of discussions has been going on between the Department of National Defence, the Department of Defence Production and the authorities in the United States as to the proportions of the cost of Bomarc squadrons which should be borne by the two countries since these weapons will provide a portion of the defence of both countries. But the matter has not yet been finally dealt with. I am not in a position to confirm or otherwise deal with the press statement which says that two-thirds of the cost will be borne by the United States and one-third by Canada.


Lester Bowles Pearson: If I may, I should like to ask a supplementary question. Is it a fact that these Bomarc squadrons will be wholly under the administrative and operational control of the R.C.A.F.?


George Randolph Pearkes: These squadrons will be part of the defence of the North American continent. They will be under the command of the R.C.A.F., being part of the R.C.A.F. air defence command, but like the air defence command itself they will be under the operational control of NORAD.


Hon. Paul Hellyer (Trinity):: Can the
minister tell us if the Bomarc missiles will be equipped with atomic warheads?


George Randolph Pearkes: Bomarc missiles are capable of being equipped with nuclear warheads.


Paul Theodore Hellyer: I wonder if the minister could give us some indication, because this is a matter of vital importance to our defence thinking.


George Randolph Pearkes: As I said, the Bomarc missiles are capable of being equipped with nuclear or atomic warheads, and when these missiles are available a decision can be made as to whether or not they will be so equipped.



ALLEGED FALSE SIGNALS TO ALLIED AIRCRAFT

[Stage Direction]
On the orders of the day:
Mr. Hazen Argue (Assiniboia):: Mr. Speaker, I wish to direct a question to the Minister of National Defence. It arises out of an item in this morning's press in the wake of President Eisenhower's statement yesterday that he believes some United States planes have been lured across the iron curtain by false radio signals, the report being that a Russian ship once tried to lure a flight of Canadian star jet fighters into Soviet territory.
Can the minister say whether it is technically possible to lure western planes into the Soviet union, with all the danger this implies.


George Randolph Pearkes: In answer to the first part of the question, the R.C.A.F. have no confirmation that any attempts were made by the Soviets to lure any of the F-86's which were in transit from this country to Europe in 1953 and 1956. As to the technical possibility of this being done, I cannot express an opinion.



D.E.W. LINE    STATEMENT ON CLEARANCE FOR VISITORS

[Stage Direction]
On the orders of the day:
Lester Bowles Pearson: Mr. Speaker, I wonder if the Secretary of State for External Affairs is in a position to answer the question I asked

him last Tuesday regarding arrangements for security clearance in connection with the D.E.W. line.


John George Diefenbaker: The Leader of the Opposition, as reported on page 859 of Hansard, asked the following question:
In view of the statement of the Prime Minister in the house a few days ago that Canada has now taken over responsibility for the administration of the D.E.W. line, is there any necessity now for a Canadian to secure clearance from any United States authority in order to visit that line?
May I say this, that I made the situation most clear on August 16 and August 18 last in regard to similar inquiries by the hon. gentleman. The answer was then and still is, no. I make that very clear and unequivocal with regard to the portion of the statement contained within the hon. gentleman's question to the effect that Canada has taken over responsibility for administration of the D.E.W. line, I should make it very clear that it is the operational control and not the administration of the D.E.W. line which was taken over by the R.C.A.F. The D.E.W. line is still maintained by the United States and, as I said a moment ago, the answer to the question is an unequivocal no.
While I am on my feet, may I say that since I spoke here on August 16 and 18 last the spirit of partnership which has characterized the combined efforts of Canada and the United States in constructing and operating the early warning system of which the D.E.W. line is an integral part has been satisfactory, and I am sure that in this respect the Leader of the Opposition, whose experience in office brought him into contact with these defence arrangements, will agree with what I have said.


Lester Bowles Pearson: In view of the reference made by the Prime Minister to the discussion of this matter last session in July and August, may I ask him whether he will now do what he promised to do at that time but which was not done before the end of the session, namely table the regulations governing visits of Canadians to the D.E.W. line, in accordance with the questions I asked him on August 23 which are to be found in Hansard of that date.


John George Diefenbaker: I may say there were a number of other items for which the hon. gentleman asked in connection with this, constituting quite an assortment of documents, but tabling will take place. I am glad the hon. gentleman has brought this to my attention, because it was not done before the end of the last session.
Inquiries of the Ministry



REPORTED CANADIAN INTEREST IN U.S. FIGHTER AIRCRAFT

[Stage Direction]
On the orders of the day:
Paul Theodore Hellyer: Mr. Speaker, I wish to direct a question to the Minister of National Defence. Has the minister seen the Washington dispatch which appeared in several Canadian newspapers yesterday to the effect that Canada was interested in the Northrop N-156F fighter aircraft and, if so, can the minister tell us if the Canadian government is in fact interested?


George Randolph Pearkes: The R.C.A.F. is interested in all new types of fighters. This particular aircraft is a small interceptor type.


Paul Theodore Hellyer: I wonder if the minister could tell us what use they have in mind which would prompt an interest in this particular aircraft?


Mr. Speaker:: I think it is hypothetical to ask what use might be found for the aircraft, in the circumstances of the minister's reply.



ADMINISTRATION OF JUSTICE


[Stage Direction]
On the orders of the day:
Mr. J. A. McGraih (St. John's East):: Mr. Speaker, I have a question for the Minister of Justice. In view of several reports in today's press regarding further interference by the R.C.M.P. in the loggers' strike at Grand Falls, Newfoundland, does the minister have any further statement to make at this time?


Hon. E. D. Fulton (Minister of Justice):: In
answer, I should like to advise the hon. member that the R.C.M.P. are acting only to preserve order in the situation in Newfoundland. Feeling is apparently running very high between those who are on strike and those who wish to continue working. Such a situation demands that precautions be taken to prevent disorder or to bring the situation under control instantly should an outbreak occur. A police force cannot avoid its responsibility in such circumstances, and I am sure the R.C.M.P. in particular would not be expected to do so.
I am advised that the police have in no case escorted or attempted to escort anyone through a picket line. They do not take sides in a strike. They have, however, been called to the picket line when disturbances have occurred. Union leaders have been advised of the position and attitude of the police in this regard.

Inquiries of the Ministry
The report that women were injured when a police car forced its way through a picket line a couple of days ago is incorrect. The car was stopped at the time, and the members of the patrol were carrying out their duty in seeing to the removal of an obstacle which had been placed on the road. A woman tried to break the windshield of the police vehicle but did not succeed.
I should like to repeat that in carrying out their duty in this connection the R.C.M.P. are merely discharging their role as the force responsible for the maintenance of law and order in Newfoundland under the contract, and are acting in the role of a provincial police force which reports to the provincial attorney general.



NEWFOUNDLAND


[Stage Direction]
On the orders of the day:
Hon. J. W. Pickersgill (Bonavisla-Twillin-gate):: Mr. Speaker, I wonder if I might ask the Prime Minister whether in view of the difficulty or indeed the virtual impossibility of appeals being heard in the supreme court of Newfoundland, when there are only two judges, he expects soon to be in a position to recommend the appointment of a chief justice?


John George Diefenbaker: Mr. Speaker, one of my real regrets is that my hon. friend is not through his law course and is not one of those who could be considered.


John Whitney Pickersgill: A supplementary question, sir. I am sorry I cannot share the Prime Minister's regret, but can the Prime Minister indicate when he hopes to be in a position to recommend the appointment of someone else?


John George Diefenbaker: Now that I see the hon. gentleman himself is not interested may I say I hope that appointment can be made at the earliest possible date.



ATOMIC ENERGY


[Stage Direction]
On the orders of the day:
Mr. H. W. Herridge (Kootenay West):: Mr. Speaker, while I do not expect an octavo from Waldo concerning his credo on radiation on orders of the day, I wish to ask the Minister of National Health and Welfare a question. Has the minister's attention been drawn to a press statement of Professor M. E. Kettner, of the University of Manitoba, to the effect that the radiation effects of strontium 90 can cause leukemia, cancer of the bones and long-range harmful genetic effects, and that the

rate of fall-out appears to be going up steadily as snow and rain bring more of the element to earth? In view of the serious nature of this problem, can the minister inform the house if studies and investigations are being undertaken by his department?


Hon. J. W. Monfeiih (Minister of Naiional Health and Welfare):: Mr. Speaker, I am afraid I did not catch the hon. member's introductory remarks to the question. I shall have to look it up in Hansard, and perhaps I can address him personally in respect to those. I was, however, anticipating the possibility of such a question, and I would say that since 1955 when the department began measuring radioactive strontium in dried milk samples, a gradual but small increase has been noted in radioactive strontium levels.
The maximum permissible concentration of strontium 90 in milk for regular consumption has been estimated as 80 micromicrocuries per litre. The estimates of strontium 90 available to us based on monthly analyses of samples from more than a dozen stations across Canada are well below the maximum permissible concentration. The levels that have been measured in Winnipeg are not out of line with those which have been observed for other stations in the country. The department is, however, continuing to keep a close watch on this matter.



TRANSPORT


[Stage Direction]
On the orders of the day:
James Aloysius McGrath: Mr. Speaker, I have a question for the Minister of Transport. In view of the unseasonable ice conditions existing in Conception bay in eastern Newfoundland resulting in the disruption of the ferry service between Bell island and Portugal Cove, can the minister assure the house that government icebreakers will be dispatched to the scene?


George Harris Hees: Yes, Mr. Speaker, we will provide all the icebreaker assistance which we are capable of providing when we receive requests for such service.
(Translation):



CANADIAN BROADCASTING CORPORATION


[Stage Direction]
On the orders of the day:
Mr. J. O. Latour (Argenteuil-Deux-Mont-agnes):: Mr. Speaker, I should have liked to direct a question to the Minister of

National Revenue, but since he is absent, I hope he might find it possible to reply to it a little later. Yesterday, in the course of a debate, the hon. member for St. Lawrence-St. George (Mr. Chambers) informed the house that the strike between the C.B.C. and its producers was over. I should now like to ask the Minister of National Revenue the following question: could he tell me exactly what positions are held by Messrs. Andre Ouimet, J. P. Ladouceur and Yves Vien in the C.B.C., and what are their duties and responsibilities in the corporation?
(Text):


Some hon. Members:: Order.


Hon. J. M. Macdonnell (Acting Minister of National Revenue):: Mr. Speaker, perhaps I could take that question as notice.


Mr. Speaker:: I am not sure that the minister should take it as notice, because it seems to me that it infringes the rule in that it is asking for an opinion.
(Translation):


Joseph-Octave Latour: Pardon me, Mr. Speaker, but I gave notice of that question a week ago today. I did not want to raise it until now precisely in order to avoid interfering with the debate and the possible settlement of the strike at that time.
(Text):


James MacKerras Macdonnell: Mr. Speaker, the translation system was out of order and I did not get the sense of the question, so perhaps the hon. member would repeat it.


Mr. Speaker:: I might advise the hon. member that it was not a question but a statement of fact, and the minister need not ask for its repetition.



MONTREAL


[Stage Direction]
On the orders of the day:
Mr. Augustin Brassard (Lapointe):: Mr. Speaker, neither the Minister of National Revenue nor the hon. member for St. Lawrence-St. George is in his seat at the moment. I wonder therefore whether I can direct my question to the Acting Minister of National Revenue. Has the acting minister any progress report on the negotiations now going on between the C.B.C. representatives and those of the unions involved in the strike?


James MacKerras Macdonnell: Mr. Speaker, I understand the question is addressed to me personally, and the answer is no.
Inquiries of the Ministry (Translation):



HEALTH AND WELFARE


[Stage Direction]
On the orders of the day:
Mr. J. E. Bissonnette (Quebec West):: Mr. Speaker, I should like to direct a question to the Minister of National Health and Welfare. Has the minister read the many items published by the Action Catholique, of Quebec, during the last few months with regard to the possible closing of Parc Savard hospital in Quebec west, and particularly the news report published January 11, 1959, under the heading "Justice claimed for Quebec", according to which there are no hospitals specially devoted to the treatment of Indians in the five eastern provinces of Canada, while there are 18 such in the five western provinces, thus providing jobs for several thousand people? Would the minister also explain to the house the significance of this discrimination against eastern Canada, as compared to western Canada? (Text):
Hen. J. W. Monteith (Minister of National Health and Welfare): Mr. Speaker, I should like to thank the hon. member for notifying me of his intention to ask this question. I can understand his interest in a situation that involves my department's operations within his own riding, but I feel I should point out as forcefully as I can that in my view nothing that can justifiably be termed discrimination exists in our method of supplying health care to Indians.
The bulk of Canada's Indian population, about 85 per cent, is found in the five western provinces-


Mr. Benidickson:: Five?


Jay Waldo Monteith: -in which large groups of Indians are often concentrated in areas where special facilities must be provided if they are not to be left completely without hospital services. This is the reason for the existence of 18 Indian hospitals in these provinces.
However, the situation is quite different in the five eastern provinces, where the number of Indians is about 15 per cent of the total Indian population. It must also be remembered that most of these Indians live within easy reach of established hospitals. To construct hospitals expressly for such Indians would not only be costly and unnecessary but at the same time would create undesirable competition with existing hospitals. My department tries to avoid this, and wherever practicable attempts to use existing hospital facilities.

Inquiries of the Ministry
I have not had the pleasure of reading L'Action Catholique, but as far as Parc Savard hospital is concerned it is quite correct that the question of future use is at present under consideration. However, I am pleased to assure the hon. member that at no time has any thought been given by myself or my officers to the possible sale of this institution to private commercial interests. On the contrary-


Some hon. Members:: Order.


Mr. Speaker:: Order.


Lionel Chevrier: Mr. Speaker is on his feet.


Mr. Speaker:: I think hon. members should either rise on a point of order or allow the minister to finish his statement, which I quite agree is rather extended. Has the minister leave to finish his statement?


Some hon. Members:: Agreed.


Jay Waldo Monteith: On the contrary, if the departmental services Parc Savard now provides can more economically be obtained elsewhere and for this reason it is decided to dispose of the hospital, all necessary steps will be taken to ensure that the hospital's facilities remain available to the community. Furthermore, it is my intention that arrangements in the event of change provide that the staff now at Parc Savard will be given the opportunity to continue in employment, either by being absorbed by a new administration or by being transferred to other positions within the civil service with as little disruption as possible.
I should perhaps add-


Lionel Chevrier: Oh, no, don't.


Some hon. Members:: Speech.


Jay Waldo Monteith: -that the possibility of disposing of Parc Savard does not involve an isolated case. In accordance with the efforts of my department to discharge its responsibilities as economically and efficiently as possible, the future use of Rockhead hospital at Halifax is at present receiving similar study. Negotiations in this latter case have been going on for some time, and I hope that satisfactory arrangements for transferring authority to another administration will be completed in the very near future.


Some hon. Members:: Bravo. Encore.


William Moore Benidickson: A supplementary question, Mr. Speaker. I do not want to make a speech. In his statement the minister referred to five western provinces. Was he including his own province of Ontario?
IMr. Monteith (Perth).1


Jay Waldo Monteith: I believe I referred
to five eastern provinces, as compared with the other five.


Mr. Maurice Bourgel (Levis):: In view of
the short answer given by the Minister of National Health and Welfare to the hon. member for Quebec West, can he inform the house whether the hospital has been transferred to Crown Assets Disposal Corporation?


Jay Waldo Monteith: No, Mr. Speaker.


Maurice Bourget: A supplementary question,
Mr. Speaker. Can the minister tell the house when the department will transfer the building to crown assets?


Jay Waldo Monteith: No, Mr. Speaker.



WATER RESOURCES


[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 Secretary of State for External Affairs. Has the minister given consideration to having an observer at the conference in Detroit on February 25 and 26, called by the association of all the mayors of the cities on the great lakes, the topic at such conference being the blocking of the Chicago water diversion?


Hon. Sidney E. Smiih (Secretary of State for External Affairs):: Mr. Speaker, to the best of my knowledge we have had no notification of such a meeting being held. We have not received an invitation to send anyone to that meeting. We will be interested, Mr. Speaker, in learning of the discussions and of their proposals.


Lester Bowles Pearson: A supplementary question, Mr. Speaker. Has the minister yet sent a protest on behalf of this government to the United States government? If not, does he realize that he has only a week left before the hearings begin in the senate on this matter?


Sidney Earle Smith: As I informed the house on two recent occasions, this matter is under close study by our officials and, as I indicated a moment ago, we are ready and anxious to get information with respect to the discussions. We do realize that the hearings will begin in the near future, but that does not indicate that the bill then will be adopted.

Inquiries of the Ministry



COMMUNIST CHINA


[Stage Direction]
On the orders of the day:
Frank Howard: Mr. Speaker, I should like to address a question to the Minister of Trade and Commerce. Has his attention been drawn to a statement in today's Globe and Mail by Mr. James Muir, president of the Royal Bank of Canada, to the effect that the people's republic of China desires to trade with Canada, and also the fact that Mr. Muir thinks the government is asleep in this matter?


Hon. Gordon Churchill (Minister of Trade and Commerce):: Mr. Speaker, I did see the article. We have been very active in our trade with China, which doubled during the last year.


Frank Howard: A supplementary question. Is the minister making reference to our exports to China or our imports from China, or both, when he talks about our trade doubling?


Gordon Minto Churchill: Our exports to China
doubled during the last year.



IMMIGRATION


[Stage Direction]
On the orders of the day:
Hazen Robert Argue: Mr. Speaker, I should like to address a question to the Prime Minister. Is the Prime Minister in a position to answer a question of mine that he took as notice quite some days ago as to what action the governor in council has taken on the petition, on humanitarian grounds, for the staying of the deportation order affecting Mr. and Mrs. Raoul Arthur Rolling?


John George Diefenbaker: Mr. Speaker, I have not the file before me but my understanding is that application has been made to the courts for a writ of habeas corpus. That being so, the matter cannot be discussed or referred to in the house.


Hazen Robert Argue: A supplementary question, Mr. Speaker. May I ask the Prime Minister whether this is still before the cabinet, or whether the cabinet has taken a decision?


John George Diefenbaker: Things do not come
before the cabinet so long as they are being considered by the courts.


Hazen Robert Argue: A supplementary question. Is it correct that this application first came
to the cabinet last December 4, many weeks before it was in the courts?


John George Diefenbaker: Apparently the hon.
gentleman does not realize that so long as a matter is before the courts there cannot be a duality of approach on the part of any person affected.



WHEAT-INTERIM PAYMENT ON 1957-58 CROP  DEFICIENCY PAYMENTS

[Stage Direction]
On the orders of the day:
Hazen Robert Argue: Mr. Speaker, I should like to ask the Minister of Trade and Commerce this question. In the making of an interim payment on the 1956-57 wheat crop has the government under consideration supplementing such a payment by a deficiency payment?


Gordon Minto Churchill: Mr. Speaker, is the hon. member speaking of the 1956-57 crop?


Hazen Robert Argue: My error, Mr. Speaker; 1957-58.


Gordon Minto Churchill: As long as the hon. member is clear on what he is asking, that is fine. Consideration has not been given to that problem as yet.


Hazen Robert Argue: Mr. Speaker, a supplementary question. Has the government under study the possibility of providing a parity price or a two-price system for wheat going into domestic consumption?


Gordon Minto Churchill: The government has under study all matters affecting agriculture. This morning we met for three hours with the representatives of the Canadian Federation of Agriculture covering almost all the problems that have been raised in the House of Commons during the last year, and some that the hon. member has not even thought of yet.


Hazen Robert Argue: Mr. Speaker, I do not want to misinterpret the minister. Can I take it from his remarks that the cabinet has under study the possibility of a parity price for wheat going into domestic consumption?


Gordon Minto Churchill: I would suggest that the hon. member is imagining quite a number of things. He can go on speculating to his heart's content; he has been doing that in this house for years.


Hazen Robert Argue: Will the government give it consideration?


Gordon Minto Churchill: Mr. Speaker, the hon. member is now asking for an expression with regard to policy.


Hazen Robert Argue: Obviously you do not have one.
948	HOUSE OF
Interest Act INTEREST ACT



AMENDMENT TO PLACE CEILING ON INTEREST RATES

Hazen Robert Argue: the si cond reading of Bill No. C-3 to amend the Interest Act.
He said: Mr. Speaker, I move the second reading of Bill No. C-3 at this time because I think it is of the utmost importance that this parliament take action to place a ceiling on the fantastic and exorbitant interest rates and carrying charges which are being levied in this country at the present time. I suggest that this bill covers a subject of major importance because of the tremendous growth in credit of various kinds in recent years.
I hold in my hand the Bank of Canada statistical summary for December, 1958 and it shows that in September, the latest month for which statistics are available-


Mr. Speaker:: Order. If the hon. member will allow me to interrupt, may I ask hon. members who are about to leave the house to make their departure expeditiously and those who are not about to leave it to moderate their tones so we can hear the hon. member.


Hazen Robert Argue: Thank you, Mr. Speaker. Statistics for the last month available show, with respect to the various kinds of finance companies and credit extended by retail dealers to consumers, that the balance outstanding was the tremendous sum of $1,947 million. I am going to go on to indicate some of the fantastic interest rates that are being charged, and I suggest that if the bill before the house were passed it would result in the saving of tens of millions of dollars for Canadian consumers. It would place a ceiling on interest rates of 12 per cent per year, whereas in the sum of $1,947 million to which I have referred interest rates of double that amount or more are involved.
To demonstrate to the house how much saving there would be from the passing of such a bill one need only point out that if there were a reduction of 10 per cent in the credit extended, for example, it would mean an annual saving of some $195 million. With such statistics placed before the house I think one can understand the importance of this subject.
Credit is important to our country, consumer credit, instalment credit, credit obtained from small loan companies. These various types of credit are very important to commerce and to the individual who is able to obtain credit. Statistics I have here show that the total amount of such credit in 1951 was $706 million and that by September, 1958, this had increased to $1,947 million.


This tremendous sum of money is made up as follows: instalment finance companies, total credit of $752 million; small loan companies issuing instalment credit, $18 million; cash loans by small loan companies, $373 million; credit outstanding by departmental stores, $256 million. These figures total $1,399 million, and one must add to that the amount of credit provided by other retail dealers, making a grand total of $1,947 million.
One of the important kinds of credit is instalment credit. Various examples of the tremendous rates that have been charged have been placed before the house on previous occasions. The interest charges accompanying instalment credit range from the very low level of 10 or 12 per cent up to the very high level of some 54 per cent per year. There are companies that find the return in providing instalment credit and charging high rates of interest so lucrative that it is reported they are most anxious to promote the instalment end of their business even at the expense of cash sales.
In the whole field of instalment credit the great retail corporations are charging exorbitant rates. I have placed on the record on previous occasions the very high interest rate for instalment credit charged by Eaton's and Simpsons-Sears. The smallest purchase one can make from these companies under the instalment plan is an article worth $20 for which they make an interest charge of $2.25, with payments at the rate of $5 per month. This works out to an annual interest rate of 54 per cent. On previous occasions I placed this figure on the record, and at the time some members questioned whether or not the mathematics were accurate; but no one has yet shown that this figure is in any way inaccurate. I suggest to hon. members that such a rate should not be tolerated in Canada at this time. The purpose of the bill is to prevent such an exorbitant rate being charged.
A tremendous amount of instalment credit is involved in the purchase of automobiles, and the interest rates I have looked at range from 16 to 22 per cent per year. These rates are charged by the main companies in the field of providing credit for the purchase of automobiles. There are examples of companies charging much higher rates. I have in my hand a letter from the Middlesex Acceptance and Discount Company, London, Ontario, showing that on an unpaid balance a rate of 29.7 per cent had been charged. I suggest to hon. members that such a high rate is a disgrace to our country, and warrants action by members of parliament to see that such a high rate is prohibited in the case of automobile financing.

Another very large credit field in which huge interest rates are being charged has to do with second mortgages on houses. The government has provided excellent legislation for the purchase of homes. Even in the purchasing of homes, where large amounts of credit are available at lower rates of interest, it is often necessary for a purchaser to obtain a second mortgage, and in the buying of older homes the rates are often very high indeed.
In 1958 the hon. member for Vancouver East (Mr. Winch) placed some concrete examples on record showing the very high rates that are being charged on second mortgages. One example he gave at that time indicated that where a person wished to obtain a second mortgage for $4,250 he not only had to pay what I would suggest was a very high rate of interest, 7 per cent, but in order to get a mortgage of this size he had to pay a bonus of $750 and sign a mortgage for $5,000. Other examples were placed on the record by the hon. member for Vancouver East. He showed in the case of the example to which I have just referred that the interest rate worked out to 15i per cent. Other examples involved interest rates of varying amounts, but all of them were in that general range.
The passage of this bill would prevent such high interest rates being charged on second mortgages for home owners. This bill as it is now drafted would not apply where the interest rate is limited by a particular law. It would apply to interest rates that are not controlled by a particular law. Since that is the case, this bill would reduce to 12 per cent per annum the interest rate that may be charged by small loans companies making loans in excess of $1,500.
In 1956 we had a very long and very useful discussion both in the house and in the standing committee on banking and commerce with regard to the whole question of interest rates charged by small loans companies. Although the government at that time was reluctant, and although many members of the Liberal party in the banking and commerce committee at that time commenced by questioning the very purpose of the bill that was before the committee, I suggest that as a result of pressure of public opinion, sound arguments from those who approved of further controls on small loans companies, and some very definite pressure by the then minister of finance, Hon. Walter Harris, that bill was recommended by the committee to the house and subsequently passed. As a result of the passage of the bill there was an increase in the area of control from a ceiling of $500 on loans made by these companies to a ceiling of $1,500.
Interest Act
The effective rates that small loan companies are allowed is still high. Beyond the $1,500 there is no control, and there is no limit. I have in mind an advertisement, a so-called letter, which was sent to householders in Ottawa approximately a year ago over the signature of the manager of Pacific Finance Credit Limited, which reads as follows:
We will lend you up to $3,000 to consolidate your debts. Why not call me at Central 2-9476 and have a chat about it?
Yours truly
I believe the amount of $3,000 is suggested because if you obtained a loan of $3,000 there would be no control by parliament or anyone else on the amount of interest that could be charged. The passage of this bill would result in the control of interest rates charged by small loan companies on loans over $1,500.
Why are we asking that this bill be considered? We are asking the government to consider this bill because it is the ordinary Canadian who is paying these fantastic interest rates. Do I hear somebody say they do not have to pay them? If a young couple get married, they do not need a refrigerator or a washing machine or a home? They do not need this kind of credit? They can sleep on the street and they can eat at one of the neighbours? They do not need to buy all these articles to which I have referred? Of course that is not true. Canadians need credit. They have to have credit, and when they have to have credit they are forced to pay these fantastic rates of interest. I am suggesting that the government should take action in this field, and should study this whole question.
I have been in the house long enough to know that public bills introduced by private members are seldom passed. However, there are many instances in which the debate on a private member's bill has led to action by the government. I have no particular pride of authorship in the exact wording of this bill. I do submit that the principle contained in the bill is a good one, and it is something that the members of this house should study carefully.
I would ask the government to consider the possibility of referring this whole question to the standing committee on banking and commerce so we could go into this matter very carefully. I think it is time the government and parliament took action to remove Canadians from the clutches of loan sharks. These people are loan sharks, whether they masquerade as a respectable large retail firm or as a small loans company or as a company with a name like Beneficial Finance

Interest Act
Company. They are loan sharks and parasites, because they are charging these fantastic rates of interest which poor people must pay.
As we face a condition of recession and unemployment, then more and more people with smaller incomes will be forced to go to these companies to borrow money at these huge interest rates. One cannot argue that people pay these rates voluntarily, that they do not have to have the money. If there is sickness in the family, if an operation for a loved one in the family is necessary, if expensive drugs are necessary, the father of a family will pay any rate of interest, no matter how fantastic, to provide such essential medical service. I suggest those are the very items, these essential services, that place people in the hands of finance companies.
Perhaps another reason why people go to the finance companies is the type of high pressure advertising, the slick advertisements, asking people to come in and talk over their debts and their worries. I have in my hand an advertisement put out by Consolidated Finance Corporation, suite 26, Imperial Bank of Canada building, 171 Yonge street, Toronto. What does it say?
Here's the answer to your debt worries . . .
The present high cost of living makes it often very difficult to meet the demands of all your creditors.
The result: you get phone calls and letters of demand from your creditors, garnishees on your pay, court judgments and seizures, lawyers' actions . . . problems upon problems.
Now. with one visit to the office of Consolidated Finance you can shed your problems. Simply make a list of all debts you owe for: hospitals, automobile, furniture, jewellery, groceries, doctors, lawyers, loan companies, etc.-then see us.
With one regular payment to Consolidated Finance all your debts will be taken care of . . . all your financial worries ended.
What soothing syrup that is.
Security or guarantors are not required. 99 in 100 people are honest-
The company, therefore, say they are not going to have many bad debts.
So act now-make a list of all your debts-pick up the phone and make an appointment with Consolidated Finance Corporation, Empire 6-3322.
Finally, at the bottom there is this:
We have a "heart"-in the "heart" of Toronto.
If you ever walk into this office I would suggest you are not likely to get out of their clutches for many years to come. The evidence that was brought before the banking and commerce committee in 1956 by the superintendent of insurance indicated some of the fantastic rates that are charged by small loans companies. I remember clearly that he brought in evidence to the effect that a small loans company in Toronto had

charged rates of 75 per cent a year. In a country like ours surely, it is time parliament took action to outlaw such fantastic interest rates.
Somebody no doubt is going to stand up and say, "Some of these things are all right. We might like to move in this direction, but the draftmanship of this bill is inadequate and inferior". Mr. Speaker, may I say this. One can obtain the best legal advice available to a member of parliament in the drafting of these bills; nevertheless one is always faced with that argument. This particular bill has been drafted in the general language that has been used in the Small Loans Act, namely clause 2, paragraph (a) which defines the word "cost".
In the evidence given before the banking and commerce committee by Mr. Varcoe, the deputy minister of justice, it was pointed out by him that the Small Loans Act which controls all charges made by small loans companies within a certain area has never been challenged in the courts, and in his opinion was fully within the constitutional powers of the federal government. I suggest that there is no question whatsoever that this bill is drawn in such a way that if it were passed by this parliament, its terms would and could be enforced.
When the deputy minister of justice was before the banking and commerce committee he was asked a number of questions. As reported at page 684 of the minutes and proceedings of the committee he was asked this question by Mr. Enfield:
Q. So the conclusion of the argument, then, is that any charges whatsoever under a conditional sales agreement by way of prior discount could, if we wished be regulated by an act?
A. That is correct.
Then again as reported at page 692, a question by Mr. Follwell:
Q. Mr. Enfield and I were looking at section 2 and we saw there that with respect to automobiles or real estate that the interest could be on whatever the agreed basis is.
A. Yes.
Q. That is a fact?
A. Yes.
And further down the page we find a question by Mr. Crestohl:
Q. Take these acceptance corporations.
A. As far as the acceptance corporations are concerned, they do not do what they are doing by virtue of any provincial law, but they do it by virtue of the fact that there is no federal law.
In other words these companies are able to charge these exorbitant rates of interest because there is no federal law to control them. I would suggest, Mr. Speaker, that this is a bill that warrants the support of the members of this house. I ask the members on the government side of the house to

allow this bill to come to a vote today, and to let hon. members express their own individual opinions as to whether or not they think action of this kind is necessary.
Under the former administration, the Liberal government, the situation used to be that a number of private members' bills and resolutions came to a vote. It is quite true that if there was one that was a particularly hot potato, perhaps it was talked out; nevertheless the former government over the years allowed a great many private members' bills and resolutions to come to a vote. But this government, with its overwhelming majority, seems to be timid and frightened with regard to the matter of allowing a private member's bill or a private member's resolution to come to a vote. The amount of courage, if I may use that word, Mr. Speaker, seems to be in inverse proportion to the size of the government's majority.
I suggest that the government should allow members of parliament to deal with these bills by way of a vote. Private members' days in the past, in my opinion, have been important. A private member's bill or a private member's resolution is allowed discussion in the house without the government being committed. When a vote on such a bill or a resolution is taken, an opportunity is given to members of parliament individually to say what they think of the bill. If that were done in this case I am confident that at least some members on the government side of the house would support the bill. If a bill like this were allowed to come to a vote when it is presented to parliament, I believe that as time goes on more and more members would come to support it and that we would come closer to the day when its provisions became law.
But if the government continues to take the attitude which it apparently takes, namely that no private member's bill and no private member's resolution shall come to a vote, that one government speaker after another shall be placed on the list, then the government is making a farce of the whole procedure for dealing with private members' motions and private members' bills. It makes a mockery of our procedures in this house. I would suggest that the government, from its own standpoint, is taking the wrong attitude. I think the government would be in a better position to bring forward worth-while legislation if it allowed members of parliament, by a free vote, to express their individual opinions on a given piece of legislation.
I appeal to the members on the government side of the house to allow this bill to come to a vote today. I know it is going to be argued that if you put a limit of 12
Interest Act
per cent on interest rates, you are going to make it impossible for people to obtain this kind of credit. I do not believe that for a moment.


An hon. Member:: Why not?


Hazen Robert Argue: That was the story we heard
when we moved to reduce the interest charges made by small loan companies, but they are still in business. They have more advertisements on the radio now than they used to have a few years ago. They are still putting out literature asking people to come in and get rid of their worries and take one of their obligations. I think any business firm that cannot make a profit at a 12 per cent interest rate should not be in business, because it must be extremely inefficient if it is not able to pay its expenses on a high rate of 12 per cent.
If it should be correct that a ceiling of 12 per cent on interest rates is going to make it impossible for Simpsons and Eaton's to provide instalment credit-and I do not believe that for a moment-and if it is going to put out of business the Beneficial Finance Company of Canada and the Consolidated Finance Company Limited, may I say that the C.C.F. will not weep. Perhaps that would be the best thing that could happen from the standpoint of the ordinary borrower in this country. At the same time I hasten to say that it would be the duty of the government to provide an alternative means of obtaining credit at reasonable rates of interest. The chartered banks of this country are not doing a job in the matter of providing money by way of small amounts to the ordinary borrower. The Bank of Canada statistical summary that I have in my hand-


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


Hazen Robert Argue: Yes.


Frank Charles McGee: Is the hon. member not
aware of the recent steps taken by the Bank of Nova Scotia to enter this field?


Hazen Robert Argue: I am aware of all these steps,
but I just happen to have the statistics that are put out by the Bank of Canada as to the total amount of loans made by the chartered banks in this country in the personal loan field. Just how high a personal loan goes I do not know, but the amount is only approximately 25 per cent of the total amount of consumer credit in this country. Obviously the banks are not doing a job in this field, and there is evidence to that effect. There was evidence given before the banking and commerce committee a few years ago, and as this government follows the policy of higher and higher interest rates and as the bank discount rate goes up and the margin

Interest Act
on which the chartered banks operate goes down, the banks become less and less interested in a large number of small accounts and more and more interested in providing large loans to corporations. What do the banks do? Banks are very happy to lend money to these finance companies, these legalized sharks about which members of the present government are apparently prepared to do nothing. The banks are happy to carry these big loan accounts for the small loan companies, but they say "no" to the ordinary person who comes in for a small loan and who is often in dire need of money.
I suggest it is time that the federal government itself should enter the field of providing loans to ordinary borrowers at reasonable rates of interest. We have an industrial development bank in this country which is federally operated. Hon. members can, if they like, say this is socialism, and therefore bad. Everyone in parliament is in favour of it nonetheless; everybody votes for it. I suggest that if the chartered banks fail to do this job, as they are now failing to do it, it is time the government took action by providing a publicly owned banking system to furnish these loans. This could be done by a change in the system of operation of the industrial development bank or by some other means. It would provide some real competition for the chartered banks who are not doing a job in this field.
Another method which might be followed- and I think it would be a good method- would be to study whether or not credit unions in Canada could be given the full rights which are now provided to the banks. I believe that if the vast number of credit unions in this country were incorporated as chartered banks and if the government were to give them the same consideration as is given to the chartered banks the credit unions could expand even more rapidly in the future than in the past. On this point I might say that credit unions and people interested in credit unions all across this country are turning increasingly to the belief that the time will soon come when credit unions should be given a federal charter to make them in fact the peoples' banks of our country. If credit unions had this further power I think they would be able to expand their business and provide the type of credit which is necessary to meet the needs of the ordinary borrower in Canada.
I have no hesitation about moving this bill again. I think it is a blot on democracy and a blot on the so-called free enterprise economic system that ordinary borrowers should have to pay this fantastic rate of interest. We have in the C.C.F. group moved

similar bills in the past. We have never obtained full satisfaction, but in 1956 we made some substantial progress. I ask that this whole question be referred to the banking and commerce committee for a thorough study. In 1956 when the measure under consideration at that time was before the banking and commerce committee we had what were then dubbed by one hon. member, 50 men in grey suits, representatives of the small loans companies, sitting in as observers of the committee, some of whom gave evidence in an attempt to kill the measure which had been passed by the House of Commons on second reading and referred to the committee. We do not need evidence from this kind of people. We have heard their evidence. I think it is time we had brought before the banking and commerce committee representatives of farm organizations, representatives of labour organizations, representatives of credit unions and representatives of consumer organizations to see whether working together we can provide in this country a system of credit at reasonable rates of interest. I say that the 12 per cent ceiling prescribed in this bill is a very high one. It is one above which no interest rate in this country should ever be allowed to rise.


Mr. William Skoreyko (Edmonton East):: Mr. Speaker, in rising this afternoon to speak on this motion I feel my first action should be to offer some words of congratulation to the hon. member who has brought this motion before the house. I am sure the hon. member who introduced this motion did so from a motive of anxiety to serve the public in this regard. I know he feels, as many of us do, that on occasions there have been cases where some members of our society have paid what must seem to all of us, on the surface at least, exorbitant rates of interest. Certainly I have no quarrel with this bill, the aim of which is to bring relief to some of those people who find themselves from time to time in the position of having to pay two or three times the rate of interest at which most business people can borrow money.
I am sure, also, that the hon. member who introduced this bill did not intend to make it more difficult for the people of this great nation to borrow money. I think he intended to keep to a reasonable minimum the amount of interest a Canadian citizen must pay for the money which he has borrowed. I do not wish to labour the point, but I feel that this bill is important to my constituents and, therefore, that it is very important to me. It is, of course, all the more important to make sure that what I have to say on this

bill will not be misconstrued by anyone in this house. I will go further and ask the indulgence of the house in this regard for what I have to say, no matter how elementary it may be on this issue. The truth is that I am anxious to see no person, man or woman, wealthy or poor, pay more than a reasonable amount of interest for any sum of money which circumstances may require them to borrow.
I must confess, however, that I am greatly troubled about achieving the objective which this bill seeks to ensure. Both the hon. member who introduced this bill and myself wish to make sure that no one can be victimized by the imposition of extra rates and by having to pay interest rates which are higher than those at which money can normally be borrowed from institutions such as banks. Just as much as I am concerned with the possibility of hardships on my friends in having to pay excessive interest charges, I am concerned with the thought that my friends must be able to borrow money as well.
Here is where I find I have some difficulty with the bill proposed by my hon. friend who wishes to limit the interest rates payable by any person in Canada no matter how such a person may happen to borrow money and no matter in what circumstances he may have to pay it back. There are some things I should like to point out to my fellow members of this house all of whom are interested in protecting their constituents from usury. I am a business man. It is true that I am a small business man and as such I have very little knowledge of the workings of high finance and the involved financial transactions that occasionally are necessary to float a major industrial activity. My business is a small one and my dealings are therefore almost entirely with ordinary people who are accustomed to dealing with me in very small amounts of money.
I hope I may be pardoned, Mr. Speaker, for feeling, to some extent, capable of speaking on this subject from the point of view of the small businessman. I happen to represent these as a class. I shall perhaps be forgiven for attempting to portray the point of view of the ordinary working man who happens to be my best customer, my usual and political contact and who in fact is representative of the fine Canadian people who are my friends and constituents.
I must confess that my first concern about this bill, which I am sure is that of all those in this house or outside of it who are small businessmen like me, is the question of the effect such legislation might have on the possibility of the ordinary citizen being able to borrow money. I realize that more
Interest Act
than the borrowing potential of the ordinary working man is at stake. Certainly for some small businessmen and especially those engaged in new, small and as yet unestablished businesses, it is every bit as important as it is to the average working man.
Credit in today's scheme of living is extremely important. I could go further and say that credit is the most important factor in the economic life of working people today, second perhaps to the holding of a job itself. The extending of credit or financing of money is really one and the same thing to us. It makes no difference whether I extend credit to a customer or whether he borrows money to pay me, the purport of this bill could be instrumental in deciding whether or not I can do business with a customer. Certainly I do not want to do business with him if he does not have the cash in some cases, and in other cases he cannot do business with me if I cannot arrange on my own the credit to cover the particular business transaction we have in mind.
I believe that my last comment has really brought us into the heart of the problem, one that consideration of any legislation dealing with interest always brings to mind. We must provide or maintain an incentive for the people with money to lend money to those who need it. Expressed another way, people who have money do not want to lend it unless there is a reward for allowing someone else to use it. People can invest money in many kinds of business, the object of course, always being the same, to earn a profit. If there is going to be money available for loans the lender must be assured of a profit and he seeks the highest profit he can obtain.
A major factor in determining the amount of profit that is made in the money lending business is, of course, the interest rate. The interest rate is determined to a certain extent like the price of other commodities is determined and there is the consideration that you want to get the best price and still get a lot of customers. The borrower would like to get his money for nothing and somewhere in between the money-for-nothing viewpoint and a desire for large profit is a mutually agreeable rate of interest that must be reached before money will be loaned or borrowed.
The bill before us today does not attempt to set an interest rate for everyone but it does set a maximum interest rate which can be demanded or paid. If we are to make an intelligent decision on the merits of the proposed bill we are forced to consider the factors which influence interest rates. As in the case of other commodities which are bought and sold, there are such factors as market fluctuations in the money market.

Interest Act
Usually an overabundance of goods in a store leads to sales at cut prices. In the financial world large supplies of money available to borrowers usually means that the interest rate will have a tendency to go down.
We should also bear in mind that in those cases the lender is himself a borrower so we must consider not just the amount of money that a finance company, for instance, happens to have on hand during a particular year, but we have to consider the amount of money his financial supplier happens to have on hand. Sometimes the amount of money available in the consumer finance field is not quite adequate to meet the demand of the credit buying of the nation during a particular period and this relative scarcity in the secondary sources of supply puts an inflationary pressure on the interest rate right down the line. I do not pretend to be an economist but I do have some experience and know what the effect is on my friends and constituents when they find themselves unable to get the amount of credit they require from time to time.
The scarcity of secondary supply of money may mean not only that the interest rate may rise somewhat but the secondary result of the inability of the usual consumer credit supplier to meet the demand might mean that new sources of money supply may enter this field; that is, there comes a strain on friends, relatives, the pawnshop or perhaps the poor corner grocer who, at a time when he finds his usual credit supply being restricted, is not able to collect at the usual rate from his customers.
Somewhat analogous to the question of supply of money generally, is the question of the number of suppliers. It is a well-known marketing principle and in fact it is one of our strongest beliefs that healthy competition is a very important factor in keeping prices down. Therefore competition in the money lending field is an important factor in keeping interest rates down. There is at all times a natural limit on the amount of interest a person will pay to any of the usual established money lending or finance institutions. There is keen competition between the various companies or agencies engaged in the finance industry themselves. They all want the business and there is a natural pressure driving interest rates down from the usual marketing device of attempting to attract more business than the competitor by making the price of the goods cheaper. Applying that to money it simply means that people who wish to borrow shop for money in the same way they shop for anything else. They try to get the cheapest rate of interest.
As well as the competition within the industry itself there is competition from what

I will term irregular or casual sources of money supplied, that is, the friends or relative or occasional lenders. Such irregular sources of supply play a more important part as the scarcity of money becomes evident, or the cost of it from regular sources seems to be out of proportion to the amount of good the borrower feels the loan will do him.
So far I have only mentioned competition among the lenders as a factor in depressing the interest rates, but along with this of course is the other side of the picture, namely the demand for money, or perhaps the competition for money among the borrowers. Canadian people seem to have spending patterns which may vary almost like the weather. At certain times there may be a great rush of consumer buying on credit; at other times there may not be such a demand for that type of money but there is a great demand for finances for expansion of or investment in small businesses, for the development of a new idea or the possibility of industrial development.
The point I am illustrating is that not only may there be a great demand from one type of borrower, or a great amount of competition for one type of lending money, but there may be a demand for other types of lending money, and the competition therefore between the lenders as borrowers from their sources of supply may have an inflationary effect on the interest rate they have to pay which, of course, is felt all the way down the line.
I think I have perhaps said enough about the factors of demand and competition as inflationary or deflationary pressures and as factors affecting the interest rate; they are after all usually broad underlying factors, which the general public is hardly aware of. The most important factor in so far as most people are concerned is that simple word "risk". Certainly, if interest is the reward for allowing someone else to use your money, some part of the interest at least must be the lender's reward for taking the risk that he may lose his money. On an individual transaction the amount of reward by way of interest will set the limit on the amount of risk the lender will take. In plain English, that is the little gimmick that says whether or not the bank or the finance company, or my friends, will lend me money at all.
For the sake of convenience, I would refer to this as the immediate risk factor. It is immediate in the sense that it is the biggest single factor in determining whether or not I can borrow money at a particular time. I think I should now state that the one word that bothers me the most about this bill is that the rate of interest we would arbitrarily

set as a ceiling could fall short of the incentive required to cause any lender to lend money to my constituents or to anyone else at a time and for a purpose which might be a very good and sound reason for them to borrow at that time. In other words, maybe they could not get money when they needed it. I am distressed at the thought of any of my friends paying interest rates higher than those mentioned in this bill, but I am even more distressed at the thought that I might prevent them, or bar them completely, from getting money which might be desperately needed. I will not labour the point too much. I am sure we all have some acquaintance with situations where a very high interest rate is much less important than being able to get some money somehow.
This, of course, is the risk factor on the basis of the single transaction and the direct effect on the interest rate for that single transaction. Risk, however, has an over-all effect on the interest rate covering any particular class of borrowing. There are always some losses. These losses in the money-lending business are part of the cost of running that business. They are just as much an expense as the office help or the office rent. As part of the expenses of the business they must be covered by the selling price of the product. Every borrower, therefore, must pay part of the cost of the losses in his class since it is reflected in the price. That means that the interest will go up or down, depending on how losses have been lately on that class of loan.
Risk is so important-a direct factor and an over-all factor-that lending institutions are classed by the type of risk they run. To put it in another way, while one may lend money on business firms the other may lend money on mortgages and still others may finance only car purchases. It is easy, I think, to see why I am troubled by an arbitrary interest ceiling, when risk is such an important factor in setting the interest rate.
Perhaps it might help to deal just a little with some of the risk factors, such as the length of time of the loan. Obviously, the longer the loan the more chance there is that the borrower may become ill or lose his job, or have sickness in the family. Long term loans actually might see almost a complete change in most of the risk factors. Since it is so hard to judge what might happen, one good way of meeting changed conditions is to try to get as much security as possible for the loan. Security is, of course, merely a means of reducing the risk and the more security the easier it is to borrow at a lower interest rate.
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I think I would be wasting the time of this house, Mr. Speaker, if I got into a long involved discussion of long term, highly secured loans. The bill before us would really affect only the short term borrowers- with little or no security. In this class I suppose the car financing and the personal loans are the two largest groups of regular finance dealers. There would, of course, be a host of unorganized lenders who might also be affected.
When I mention car financing, I think we should really consider other laws which enter into the picture and affect rates of interest. In Alberta, as in many provinces, we have a conditional sales act. The most important clause in that act about this subject is the clause limiting the action that may be taken to collect. The act simply says that if a car is repossessed by the finance company it can no longer look to the borrower or buyer for further payment. If the car is worn out when retaken, the sale price may not meet the balance owing and someone takes a beating. This is just another risk factor. Frankly, I feel that a direct effect of the bill before us will be to increase the down payment required on not just cars, but on trucks, tractors, household furniture, and so on.
I do not want to get involved in that very involved argument as to whether or not people should or should not finance so much. I want to leave it to them. I feel that my constituents are grown-up, sensible people, and are able to manage their own affairs. If they want to pay more cash down on a car they can. If they are not able to, our action here might prevent them from buying material things they want. I do not think I am stretching things when I suggest that they might have to keep on driving an old car or living in an old home, or not replacing old furniture because of the action we take here. We would then have defeated our own ends and possibly I would have a constituent mad at me because of the action I had taken.
I want to protect my people as much as I can. I want to help them in whatever way I can. However, I am a little afraid that the bill might not provide as much protection as we want and it might hinder in the manner I have suggested. I think we must give much thought to our most important safeguard, the good common sense of the ordinary Canadian citizen. His idea of what he wants or needs might not be the same as mine. Each of us may find himself thinking that our neighbours are unwise on some occasions in the way they handle their money. I have some friends who I think spend too much on sports equipment. Maybe they do not

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make a big enough down payment. On the other hand, that is the nice thing about a free country. We can even be foolish if we want to. I think we must make haste very slowly in this matter. We do not want to make protection an unnecessary restriction on freedom. Here is a thought that must give us pause.
(Translation):


Mr. Adrien Meunier (Papineau):: Mr. Speaker, I have listened very carefully to the hon. member for Assiniboia (Mr. Argue). For many years, the hon. member has been proposing a similar bill in the house, and I understand that when he uses the word "interest" in the bill, he means commission, brokerage, inquiry and other costs, since in all those financial transactions of chattels or movables, the finance companies do all they can to pass collection charges on to the borrowers. In a few moments, I shall give you a few examples of what I mean.
This bill would set a maximum interest rate on transactions between consumers and their creditors, in connection with deferred payments.
According to section 91 of the British North America Act, the legislation governing rates of interest is a responsibility of the federal government.
However, it must not be forgotten that property and civil rights come within the jurisdiction of the provinces, and that they alone may legislate in this matter.
However, since the interest rate in no way affects individual property rights, I believe it would be of service to the consumers if an interest rate were fixed for business transactions involving instalment sales.
In the province of Quebec, there is a chapter in our statutes which governs instalment sales. It has been in force since 1917. The act provides that the seller must require of the buyer, as first instalment, a certain amount in cash, the interest rate being fixed at f of 1 per cent. However, that law applies only to retail sales, not exceeding, in any one case, $800.
There are, however, several exceptions; the law does not apply to the purchase of ships, farm implements, stationary engines and cars, to name but a few items.
Unfortunately for Quebec consumers, this legislation on deferred payments is not fully enforced, and large department stores still

urge customers to buy on the instalment plan, by means of signs bearing the words "no down payment" in big block letters.
As the provincial act provides no penalty for delinquent dealers, it has practically no effect.
In the case of sales in the medium price range, as we know there are carrying charges, covering bookkeeping and administration, as a means of evading the law. Those medium price sales, apply to such items as washing: machines, refrigerators, radios, television sets and certain items of furniture. Charges levied by the stores on such items appear rather unreasonable. However, since the amount of the purchase is not too high, the purchaser eventually manages to pay off his debt.
Yet, Mr. Speaker, there is one field in which interest rates are excessive, burdensome, and usurious, and I refer to the sale of cars, where the item being financed has greater value and is priced higher.
According to statistics, about 70 per cent of car sales are financed sales and, as of 31 December 1957, companies had financed such sales to an amount of $639 million. In my law practice, I am constantly dealing with these rapacious and usurious firms, and I think it is in the interest of the people of Canada that they be told of the methods of operation of those companies. First of all, those finance companies are in competition, and in the past two years, they have been pressing car dealers to get their business. To get this business, they agree to give the car dealers a 25 per cent commission on new cars and 15 per cent on used cars for any amount financed under the sales contract. However, the commission is payable only when the purchaser makes his last payment. Besides appealing to car dealers, they buy space in magazines and newspapers, and time on the radio. You would think, on reading those ads, that they are out to do a favour to people willing to do business with them. They make a show of fair competition and draw customers by alluring advertisement. Yet, in some cases their interest charges run as high as 25 percent, on the grounds of the high cost of inquiries, investigations and commissions.
I would even say that sometimes their interest charges run as high as 35 per cent, in cases of refinancing. Let me give you an example. Suppose a buyer has had his car financed for 18 months and was charged, say, $200 in

carrying charges. Now suppose the buyer runs into financial difficulties and wants his payments spread over a 24 or 30 month period instead of 18 months. In that case, he has to agree to additional finance charges for the new period, based on the unpaid balance, which already includes the original finance charges. In this case the buyer has to pay interest on the original amount of interest that had been charged to him. Other companies are even bolder. At the time the buyer is signing his contract, he is asked at the same time, in the car dealer's office, to sign a note for the same amount as the contract, and the car dealer assigns both instruments, the note and the contract, to the finance company. If the buyer returns the car, he is not credited with the value at the time of delivery and required to pay only the balance, but the car is sold, and the finance company, as true owner, sues the purchaser for the note, under the Bills of Exchange Act, and the purchaser has no choice but to pay.
All those examples, Mr. Speaker, show that the government must take steps to protect people who have to buy on terms. Those finance companies are subject to no control at all, and do just about all they please. I believe the government should investigate their methods and put a stop to their cunning and their greed.
The hon. member for Assiniboia said earlier that, because of the methods they stoop to, finance companies are crippling this country's economy. In fact, many buyers are in financial trouble because finance companies are forcing them to pay money they do not owe. I realize that there are times when people have to borrow, because of particular circumstances, but then the government should protect them against callous, soulless profiteers.
A few years ago, Mr. Speaker, finance companies used to follow a certain policy, but today competition, high pressure and publicity are such that those companies do not know where to stop. I suggest that the government take steps to check their insatiable appetite.
Since 1956, we have had in our statutes legislation which governs small loans not exceeding $1,500. When that act was passed, finance company representatives complained before the committee on banking and commerce, of the predicament in which they were being placed, said that they would not
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be able to stay in business. Since then, they have kept operating for the benefit of borrowers, and none of them ever went bankrupt or had to quit.
If after due inquiry, the government of the time adopted the right legislation for the welfare of the people of Canada and of the borrower, I wonder why the present government could not do the same regarding the interest rate charged by those big companies that are putting the squeeze on borrowers.
I believe, Mr. Speaker, that a committee could be set up-we already have the committee on banking and commerce-and I agree with the hon. member for Assiniboia (Mr. Argue) who suggested that this bill be referred to the committee on banking and commerce where these companies could be asked what profits they are making, and where borrowers' unions and other people concerned, like car dealers could be heard. I am sure that in his report that committee would suggest that a bill be introduced in the house like the one which was adopted when the Small Loans Act was enacted in 1956, an act that would protect the people of Canada.


Mr. L. J. Pigeon (Jolielle-L'Assomplion-Monicalm):: Mr. Speaker, I heartily endorse this bill to amend the interest act. The reason given for the bill is as follows:
Section 2 as at present provides that there is no restriction as to the rate of interest except as provided by statute. The amendment limits the rate to twelve per cent. This section now reads as follows:
"2. 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."
Mr. Speaker, allow me to draw your attention to the advantages of credit unions or "caisses populaires" which are more flexible than any other financial institutions in their dealings with borrowers.
Caisses populaires are also performing an educational and moral function by supporting such activities as campaigns against obscene publications.
There are also farm establishment funds, developed by the Quebec clergy and by the UCC, which lend money at very low rates to farmers' sons who wish to settle on a farm of their own; in a sense, they supplement the provincial farm loans. The Quebec provincial farm loan bureau also loans money at 24 per cent, a world record.

ASSETS:
Bond investments	$1,941,578.84
Miscellaneous investments	 83,350.00
Securities with district unions or
central unions	 925.00
LOANS:
Promissory notes	 29,772.75
Mortgages	 60,900.00
Co-operatives	 49,450.00
Church fabrics and religious
congregations	 67,750.00
Municipalities and School boards	177,500.00
Real estate	 31,600.00
Inventory (furniture, etc.)	....	13,365.42Cash as of August 31, 1958	....	927,838.01TOTAL ASSETS	$3,384,030.02Expenditure	
26,078.27Interest paid	
52,185.92TOTAL	
78,264.19GRAND TOTAL	$3,462,294.21
Mr. Speaker, Canadians in all walks of life should be encouraged to join the caisse populaire movement. Those unions have proved their worth. At first, they had to overcome huge handicaps. The caisse populates of the province of Quebec have now run into difficulties with the chartered banks. I urge the people of the province of Quebec to back the caisses populaires and to help them so that those financial institutions, indispensable to the average Canadian, indispensable to the worker and farmer, might carry on their good work in the interest of the average Canadian.
Mr. Speaker, the current situation between them and the banks is unfortunate. Banks have a place in society. Chartered banks render a tremendous service to society, but caisses populaire are indispensable to society. I would even say that, with all due proportion, they are more beneficial than banks, because caisses populaires take moral values into consideration. The city of Joliette has been expanding at an extraordinary rate in the last few years, partly due to loans granted to workers. Do you believe, Mr. Speaker, that other financial institutions, such as loan companies or even banks would have shown confidence in the workers to the same extent as did the caisses populaires? I doubt it, because not only do caisses populaires loan money at low rates that all Canadians can afford, but they take into account the moral character of the borrowers.

I associate myself with all organizations which have protested against the attitude of chartered banks, and I again urge the caisses populaires to stand firm and to continue their good work. They can be assured of the full co-operation of the present member for Joliette-L'Assomption-Montcalm. I cannot speak for my colleagues, but I know others in this house share my views and feel that chartered banks are not acting in good faith, nor in the interest of the average Canadian, in seeking to cause hardship to the caisses populaires. The people are on the side of the caisses populaires because they are closer to the people than any other financial institutions.
I support the bill proposed by the hon. member for Assiniboia, and I hope it will be passed.
(Text):


Mr. Gabriel Roberge (Megantic):: Mr. Speaker, I have no quarrel at all with the hon. member who has just resumed his seat, but I should like to enlarge somewhat the scope of the discussion on this bill, and in order to put before the house what I have in mind I think it would be a good thing for me to read section 2 of the act as it now exists and, also, the proposed amendment.
In chapter 156 of the Revised Statutes of Canada, section 2 of the act reads as follows:
Except as otherwise provided by this or any other act of the parliament of Canada, any person may stipulate for, allow and exact, on any contract or agreement whatsoever-
I should like to underline, at this point, the words "contract or agreement". The section continues:
-any rate of interest or discount that is agreed upon.
Section 2 as it is intended to be amended, reads as follows:
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, defaults or renewals or otherwise-
I should like to call attention to the presence in this section, also, of the words "contract or agreement".
If we refer to the act as it now stands we see, in section 3-hon. members will perhaps excuse me if it is more convenient at this point to continue in French.

(Translation):
Section 3 reads as follows:
3. Except as to liabilities existing immediately before the 7th 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.
And I point out again that section 3 contains the word "agreement".
I am therefore led to think, Mr. Speaker, that one might question the applicability of the amendment now under debate and the authority of the parliament of Canada on this subject. The hon. member for Papineau (Mr. Meunier), in referring to that point, said that according to section 91, subsection 19, of the British North America Act, the federal government could legislate on money interest. And he went on to quote section 92, subsection 13 which says:
In each province the legislature may exclusively make laws in relation to property and civil rights in the province.
All hon. members will agree that the central government has the authority to legislate on interest, while the provinces alone have the authority to legislate in relation with property and civil rights.
At this stage of my remarks, Mr. Speaker, I must recall an earlier statement of mine, when I said that section 2 of the Interest Act insists on the word contract or the word agreement and leaves open the rate of interest, but that section 3 of the same act stipulates that, in the absence of an agreement, the rate of interest shall be 5 per cent per annum.
Consequently, in the case of contracts between individuals, a doubt comes to my mind and I wonder if the central government has authority to legislate in such case.
As you no doubt know, Mr. Speaker, there are various constitutional theories. First, there is that of the unoccupied field. On that count, I must say some provinces, namely the province of Quebec, have already occupied that field, as my hon. friend for Papineau (Mr. Meunier), pointed out a moment ago. When he spoke of instalment sales in the province of Quebec, he said, in fact, that they came under the civil code, which also provides for a yearly interest rate of 9 per cent for a period up to 24 months.
There is also another chapter, in our civil code, concerning interest on loans. But other provinces have also legislated in the field of instalment sales, although I do not think they
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did so in regard to interest rates particularly, but rather in regard to instalment or credit sales.
Chapter 34 of the Revised Statutes of New Brunswick, 1952, entitled "Conditional Sales Act" includes several provisions which are identical to those of the Quebec civil code.
The province of Alberta has also legislated in the field of instalment sales, and I would refer the hon. members to chapter 66 of the Revised Statutes of Alberta, 1955, entitled "An Act Respecting Agreements Relating to Sales on Time and to Cash Loans".
Mr. Speaker, a study of the provincial statutes shows that at least three provinces have legislated in the field of instalment sales, of long term or short term loans, or interest loans. Furthermore, there is another theory, that of ancillary powers. I still have some doubt in my mind about this, which I should like to outline to the house.
You will recall, Mr. Speaker, that in 1919, I think it was, the federal parliament legislated in the field of bankruptcy. There was some doubt at the time, because bankruptcy impinged on civil and property rights, as well as on the jurisdiction of the provinces. The case was referred to the Privy Council, which stated that the federal government could legislate in the matter, because it was a case of ancillary powers.
I have no doubt, as I said, that the central government can legislate on interest rates, but can such legislation go as far as to require the parties involved not to go beyond a maximum rate of interest? That is where a doubt arises in my mind, and in view of this doubt and of the other reasons given in this house, particularly by my hon. friend from Papineau-in fact, this suggestion was made by the mover of the bill we are now considering-I feel that all aspects of this legislation should be referred to the committee on banking and commerce for consideration.
Neither 1 nor the members of this house have any doubt that finance companies, such as small loan firms, automobile financing firms or firms that loan money under provincial legislation on instalment sales, whether in Quebec or in other provinces such as New Brunswick and Alberta, are charging rather high interest rates. In many cases, they also charge heavy handling fees and investigation fees against which the people

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must be protected. On the other hand, I feel there is some doubt as to the federal parliament's constitutional jurisdiction, and that great care should be taken to avoid infringing upon the provincial field of civil rights and property. For this reason and for those advanced by the hon. member for Papineau and other members, I therefore move the following resolution:
(Text):
For all the reasons I have given, because I have some doubt regarding the competence of the federal parliament to act in this regard because it seems to me it might be overlapping provincial rights, and for the other reasons given by the hon. member for Papineau (Mr. Meunier), I should like to move, seconded by the hon. member for Drummond-Arthabaska (Mr. Boulanger):
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.


Mr. G. H. Aiken (Parry Sound-Muskoka):: Mr. Speaker, I am rising to speak at this time in connection with this bill, and an amendment of which I had no previous knowledge. However, it is my feeling that the amendment that was just introduced is a proper one.
At the outset of my remarks I feel I should state that it is my conviction that there must be some limit imposed upon the amount of money that people may borrow and upon the interest rates which they may be obliged to pay. The bill as presented here, however, in my view is too definite in that it states an interest rate of 12 per cent. That is the principal fault of the bill. I do not believe an interest rate should be set at 12 per cent or any other figure without there being held a full inquiry so that members of the committee could examine expert witnesses from the finance field, the lending institutions and banking institutions. There should be some opportunity for investigation and discussion of this matter other than the limited opportunity provided here today. We should not arbitrarily take out of thin air the figure of 12 per cent. Nevertheless I feel the bill is a good one and in that I seem to be in agreement with most hon. members who have already spoken this afternoon. I should now like to draw a distinction between this bill as it relates to financing and the small loans bill. I do not wish to enter into a discussion of the relative merits of the two bills but merely to discuss the different types of lending which are involved.
The present bill concerning interest rates, as I understand it, includes all forms of interest except that charged on small loans as

defined by the Small Loans Act. I feel that the subject of interest rates should be divided into three categories each of which has its peculiar problems. The first would be mortgage interest; that is, interest charged on mortgages held on land, or chattel mortgages which are properly secured. The second would relate to bank interest and the third to purchaser credit. Thus far today the main body of discussion has centered around the subject of purchaser credit which normally involves a lien or a conditional sales agreement.
The hon. member for Assiniboia (Mr. Argue) in opening the debate indicated the enormous volume of credit financing that is taking place in Canada. In one sense he may have refuted his own argument. The volume of credit buying in Canada indicates that we must not act in such a way as to completely discourage such buying or cause the drying up of credit purchasing. It may be that imposing a limitation on interest rates would not have that effect but I feel that the imposition of a maximum of 12 per cent would have a detrimental effect on credit buying in general.
I should like to talk about loan sharks for a moment. Rather free use of that term has been made in the house today and X am not sure all of the comments made in this connection are justified. I do not dispute the fact that we have loan sharks in Canada. No one would be so naive. But perhaps we are being unfair to some of the larger companies who carry on well established businesses that are closely scrutinized and whose operations are aboveboard, to refer to them as loan sharks.
I was interested to see what a shark was, and I sent out for a dictionary. It says that the shark has not this name for nothing; that he will make a morsel of anything that he can catch, master and devour. I think that is the definition that the hon. member for Assiniboia places on the word and I agree that there are such people. However, I understand that there are some 150 purchase credit companies in Canada. Perhaps among the smaller of these there are very bad practices followed; in fact, I know there are. The main companies are the Industrial Acceptance Corporation, General Motors Acceptance, Traders Finance and Canadian Acceptance Corporation. These four companies handle 80 per cent of the business of purchase credit companies in Canada; the other 146 companies handle comparatively smaller amounts of business. I do not think we should say that all of these companies are loan sharks. I am not rushing to defend them but neither do I think we should be unfair.

I should like to speak for a moment on the three types of interest which I previously mentioned. Firstly, there are the mortgage loans. I would be inclined to agree with the hon. member for Assiniboia that on mortgage loans perhaps a maximum of 12 per cent interest, on a properly secured land mortgage, would not be unreasonable. Certainly, the average rate over the last 20 years at least that I have been in the practice of law has run from, let us say, 4J per cent to 8 per cent, and examination of previous documents indicates that mortgage interest very seldom ever rose above 8 per cent per annum.
There is the present difficulty of discount mortgages, and the hon. member for Assiniboia mentioned the fact that the interest rate is actually carried at a certain amount but when the mortgage is discounted the interest rate goes up. I think that we should not try to legislate mortgage interest on a sale basis. After all, when a person puts a mortgage on the market he wants to sell it and get cash. A lot depends on the buyer and what kind of land security he is paying for, how long the term is, whether it is a first or a second mortgage, and whether the owner of the property is in good circumstances. But, on the question of original mortgage loans, I would think that 12 per cent might be a reasonable maximum.
I now turn to the second type, namely that of bank interest. There again perhaps 12 per cent might be a reasonable maximum. The banks are very careful with respect to the people to whom they lend and in fact are at times unduly restrictive. A good many people who would like very much to obtain small loans are in this position: Because they have not had a previous history of any kind with a bank they are unable to secure bank loans and that puts them into the hands of the third class of persons I mentioned, namely the purchase credit companies.
I feel that to set a maximum of 12 per cent for this group of people would be unreasonable. I think the rate would be too low because the people who cannot get a mortgage loan on their real estate, either a first or second mortgage, or the persons who cannot get a bank loan, are not in very good financial circumstances. I have no doubt that that is the type of person that the hon. member for Assiniboia intends to protect, a person who just has to have some money and he cannot find anyone who will give it to him on a normal basis. I feel that to put too low a maximum on the amount that a person can borrow, or at least the interest rate at which the person can borrow, would not bring about the desired result. I am afraid it would dry up the small loans and the purchaser credit.
66968-9-61J
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I think we would in fact be saying to a man who is desperate for money, "We know you need the money; we are sympathetic with you; you have tried everyone. We want to protect you; we know you cannot get your money at 12 per cent but that is your tough luck and we are going to protect you whether you want it or not." I am afraid that that might be the result of setting that rate of interest.
Some of the securities and risks undertaken by purchaser credit companies are pretty serious ones, particularly on motor vehicles and appliances. They are most difficult to repossess; they are subject to being damaged to such an extent that they are useless in a very short time and in a good many cases it is very difficult for them to recover. Therefore, the risk being higher, the rate of interest must be higher.
I am not here to speak for the finance companies. On the contrary, I practise law in a town where I am constantly consulted by people who are in what the hon. member for Assiniboia would call "the clutches of the finance companies". Time after time I have had people come to see me who have felt that they have been badly used in their dealings with a company. I have had people tell me that they had entered into certain deals on misunderstandings and that they regretted them. Therefore, I see the problem from the point of view of the person who has to deal with a purchase credit company, particularly in connection with automobiles. I am not sure that it is always the fault of the company. I think that the dealers come in for their share, and in a good many instances the dealers who are anxious to make sales take the papers and turn them over to the finance company in such a way that the finance company lends the money but really takes a bad security. In a case such as that, Mr. Speaker, I feel that the dealers in many instances are actually agents, not in a legal sense but in an actual sense, of the finance companies because they accept the forms and they fill out the papers that the purchaser requires and then sell them to the finance company. In an instance such as that a good many members of the public are not given a good deal, but I am not sure that the interest rate has very much to do with it. I think probably out of five cases that I have had to deal with recently at least two of them were the result of a person being very stupid in entering into a transaction that he should never have gone into. I think it is the experience of the house that you cannot legislate against stupidity nor can you legislate to protect people against their own actions when they know full well what they are doing.

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I should like to speak for a moment on another matter, the interest rate placed in the forms that are presented to the buying public. A lady came to me one time and said to me, "I have found just about the best finance company I ever heard of. They are lending money at 2 per cent. I just filled out a form today and they lent me $500 at 2 per cent. I never thought there was a finance company like that in Canada." I said I should like to see the form and she brought it to me. The figure "2" had been inserted in the contract but in the small print were the words "per month". She had signed a contract to pay 24 per cent per annum rather than 2 per cent.
If we are to give thought to what rate a person may pay we should also give thought to making it very clear to people what they are paying, and the use of an interest rate per month should not be allowed. This is very much in keeping with other sections of the Interest Act relating to regular monthly payments which specify that a mortgage must contain the exact interest rate per annum which is being charged. I think that is one instance where people are often misled. They think at the time that 2 per cent is not very much and they do not realize what is meant until they read the contract in full.
In 1957 sales of merchandise which was financed amounted to over $1 billion. These were goods sold and distributed to the public through instalment buying. If instalment buying were not encouraged these goods would not have gone to the public. They would not have been marketed. There were one million individual accounts opened by people and of this figure 70 per cent was handled by the known finance companies and the other 30 per cent by people who do their own financing. I merely point that out to indicate that for the sake of the economy of the country we should not take action that would reduce too much the legal maximum interest rate because it would have the effect of diminishing the purchasing power of the public and also of drying up credit for people who would like to buy.
Certainly it is my own feeling that credit buying for the individual is not a good thing. I feel, as do a good many other people I know, that if you cannot afford a thing you should not buy it. However, that seems to be just about the last theory that most people in this country follow.
Finally, Mr. Speaker, may I say that I am in agreement with the principle of the bill but I am not in agreement with the arbitrary setting of the rate at 12 per cent. I think it is too low and that it would have an adverse effect. If we were to go into the matter in a

committee perhaps we might find out what the effect of the Small Loans Act has been. As the hon. member for Assiniboia said, it may not have been as serious as the companies have indicated. If we had such an examination I think we might be able to arrive at a rate of interest which, while maintaining the purchasing power of the people and keeping credit available, would still be sufficient to protect the general public from their own folly and from the absolute necessity of paying exorbitant rates. I have been speaking on the amendment and I am in favour of referring this whole matter to a committee.


Mr. Murray Smith (Winnipeg North):: Mr. Speaker, when I saw this bill on the order paper I endeavoured to prepare myself for debate on it by reading some of the past debates in Hansard and, having done so,
I feel I should congratulate those who have spoken on this subject in previous sessions of parliament. In particular, I was very impressed with the comments made by the hon. member for Winnipeg South (Mr. Chown), the hon. member for Davenport (Mr. Morton) and the hon. member for Burnaby-Richmond (Mr. Drysdale). I think they contributed a great deal to debates on this same topic in past sessions.
I should also like to say, speaking now as a new member of the house, that in my opinion one of the finest traditions of parliament is private members' day and private members' hour. An opportunity is certainly provided for every member of the house to stand up and present his views on important matters affecting the nation as a whole and its citizens. For that reason I should like to take exception to the concluding remarks of the hon. member for Assiniboia (Mr. Argue) when he urged that members of the house vote on the bill rather than voice their opinions. I suggest to him that there are a great many new members in the house who have not had an opportunity to express an opinion on this matter in past parliaments and I think it would be beneficial to the debate to hear from as many of the new members as possible because they may very well put forward some new ideas with regard to this important subject. I should also like to mention that I noticed that the hon. member for Assiniboia, while urging others to refrain from speaking, took up nearly the full time allotted to him.


Hazen Robert Argue: I wonder whether the hon. member would permit a question. Would the hon. member be in favour of having the vote on the bill at one minute to ten o'clock tonight?


William Murray Smith: Mr. Speaker, I hope to acquaint the hon. member with my views in that regard during the course of my speech on this subject.


Mr. Woolliams:: He will be finished before a minute to ten.


William Murray Smith: I would also point out to the hon. member that there is an amendment before the house which has to be disposed of before the vote on the bill takes place.


Hazen Robert Argue: We can do that by a voice vote.


William Murray Smith: I should like to say at the outset that I realize, and I dare say most members of the house do, that there are problems with regard to money lending in this country. We all know the hardships that young married couples have to face in order to establish themselves and provide security in the form of a home, furniture and so on for the family that they inevitably intend to raise. We know that in order to acquire a home they must take out a mortgage'and, normally, must pay interest. We know that a great many of them, in order to buy furniture, must finance it either through the small loans companies or through the firm from which they purchase the goods. Can these really be considered problems or are they something that is part of our way of life today?
I think the statistics enunciated by the hon. member who introduced this bill would indicate that credit today is a growing part of our society and is a business common to free enterprise countries. Those who have spoken on this bill thus far have presented their views for and against, but the majority of those who have spoken have spoken in favour of it. I should like, for a moment, to direct the attention of the house to some of the arguments that could be advanced for the other side.
First of all, I would say that a bill of this nature which is introduced to restrict interest rates to a certain percentage is a very important bill and should not be considered lightly by this house, should not be considered in a hurry. I feel therefore, that the amendment that has been presented is a good one, and that the bill should in fact be referred to the committee. There is, without a doubt, a need for money-lenders in this country. As I mentioned before, the statistics quoted by the hon. member for Assiniboia indicate this need. However, I should like to point out also that many of these statistics that were presented to this house today have been presented by him in past speeches, and to a large extent those statistics have not been revised, even to the
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extent of two or three years ago. I feel that it is impossible to accept those statistics because they are obviously not up to date.
We have not, either in this debate or in past debates on this topic, received a satisfactory explanation as to how the figure of 12 per cent is arrived at. I feel we would be doing an injustice to our country and to our economy if we introduced legislation restricting interest rates for the simple reason that we felt they were too high. I am sure we could find people in the country who would say, no matter what figure we introduced, that the rate was either too high or too low. I feel that in order for this house to arrive at a decision that 12 per cent is in fact a fair figure we should have some indication as to how this figure was arrived at. I should like also to point out that the figure of 12 per cent, as applied to a department store, means this: if someone goes into a department store and wishes to purchase a $20 article which he finances for three months, under this legislation the most interest that could be charged would be 60 cents. I wonder whether or not that is a sufficient charge to enable the company to economically carry the necessary expenditures to provide a staff to accommodate the public who wish to open charge accounts.
I should like also to point out at this stage that in the past the hon. member for Assiniboia has introduced legislation dealing with small loans companies. I would say that if such legislation were passed, and if the bill now before us were passed he would be paving the way for unregistered money lenders to charge a higher rate of interest than registered money lenders would be able to charge. He would be working in reverse, so to speak, because instead of being able to charge a little more interest for a small loan a person would be held to a certain percentage for a small loan which would be less than the one per cent per month for which this bill provides.
I do not pretend to be an expert in finance nor an expert in credit, and I would say that I do not believe the hon. member for Assiniboia is holding himself out as an expert in finance. However, it is interesting to note that in the course of his remarks he has used such phrases as "fantastic and exorbitant interest rates". He used the term "loan sharks", and talked about saving the Canadian people tens of millions of dollars if this bill were passed. I suggest that these are his opinions and it is the duty of this house to find out if those statements are really based on fact or if they are merely propaganda to appeal to the voters of this country and to persecute institutions that are, in fact, trying to carry on legitimate operations and give

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the public a service that they evidently need. I should like to indicate to the house what might possibly happen if legislation were passed which set interest rates too low.
First of all, I think it is quite obvious that if interest rates were too low and a profit could not be made a great many of the small loan companies would immediately liquidate and go out of business. I think that would lead us right into a black money market because I think everyone will agree that if there is a need for money, then the person who wants to borrow will always find someone who will lend it to him regardless of what legislation may be passed by the federal government. In this connection, I would point out that these statements of mine are borne out by publications dealing with the same situation in the United States. It has been found that in states where the interest rates were too low the loan companies immediately liquidated and left those states. Then the true loan sharks came into operation from neighbouring states and charged as much as 500 per cent interest. I think that is a thing we all want to avoid because by bringing in legislation which places interest rates too low we are bringing about the very thing we are trying to avoid.
Then, this question could be asked: If interest rates were set too low, from where would the people borrow who wished to borrow? Keference has been made to the second mortgage business. I suggest that in this business there is a great deal of risk in connection with certain second mortgages. I have had some experience with them. A young couple who wish to buy a home may find themselves in a position where they do not have a high enough down payment in order to get a home through the National Housing Act. They therefore purchase a private home. In order to do that, they need a second mortgage. I have seen people pay as little as $500 down on a house and then finance it with mortgages. That procedure certainly involves risk as far as the lender of the money is concerned because if real estate drops by a mere $500 he can be out of pocket that amount and indeed more, if account is taken of his expenses.
I should like to mention to the house-and I am sure everyone will agree-the fact that no one is compelled to borrow money. The hon. member for Assiniboia stated that the only people who borrow money, or the majority of people-I do not want to misrepresent him but I believe he said this-in his opinion, who borrow money from finance companies or from small loan companies are people who have heavy doctor bills or hospital bills to pay. I again submit to the house

that this is his opinion only. He has not given us any facts to back up this statement. Before any legislation of this kind is passed I think we should have the facts before us, and should find out just who are the customers of these small loan companies.
I may say that when I noticed this bill on the order paper I did a little bit of investigation on my own. If the hon. member would take the trouble to ask some of these people who are in the business, instead of criticizing them all the time, he would find out some of the facts. I submit to him that the small loans companies, financial companies and money-lenders all across Canada do business with people who come back to them when they want money again and who refer other people to them. I suggest to the hon. member that some of these farfetched examples of his are extreme cases and are the exceptions rather than the rule. I therefore think it is a good idea to send this bill to a committee so that these facts would come out in the open and we would find out just how authentic are some of the wild statements made by the horf. member for Assiniboia.
The hon. member for Assiniboia has classified anyone who lends money as a loan shark. I find that classification difficult to follow and difficult to go along with.


Hazen Robert Argue: That is not an accurate statement. I said that anyone who lends money at the rates about which I was talking in my opinion was a loan shark.


Some hon. Members:: Order.


Hazen Robert Argue: I said that if the rates were set at 12 per cent no one would be a loan shark.


William Murray Smith: I take it that the hon. member means that a person is a loan shark if he charges, for instance, 54 per cent interest.


Hazen Robert Argue: Correct.


William Murray Smith: I take it that the hon. member suggested that the Hudson Bay Company or the T. Eaton company and Simpson-Sears charged that rate.


Hazen Robert Argue: On some purchases; yes.


William Murray Smith: Therefore I take it that the hon. member means that they are loan sharks.


Hazen Robert Argue: That is correct.


William Murray Smith: Mr. Speaker,
I have had dealings with these companies and I think they are doing a very good job in this country. They are reputable concerns. People have enough confidence in them to purchase annually goods worth millions of dollars. I certainly refute a statement of

that nature. I should like to say that there are in this country so many department stores that competition is extremely keen in the department store field. I think the hon. member will agree with that statement. Hence if any one department store were making any finance charges that were out of line with those of another store, I think the people would soon realize what was going on and would go to the place where they could get the best bargain. I think the hon. member will agree that is only human nature.
The hon. member has stated that a great many people are brought in to these small loans companies because of their advertising program. I am not disputing that statement. I think possibly there is some merit in it. However, to single out one group in our society on that score is wrong. I think the hon. member will be obliged to agree that advertising today has on the whole degenerated to a level which is not to be considered right. I suggest to him that even the advertising of his own party has degenerated to that level.
By controlling interest rates are we not in fact controlling profits? For instance, if I have a certain amount of capital that I wish to lend and if the House of Commons sets the interest rate that I may charge on that capital, they are in fact controlling the profit that I may earn in what I choose to be my means of every day living. I suggest that a step of that nature is the thin edge of the wedge and that it is definitely a step toward socialism. Every piece of legislation that is passed by a government infringes, to a certain extent, upon a right of the individual in a free enterprise system. If we are to pass a bill to control interest rates and to control the profits that certain people can make, then should we not go further and control what other people can make? I suggest that that is socialism, pure and simple, and I for one would not like to see it come about.
Mr. Speaker, may I call it 6 o'clock?
At 6 o'clock the house took recess.


[Stage Direction]
AFTER RECESS

The house resumed at 8 p.m.
William Murray Smith: Mr. Speaker, at six o'clock I was endeavouring to outline some of the arguments which could be advanced against this bill by persons or firms engaged in the money-lending business. I was also endeavouring to point out to the house that a great many of the statements made by the hon. member for Assiniboia were merely an expression of his personal opinions and did not appear to be founded on fact.
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I realize, as do other hon. members, that there are persons engaged in the moneylending business who, it might be said, persecute some individuals who borrow from them; or, at least, that there are people engaged in this business who follow unscrupulous practices, but I do not think it is fair for us to include everyone engaged in the money-lending business in this category and label them as loan sharks. There are, it is true, loan sharks in our society; these are the ones we want to keep from getting a hold on any individual.
For these reasons I think this bill should be sent to the committee in order that both sides of the argument may be analysed and in order that the committee may be able to bring back to this house a report which could be accepted and which would be founded on fact.
I am one of those who always try to look at both sides of the question and refrain from making any prejudgment, and I do not feel it is within the province of any hon. member of this house to make wholesale accusations against those engaged in any type of business. I feel that these are also the views of this government and that when a committee, after having heard both sides of any argument, makes a report to this house, that report will be proceeded on in fairness to both sides. I believe the committee could work out a ceiling percentage which would be acceptable both to those who are engaged in the business and to those who rely on these firms and individuals for financial aid when required.


Mr. Erhart Regier (Burnaby-Coquitlam):: The amendment which has been moved means in effect that approval should not now be given to the principle of this bill but rather that the measure should be given further consideration in the banking and commerce committee.
As the hon. member for Assiniboia (Mr. Argue) stated, he welcomes the possibility of this bill, or a bill such as this, being referred to the banking and commerce committee for complete investigation and for possible amendment if the committee, after investigation, found amendment to be necessary. We are a little concerned that so many members of the house do not wish at this time to express endorsement of the principle of the bill and that they should wish to have it referred to the committee before endorsing the principle. I have no qualms of conscience at all about being ready to endorse the principle of the bill at this time. I do not see why we cannot endorse the principle that there should be a limit placed on the activities of those who are engaged in moneylending. The hon. member for Winnipeg

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North (Mr. Smith) went to considerable length to bring out his opinion with regard to the comments made by the hon. member for Assiniboia. He accused the hon. member for Assiniboia of expressing opinions rather than making statements of fact, and attempted thereby, I believe, to minimize the effectiveness of the wonderful speech made this afternoon by the hon. member for Assiniboia.
It may be recalled that about a year ago I placed on record a case in which a man had been charged an interest rate of 235 per cent. I had all the evidence on that case with me on that occasion. I have here another case-the case of Mr. and Mrs. Wag-enstein of the town of Port Coquitlam who have asked me to use these facts in the hope that some legislation might emerge or in the hope that at least other people will not be taken for a ride in the way they were. The Wagensteins are a very honest and reliable couple living on Hastings street, and on one occasion they needed some money. They have a home which I would value as being worth at least $15,000; even at a sheriff's forced sale it would bring in not less than $10,000. On January 19, 1955, they needed a loan and they gave their home as security. It was a first mortgage; there was nothing owing on this house at all, and the house was practically new. They obtained a loan of $2,400 in return for which they had to sign a mortgage for $3,000 repayable at $75 a month, with 7J per cent interest, not on the $2,400 but on $3,000. They received only $2,400. They had to repay the principal of $3,000 plus 7J per cent interest on $3,000.
The Canadian Bank of Commerce at Vancouver-the Shaughnessy branch at 3070 Granville Street-acted as collection agency for the lady who had supplied the money, a Mrs. Anderson of the city of Vancouver. Here is a case of a chartered bank receiving monthly payments on behalf of Mrs. Anderson, issuing a passbook and registering the monthly payments as they were made. By means of monthly payments this loan was completely repaid in three and a half years. I have been looking over the facts as indicated in this passbook and I find that not only did Mr. and Mrs. Wagenstein pay a bonus of $600 but they also paid interest totalling $398.59. In other words, for the use of $2,400 repayable monthly over a three and a half year period they had to pay a total in charges of $998.59. This, on $2,400 over that length of time, means a real interest rate of 23 per cent. Mr. Speaker, this money should have been available to Mr. and Mrs. Wagenstein at 5 per cent or, certainly, at not more than 6 per cent

interest. If that had been the case they would have saved themselves approximately $800.
The reason why I mention this particular case is because I have permission from the people involved to do so. Another reason is that we in this group hope that by putting actual instances on the record it will help the cause a little bit. Still another reason is that I want to emphasize the point that here is a skilled worker, a toolmaker who is employed in a mill. His services are much in demand and he has never suffered because of unemployment. Although he receives a fairly decent monthly income this man and his family have been robbed-I cannot think of a more apt word-of $800 of purchasing power which was lost to them. This type of thing is going on all across Canada. Canadian people are being robbed of purchasing power which they badly need at the present time to pin-chase the necessities of life and to supply employment to agricultural and other producers in this country. I certainly hope the amendment at least, if not the bill, will be allowed to reach a vote.


Mr. Brunsden:: Would the hon. member permit a question, Mr. Speaker?


Erhart Regier: Surely.


Edwin William Brunsden: Mr. Speaker, if the family in the case the hon. member has cited is so well established with respect to employment and income, why did the gentleman concerned have to borrow money?


Erhart Regier: I did not ask him why he
needed $2,400 at that particular time but there are many reasons why people have to borrow money from time to time. I may say that this family had a little girl in the hospital for almost a year and a half not very long after this incident occurred. There can be cases of sudden illness and many other reasons why people must borrow money at various times.
The gentleman also told me that he went to the bank but the bank was not very interested in supplying him with money over a three and a half year period. It is common knowledge that banks in general are not much interested in lending money for periods of that duration. I have cited this case because the people in this community know the family to which I have referred and they know it is a bona fide case. They know that the family deserved to receive credit at a nominal rate of interest.
We always hear a great deal about the risk involved in lending. In the case of automobiles the finance company runs no risk whatsoever. It is the agent who sells the automobiles who

must underwrite each vehicle that is financed by the finance company. If the purchaser fails to meet his payments and the amount cannot be recovered from the sale of the automobile the agent must make up any loss the finance company may have sustained. They run little risk indeed as is shown by their financial returns.
To say that finance companies lend money with little or no security is, I feel, also not in line with what actually takes place. From my observations the security they obtain usually far exceeds the value of the loan they make. They do not run much of a risk. I fail to see the logic of limiting by law the operations of reputable institutions in this field. There is a maximum that chartered banks cannot exceed. Most credit unions, I know, have provincial limits to meet that have been established to determine the maximum rates that they must not exceed. I cannot understand why so many hon. members feel that these other money-lenders should be exempt from limitations as to interest rates.
I sincerely hope we will follow this evening the usual procedure that has obtained for many years in this house, that is that when a private member has introduced a bill a cabinet minister or parliamentary assistant has replied on behalf of the government and expressed its attitude toward the proposition being put to the house. That practice was followed by the previous government. Either a cabinet minister or a parliamentary assistant would explain to the house the attitude of the government with respect to the idea being put forward in the bill. That has not occurred today but it may happen yet. As the hon. member for Assiniboia pointed out, we usually had a chance to have a vote on private bills. Even although a cabinet minister had spoken against a bill, very often six, twelve or as many as eighteen backbenchers of the government rose at the time of the vote and by so doing endorsed the principle of the bill then being proposed. I should certainly like to see that happen at this time. In that way hon. members who are supporters of the government can show that they also are concerned with the welfare of the ordinary people of Canada who, as has been admitted, must have credit from time to time.
I should like to add this further thought. It is not only the individual consumer who is being penalized by these exorbitant interest rates. There are many small businessmen in Canada who at the present time have to patronize money-lenders who charge extravagant interest rates. I have even spoken to hotel owners who have told me the only way they could obtain money for necessary 66968-9-62
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renovations was to deal with finance companies and pay interest charges of an exorbitant nature. These high rates of interest are a burden on the economy and they also impose misery and hardship on that section of the population with which this parliament should be most concerned, the ordinary people of Canada who need its help. The finance companies do not need the help of this parliament and they are not asking for it.


Mr. R. J. McCleave (Halifax):: Mr. Speaker, my first words in taking part in this interesting debate are to express envy that the hon. member for Assiniboia (Mr. Argue) should have somebody come to his door and offer to stake him to a sum up to $3,000. This has never happened to me.
There has been an interesting dispute here for part of this afternoon and evening as to whether those who charge high interest rates may properly come under the classification of loan sharks. I am one who disagrees emphatically with this designation. I offered a description of these people last year and I proffer it again to the house for what it is worth. All of us are familiar with the phrase, "men in grey flannel suits". I paraphrased it by saying, "men in grey fleece suits". Furthermore, I think that the designation is probably improper. It does not properly describe the habit of fish. In this case, we are trying to say that the loan sharks throw the bait at the people.
In the last year there has been one significant development in the credit field of Canada, which has been alluded to only very briefly in the debate that has gone on so far today. I am thinking again of one of the largest banks in the country, namely the Bank of Nova Scotia, which has set up a subsidiary company which deals exclusively in the field of consumer credit. As the hon. member who preceded me has pointed out, the amount of interest that the chartered banks can charge is, I believe, six per cent. In any event for decades it has proved unprofitable for the chartered banks of Canada to get into the consumer finance field. I have talked to bank managers about this. It was their feeling that the loans were so small that it would take some time to check into the credit of the people asking for them. A great deal of bookkeeping was involved. There was always the risk of bad debts and the profit on a large number of loans could be wiped out if even only one person defaulted. Obviously, this is what has happened. The banks have not entered this field, not because they were unwilling to do so but because the rate of return was so low, or indeed nonexistent, that it would have been impractical for them to do so.

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Since the Bank of Nova Scotia took the new step with this consumer finance company, I am informed that the new company is making a very sizeable number of loans at a rate of one per cent per month, which is 12 per cent per year, or the exact figure that the hon. member for Assiniboia has put in his bill which is before us today. I do believe that the effective rate of interest on this subsidiary company's loans, however, is just a bit over 10 per cent.
I do not want to get into the field of what should be charged for consumer finance and those other matters that were talked about this afternoon. I think we would get into a very tricky field indeed if we discussed that matter. It may be all right for somebody to suggest that 12 per cent, or some other arbitrary figure, is a magic number to cure all the ills, but I share the doubts which have been expressed by other hon. members that we can set any specific figure. I would go even further and say that we may have to consider a sliding scale of maximum interest charges. I would like to quote from a memorandum prepared by the Household Finance Corporation of Canada, which was presented for study by the council for social service of the Anglican synod of Nova Scotia and Prince Edward Island. I should say that this is a treatise prepared by a finance company, but I believe it has excellent research facilities and that these words should be given some weight. Certainly, it was accepted by the church gathering that took place in my part of the world. I quote:
One important point which many people fail to recognize is that the costs of conducting a small loans business are dictated by the number of loans made rather than the total amount of the loans. An institution which could profitably make loans of, say $12,000 at six 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".
I continue from the submission by the corporation to the council for social services:
The above quotation emphasizes another important cost factor in connection with consumer loans- the cost of investigating the considerable number

of applications which do not result in loans being made. Currently household turns down 45 per cent of applications received.
By "currently" the company means January of 1958. I continue with the quotation:
This cost is considerable as the investigation of applications which do not result in loans is in many cases as extensive as for those which do.
The parliamentary committee referred to above expressed its main objective as follows:
"Throughout its inquiry your committee's objectives has been to secure the best procurable rate for the borrower".
It is evident from the exhaustive nature of the 1956 committee's examination that they had the same objective in view.
While keeping in mind that the rate should be set as low as possible in the interests of borrowers the original committee recognized that, for the same reason, it must also be high enough so that lenders would be able to continue to provide the service. This point is emphasized by the experience in certain of the United States.
That experience, Mr. Speaker, as was demonstrated by those who preceded me in the debate, was that when the wrong maximum interest rates were set; that is, set by whim without taking into account the market conditions, the supply of money and so forth, the companies folded up their tents and left the inhabitants of that particular state, or of those states at the mercy of money bootleggers, which would probably make the hon. member's conception of a loan shark pale compared to the reality of that type of person.
I listened with great interest to the remarks of the hon. member for Burnaby-Coquitlam (Mr. Regier) who preceded me, on the problem of the Wagensteins who, to get a $2,400 loan, were forced to sign a $3,000 mortgage and pay the same back at $75 a month and in fact pay $398 interest and $600 bonus. I was curious to learn that a couple as reputable as they are should be placed in the position of not being able to obtain the proper credit facilities. It seems to me that if a couple has a $10,000 house, as my hon. friend stated they had, and the breadwinner of the family has a good job, it would have paid them very well to do a little bit of shopping around. There may have been a suggestion of criticism of the bank that my hon. friend mentioned in relation to the Wagensteins in refusing to lend them the money they needed at that time. I think it would be unjust criticism and should not go unchallenged on the record. I think there are many of us in the house who are familiar with the fact that a few years back it was difficult for the banks to make such loans. In any event, the banks have been traditionally chary about entering the mortgage field.

One should not be too hasty with any suggestion of acting improperly simply because they are the depositories of the amount of money that has to be paid by the mortgagors in this particular case. If my hon. friend had given further details to the house about the Wagenstein case I think we might be better able to make up our minds whether that case was in fact one of very great hardship or whether it was simply a case of a couple who, without proper advice or guidance, went into the money market and were consumed by the first shark who came drifting by.


Erhart Regier: There are millions like these people.


Robert Jardine McCleave: My friend says that there are millions like these people, and perhaps there are. It seems to me though that the fact that people do have difficulty in handling money problems is not really a valid excuse for trying to protect them from harm. If they are not gypped by one type of person they will be gypped by another type of person and probably the better course is education rather than protection.
So that we can get some facts on the record I should like to deal with the type of person who borrows from the small loans companies. These facts were contained in a brief submitted to the banking and commerce committee of the House of Commons by the Canadian consumer loan association in 1956. I do not propose to put all the figures on the record. That was done last year by the hon. member for Davenport (Mr. Morton) in a very thoughtful speech but I will recall some of the figures to the house. Taking loans as classified by occupation of borrowers, in the year 1954 craftsmen, foremen and kindred workers represented 30.21 per cent of those who borrowed from the small loans companies. Next in line were operatives and kindred workers, 21.60 per cent; then clerical and kindred workers, 10.57 per cent; labourers, but not farm labourers, 8.82 per cent; and so on down the line. A rather interesting point is that school teachers comprised only .64 per cent of those who went to small loans companies. Incidentally, the total number of loans made in that year was 707,530.
I think this house performs a useful function every time we discuss the Interest Act or the Small Loans Act. This has been proven today by the number of hon. members who have been able to cite specific examples of people in their own ridings who have been ill treated or have considered themselves ill treated and have taken their problems to their members, as they very properly should. It might be of interest if we turned from economic considerations and the statistics we 66968-9-62J
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have been having today to something different. For the benefit of the house and the country I should like to give in brief form what is known as the constant ratio formula or algebraic device by which one can measure the extent of the interest rate one is being charged. If everybody is ready, Mr. Speaker, the formula is as follows: R equals 2CP divided by A (N plus 1). I will elaborate on this somewhat esoteric if bare algebraic formula. R is the annual interest rate; C is the interest or finance charge in actual dollars; P is the number of equal instalment payments in one year, exclusive of the down payment; A is the amount that is borrowed; and N is the number of equal instalment payments in the whole contract period exclusive of the down payment. I was trying to work out the interest that the Wagensteins paid to see if my hon. friend's arithmetic was correct but unfortunately he ended his speech before I could quite complete the mathematics.
Last year in dealing with this subject I noted that one of the big stocks in trade of the loan companies was their ability to prey upon the fears of people, to make the sweet pitch to them that by putting all their troubles in one basket they would, instead of having a dozen nagging letters about bills they could not pay only have to make one payment. Of course, this siren song does not reveal that if anything should go awry with that one payment they will get letters the like of which they had not received from the ordinary commercial businesses to which they had owed money. But this is a tempting point for a person in today's society, and I should like to emphasize again that the danger, of course, in consolidating these principal and interest payments and a variety of debts into one large debt is that you then find yourself in the position of paying interest on your interest, and so the snowball goes on rolling and the avalanche bears down on these people, some of whom are buried and become slaves to consumer finance companies for the rest of their days.
There is no substitute for common sense in knowing how to handle one's finances, there is no substitute for looking at the fine print of a contract and being canny about money matters. But I think the point has been well made by the members who have supported the bill that some protection must be afforded to people and I am thoroughly and heartily in favour of the bill. I am inclined to support the amendment although I hope it is not a device by which the bill will become buried. It might be better to throw out the amendment, approve the bill in principle and then get it before a committee thus approved in principle so that the

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committee may hear, tor example, about the experience of organizations such as the Bank of Nova Scotia and how it has fared on entering the consumer finance field at a rate of 12 per cent compared with the companies that have been operating in that field at 15, 18 or 24 per cent over the last few years.
I say let us get their experience and the experience of other segments of society having dealings in the consumer finance field and then set a realistic figure. Again I would suggest that a proper method might be to adopt a sliding scale rather than an arbitrary ceiling.
For example, in studying the books and literature pertaining to consumer finance you will find that the smaller the loan the more costly the operation. Even if a person borrows only $100 his credit standing must be investigated in the same way as the person who borrows $500 or $1,000. Since I am informed that the cost of the investigation is about $20, it means that the person who borrows $100 does have that extra $20 burden thrown upon him in some way or another. This simply drives up the cost of his loan to a fantastic height.
(Translation):


Mr. Samuel Boulanger (Drummond-Arthabaska):: Mr. Speaker, I would like to bring in my little contribution to the debate on the bill proposed by the hon. member for Assiniboia (Mr. Argue). I would like also to say a few words on the amendment proposed by the hon. member for Megantic (Mr. Roberge). In my view that amendment could not have been better timed. During the last three sessions indeed, we spent whole days discussing identical bills with the result we know. This motion tends to refer this bill to the committee on banking and commerce, which would give us a chance to deal at the same time with other questions concerning Canadian economy and more especially the caisses populaires.
As a matter of fact, we all know that the caisses populaires are ready to render great services in the province of Quebec and, if we were given the opportunity to examine the steps required to improve their services, the bill introduced by the hon. member for Assiniboia would not have to be debated each year.
The caisses populaires offer numerous advantages, since they grant loans for the building of houses, at a very reasonable rate. It would be very interesting for the members of the standing committee on banking and commerce to compare the advantages offered by the caisses populaires with those

offered by the banks. They would realize that the law is more favourable to the banks than to the caisses populaires, namely in the field of loans for house building. They would realize that loans granted by the banks for house building are guaranteed by the government, while those granted by the caisses are not. They would also realize that the loan terms required of the caisses populaires are accessible to a greater number of people, most particularly to that category of people who cannot afford the luxury of building homes in accordance with the requirements of the Central Mortgage and Housing Corporation.
In fact, Mr. Speaker, the government grants a 15 per cent guaranty on loans granted by the banks for the building of houses, while it does not grant any on those granted by the caisses populaires.
At this stage, Mr. Speaker, allow me to remind you that there is in the province of Quebec a rather awkward situation which is hard to explain.
People who build homes financed by the caisses populaires get a 3 per cent refund from the provincial government. However, persons who build with money loaned by banks do not get this rebate, for reasons of autonomy, it is claimed. This creates a situation about which we would have liked to hear some explanation from the hon. member for Joliette-L'Assomption-Montcalm (Mr. Pigeon). Why does not the province of Quebec refund part of the interest paid by those who build houses whose plans have been approved by the inspectors of the Central Mortgage and Housing Corporation?
(Text):


Mr. Speaker:: Order; I appreciate that it is not easy to draw the line between what is relevant and what is not, but it seems to me that in discussing credit unions and not relating the discussion particularly to the rate of interest, the hon. member is not speaking to the principle of this bill. The principle is whether an unlimited rate of interest should be limited to 12 per cent.
(Translation):


Samuel Boulanger: Mr. Speaker, I realize that perhaps I have been wandering from the subject, but this afternoon we heard a speech that was entirely devoted to caisses populaires, credit unions, so I was under the impression that I could do likewise.

However, I shall discuss caisses populaires with regard to the low interest rates they charge their members. In fact, because of their policy of charging the lowest possible rate of interest, they have been helping a great many people. This leads me to say that since their inception, they have loaned over $43 million on promissory notes to individuals, co-operative organizations, parishes, municipalities and school boards. They have also loaned over $220 million on mortgages, without any guarantee from the federal government.
When I think that chartered banks, such as the Royal Bank, have loaned only a little above $200 million on mortgages, out of $4 billion in total assets, I feel that if the people had not had caisses populaires to protect them, they would have been in a terrible spot, not to mention the fact that if our municipalities and school boards had been unable to get the financial help they needed from the caisses, it would have been chaos.
Before closing, Mr. Speaker, may I say that I support the amendment moved by the hon. member for Megantic, requiring that the bill be referred to the committee on banking and commerce for consideration of the best means of reducing interest rates on small loans.
Members on the government side are unwilling to take a stand on this issue; however, it would be very helpful to have it considered by the committee on banking and commerce.
(Text) :


Mr. Terry Nugent (Edmonton-Straihcona):: Mr. Speaker, it is a great pleasure for me to rise tonight to take part in this debate upon a subject about which I have thought much from time to time and which is of great interest to my constituents. Judging from the number of speeches on the bill so far today I would say it is a subject of common interest amongst all the members from whatever parts of the country they come.
The topic is more interesting perhaps than would be indicated by the shortness of the bill presented because one is able, by listening to the debate, to get some idea of the amount of worry involved in those simple little words dealing with the maximum amount of interest. Interest being, as it is, a part of our system of credit in this country and our system of credit playing the important part that it does in our national affairs, we have today heard representatives from most walks of life and we have covered most subjects that one would hear normally discussed in the budget debate. I expect that even more topics will be covered before the
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debate is over. I certainly hope that more of my friends and colleagues will take part in this discussion and will reinforce me in my belief that this subject matter is one of great importance to all parts of Canada.
I do not pretend to be an expert on matters of interest and the economy, or on how best people should manage their affairs, but I have on occasion, as a lawyer in my private practice, attempted to help out some people who have been, shall we say, victimized by some of the abuses of our present credit system. I am not going to belabour our lending institutions entirely. I believe that this evening I may be guilty of saying the occasional harsh word about such institutions as the finance companies. However, I hope I shall be fair enough to give what I believe to be the case for their side as well.
I felt that the hon. member for Assiniboia (Mr. Argue) who presented this bill was perhaps a little bit wild in some of his statements. For instance, he referred to the fantastic and exorbitant rates of interest that are paid by some people. He gave as an example a simple little transaction involving a small amount of credit by a large company and pointed that out as an example of a fantastic and exorbitant rate of interest. Mr. Speaker, I am not trying to flay my friend. However, I thought it was only fair-and I said I was going to try to be fair-to point out how I thought my friend was a trifle unfair, so that I may be more easily judged in that respect. I thought his remark with regard to that store must be admitted by any fair-minded person to be anything but fair.
In order to present the other side of the story, instead of saying that they had paid a fantastic rate of interest, I think he should also have said that those people had a charge account opened up for them on a minor purchase of $20; that the store was put to the expense probably of checking the credit rating of the person, of opening up an account in the person's name, of taking care of the bookkeeping entries, of providing the staff personnel to look after it, of making sure it was collected on time and took the risk of loss. Certainly for one isolated purchase, when the matter is looked at in that way, the individual purchaser has had $2.50 worth of services.
Certainly I would not want anyone to construe my words to mean that I am happy to see them pay even $2.50 for the services or that I am happy to see the amount of the service charge, compared to the amount of credit, bearing a somewhat disproportionate share of interest compared to the interest rates one would expect on a long term basis

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when dealing with many purchases. However, what my hon. friend has done has, I think, opened up what should have been an enlightening part of this discussion.
There is such a thing as interest rates that are paid without any official charge. I am not talking about interest rates which are stated to be six per cent but are charged in advance, with no attention being paid to the final balance owing. Again I am not speaking of the various dodges by which storekeepers and others who lend money can sometimes fool purchasers or borrowers into feeling that they are not paying the rate of interest which they actually are paying. But it is a fact that, no matter what it may be called, whenever credit is extended for any purpose, inevitably one must pay interest. Certainly the storekeeper who buys his goods must do so. Whether he keeps them on the shelf for a long time and therefore has his money tied up and is paying the bank interest on that money or whether he sells them to a consumer who does not pay him for months, the fact remains that the storekeeper is always paying interest on the money that is owed. The money that is owed is an integral part of the price of each and every article that we use or come in contact with every day. I therefore suggest that one of the most important ways in which interest is passed along to the consumer is included in that vague term "price".
The bill that my hon. friend has introduced deals only with the most obvious and glaring examples where the interest rate is shown in the contract and where it is possible, without much imagination and without much digging, to find out exactly how much interest was paid. Obviously, if-as I believe to be the case-that interest appears really in the ordinary price without ever being called by that name it would be a simple step to have the extra interest included in the price. It is no secret today to any thinking person who has taken the trouble to examine today's marketing habits and who has gone from one store to the next to see how they are handling their merchandising to find that in fact a great many stores have discovered how unpopular interest is. They therefore make a big thing out of advertising to the effect that there are no carrying charges and no interest rates. I should be delighted if my hon. friend who introduced this bill would explain to us how this piece of legislation is going to protect the ordinary buyer of that type of merchandise.
I do not want to be misinterpreted. I am not saying that there is anything wrong with that type of merchandising. I am merely suggesting that the ordinary person does not

realize the amount of money he is actually paying for the use of money in the purchase price of every article. He might buy it on a long or a short term, but due to the merchandising practice of the firm from whom he buys in this instance their over-all charge for the use of the money is of necessity much higher than those who price their goods lower and add interest charges. In one instance the consumer himself can see how much interest is paid and the store can see the exact number of people who fall down, but in the other case it is certainly much harder for the ordinary person to detect.
I want to emphasize this point. I am not at all opposed to the principle of trying to protect people from excessive interest charges in certain respects at least. I feel that the idea of bringing in legislation to curb if possible the activities of the most vicious type of money lender we have in this country is a very sound one. I am merely suggesting that the present bill does not do what we should like to see it do. I am speaking against the terms of the bill itself; I am not speaking against the noble and ambitious idea of protecting members of the public against excessive rates of interest.
Mr. Speaker, I did not intend to deal solely with what I call hidden finance charges in my little talk tonight. I merely digressed for a few minutes to mention it as one of the factors which has interested me throughout the whole debate; to such an extent, perhaps, that I have been unable to concentrate as much as I should on some of the speeches which have been made this afternoon. A wealth of information has been brought to light, and although some of it has, no doubt, been brought to the attention of the house before, I feel that in the main it is very sound. It has been most helpful, and since the subject we are discussing today is a very important one I hope I may be forgiven if by inadvertency I repeat anything which has already been said by another hon. member. I will try to be as original as I can but there has not been an original thinker for a long time and I do not pretend to have made the grade myself.
I am especially interested in one field of finance, namely the consumer finance field of automobile and truck financing. There are in Canada today a great number of companies which finance perhaps between 75 per cent and 90 per cent of all the vehicles on the road. My principal concern is not just with the working man who has had to finance a family car. It is true that many of them are paying a rate of interest for their money which they really cannot afford. They buy automobiles and for the amount of use they get out of them it would seem

it is rather harsh on them that they should have to pay such a relatively large sum of money by way of finance particularly since they use their cars only from time to time and mainly for pleasure. Many of these owners find at the end of a year or so that the car has cost them much more than they had calculated and yet they have gone badly into debt and paid large sums of money to the finance company. For this there is, after all, a very simple remedy. The vehicle is, after all, used only for pleasure. No one has forced the owner to buy it, and if the car becomes too expensive they are not obliged to finance it. Certainly these people are to a great extent the authors of their own misfortunes. We do not like the situation but we do not have to get really worried about it because the situation is one that can be avoided.
My concern is with the family breadwinner and a situation which often occurs in the trucking industry. A great many of the trucks on the highways today are financed by a finance company. The people who run these trucks have not to a great extent perhaps the background of experience necessary to enable them to judge all the factors, particularly the cost factors involved in operating a trucking business. To a great extent they have been dazzled by hearing of the amount of money that can be earned by hauling just one load from, say, Edmonton to Toronto and back. The income looks tremendous. So they go to a finance company and put down every cent they have in order to buy a truck. I suppose that here again it can be said that the trucker has, after all, made his own choice. He can invest his money in any way he likes in order to help earn a living. But the fact is that he does have to try to earn a living; he has a duty to his family, and should there be an error of judgment on his part it is one of the gestures made by a man who is not doing something merely for pleasure but risking every cent he has in trying to set himself up in business. It is certainly a very laudable objective for any working man to try to get out on his own and earn money on his own. That is what is at the heart of this economic system of ours and it is the spirit which we feel makes our way of life perhaps a little better than any other.
The trucker finds that he has to pay a much smaller down payment to the finance company than many people would think possible. It is quite possible for a man to get into the trucking business, where the combined value of a truck and trailer may run between $15,000 and $20,000, by putting down no more than $2,000 of his own cash. What the trucker fails to realize is that his profit
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must take care of his finance charges, earn a living for himself and his family and provide enough to take care of the depreciation of the truck. This must all be done, really, out of his $2,000 investment.
He is operating a business with a $20,000 capital. Approximately $18,000 of that capital must earn profits of 15 to 20 per cent before he can break even. He fails to realize that in order to break even and before he can draw wages he must be operating a business which makes a clear profit of 10 to 15 per cent. Obviously many businessmen are quite happy to earn 10 or 15 per cent annually. My hon. friends in the C.C.F. group would feel they were being positively hoggish if they asked for anything more. I suggest that the practice of permitting the purchase of what is really a large and expensive business with such a small down payment is one of the worst faults I can find with finance companies today.
The effect is not just to make it difficult for that particular man to make a living. The effect is that automatically the trucking field becomes very crowded by people who for the most part should never have entered it in the first place because they do not understand the amount of financing required or what kind of profit they must make to break even. The situation soon develops in this field, as it would in any other field of small business, where it is crowded with bad businessmen and this plays havoc with the rates. It is most disturbing to what is at the best of times a difficult and highly competitive industry in which to operate.
The man who has invested his hard earned life savings as a down payment on a truck has no cash reserve on which to fall back. He is over-financed in so far as his total amount of borrowings is concerned but under-financed for going into business. He must, therefore, pay a set amount of money each month to the finance company and in order to do so he must keep working no matter what rate may obtain. Consequently if the prevailing rates are such that jobs are somewhat scarce he must quickly bid the rates down and in a period of slight recession trucking rates decline in a short space of time to about half the amount that is really necessary in order to pay the long term costs. Simply because the finance companies make it so easy to obtain money in this manner we find that an entire industry can be made most unstable with the result that an entire group of honest hardworking, conscientious truckers who have spent years and years to properly learn their business and to put it on a profitable businesslike basis can find themselves almost ruined by the actions of a small group with what I will call irresponsibly financed money.

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I do not want to be mistaken in my argument in this regard. Certainly I can see the advantage to any small trucker. A truck driver who is able to save a few dollars and who feels it is worth the effort to go to a finance company and take whatever risks are involved or pay whatever rates of interest he feels he must in order to purchase his own truck and by hard work build up a small business of which he may be proud is free to do so. This again is an example of the pioneer, independent, democratic spirit we like and would not want to see crushed. I am not suggesting that before the finance company buys the paper from the man who sold the truck it should give the purchaser of the truck a complete test as to his finances nor am I suggesting that he should be given psychological tests to determine if he is competent to conduct a proper business. However, it is not too much to ask that the finance company at least check to see if the man really has the one requisite that is necessary before money is invested into a business. In other words they must determine if he knows anything about the business.
My hon. friends have been most patient. I have not mentioned the word "interest" for a while but I am sure I have made my point sufficiently clear. After all, when the truckers get in trouble and lose their trucks or when the trucks break down and they are unable to keep them in a proper state of repair it simply means that more of them go broke and losses are high. The incidence of loss is an extremely important factor in determining interest rates. Interest rates for the entire trucking industry are much too high in my opinion.
It is not just with respect to the automobile financing field that I have a few complaints. There is another large group of finance companies and these, for want of a better name, I will call the direct loan or personal loan companies. These companies are characterized by what has today become perhaps the universal tragedy. Their most popular slogan, come on, or gimmick is one designed to bring everyone into their office: "Come in and see us if you have financial troubles; if you cannot pay your debts come in and we will take care of them for you."
I confess, Mr. Speaker, when I hear of the number of people who fall for this line and who actually go to these finance companies I begin to wonder if my ordinary fellow citizens have the high degree of intelligence for which I have always given them credit. The fact is the direct loan companies play that tune to an extent which almost becomes nauseous and the effects are vicious. In order to get the finance companies to pay their debts people who are already in debt

must pay more interest on their debts and therefore they are really adding to the total debt by going to the company although they do not seem to realize this. In addition to that, if they are really influenced by this slogan they are so relieved that in an expansive mood they promptly walk down to the store that has just been paid off and, finding that their credit has been reinstated, buy more stuff that they cannot afford and should not purchase.
I have had it pointed out to me by people engaged in this field that the finance companies do provide a service to this type of debtor, that they do prevent the people from being hounded by other creditors and that, after all, the finance companies are entitled to a certain charge because they render a certain service. I do not quarrel with that but I regret that the type of advertisement the companies employ which seems so successful attracts the person who is already in financial difficulty. The companies appear to take the attitude that this group of people is their special meat and I feel they should draw the line somewhere.
I do not wish to extend my remarks unduly but if hon. members will bear with me I will touch lightly upon a few more facts. When we are attempting to decide how to amend the existing legislation in this field we must ask ourselves if it will do the job we want it to. We should pause and examine to see just how much needs to be done. For instance, if I am correct in interpreting the motive that would impel an hon. member to bring in a bill such as this it would appear that we are conscious of a need to protect people from exorbitant rates of interest.
Since we are discussing a bill designed to protect people, we should see just how much protection they already have. There are a tremendous number of acts in force in the various provinces which do hedge in the ordinary citizen. They support him on the left hand and on the right hand and protect him from getting into a lot of trouble. For instance, dealings with finance companies with respect to motor cars were mentioned. I think I mentioned it-if I did not I apologize but it can stand being mentioned twice-that in Alberta we have the conditional sales act which protects the purchaser from having to pay off the balance of what he owes on a car after he has lost the vehicle. Interest charges are limited as well by the Bank Act, the Small Loans Act and the Bankruptcy Act, and there is legislation protecting mortgage holders, and so forth.
Now, the general effect of all these acts is that we are in fact restricting in an ever narrowing degree the necessity of an

ordinary citizen thinking for himself or taking care of himself. I can recall the phrase that I have heard for years, namely, caveat emptor. I think that the mere mention of this phrase today is enough to cause most of my hon. friends to scream in anguish because we have gone so far away from it. Certainly, there must be a limit beyond which we must not mollycoddle grown-up citizens. Are we so ashamed of their will power that we want to protect them from any indiscretion whatsoever? Do we feel that they are so weak-kneed, so uneducated, so misdirected in their dealings with their fellow men and in their handling of their own businesses that we want to lead them by the hand at every age through life? I suggest, that that is not the way to build citizens who have strength of character, will power and the know-how to make leaders of the Canadian people, because our people are the raw materials which will advance and make this country of ours even greater than it has been. I am therefore, in one respect at least opposed to the thinking behind this bill. I am opposed to it because I feel it is unduly restricting the activities of our citizens.
I would not want to condemn any member for wanting to protect them and certainly these are two important factors. I feel that I have been perhaps a little too long on these two simple points, but if the house will bear with me I have one more point I should like to make. It has been mentioned today that interest rates are part of the price of money. When we consider the means of protecting people from wasting their money by paying the present interest charges and so forth, we should remember that the lending of money is a business. The money itself is the product of that business. If we decide that we must put a ceiling on interest rates, then we are automatically putting a ceiling on the possibility of profit in any money transactions.
In this country a person has the right to invest his money in any business he likes, whether he is in the construction business or in any other business. Certainly, I think it is unfair and discriminatory to put a ceiling on interest rates, as is suggested by the hon. member for Assiniboia. We should be very careful before we discriminate against any one class because if we do we say to him, "Your investment is of the type that we do not like and therefore we will not allow you to make as much profit as we will allow a man to make who had the foresight to put his money into a brickyard." Certainly, we must not have discrimination of that kind. I think that even
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my hon. friends on the other side of the house would not really press this too hard if they realized that they were in fact trying to discriminate against one group of profitmaking citizens in this country.
I notice signs of movement in the house, Mr. Speaker. The remarks that I said would take a few minutes have stretched overly long.
I hope that on the next occasion a bill similar to this comes up I shall be able to speak on a few other points similar to those which I have made which I think hon. members might find interesting.


Mr. H. W. Danforth (Kent, Onl.):: Mr. Speaker, I take pleasure in rising to take part in this debate because in my constituency, as in most other constituencies in Canada today, there are a great many good, solid citizens and a lot of young folk who are taking advantage of instalment buying and the procurement of credit to make for themselves a good standard of living. Like other hon. members who have spoken, I have been very much impressed by the frank and sincere manner in which this debate has taken place today. I was very much impressed this afternoon by the way in which the bill was introduced. I was impressed by the thinking behind the moving of the amendment which suggested that the subject matter of this bill be given further study and it is my feeling that that is what should happen to the subject matter of the bill.
Today we have heard a great deal of terminology such as fantastic interest rates, the exploiting of the people, loan sharks, exorbitant interest rates, and so on. All of these words did create word pictures which perhaps did not follow the judgment and the thinking of the members concerned. With your permission, sir, just for a few moments, I should like to deal as frankly and as simply as I can with the elements of this matter and try to see what we as ordinary people would derive from the passage of this bill. I think perhaps I and most people do resent the fact that the borrowers of money have been represented here as something in the manner of weak-kneed people who fall prey to every person who has money to lend, regardless of the terms involved. I do not think that is a common practice at all. I think perhaps that when you are in need of money you shop around for the lowest interest rate, and I think most people shop around in this way as they shop for everything else.
We have heard today of various cases of extremely high interest rates and I am sure there must be such cases of extreme rates of interest charged. I wonder how many of these cases there are compared with the very many

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thousands of cases of people in dire necessity who obtain money and are very thankful for it, as it aids them in their time of distress.
We appreciate that in this day and age everyone wants the most for the least, and certainly no one wants to pay a high rate of interest if a lower rate can be procured. We have heard today of the large stores with varying interest rates from 12 per cent to 54 per cent. The names of Eaton's and Simp-sons-Sears were mentioned. I wonder whether this is a true picture of what actually happens. I should like to take as an example a boat with a purchase price of $1,800 that one might purchase from one of these stores on a monthly payment basis, with the interest and carrying charges included in the monthly instalments. I am sure if you will look at the matter very carefully, as most prospective shoppers do, you will find that the total price of the boat paid for on the instalment basis will be just about the same as the cash purchase price in the store next door. I suggest that this may be the case because corporations as large as Simpsons-Sears or Eaton's by making volume purchases can buy these boats at a price that makes this possible. So, perhaps this is a service to the public rather than a case of an extremely high rate of interest.
An interest rate of 12 per cent has been suggested today as the maximum amount that should be payable. I am not sure that this would be a workable percentage. Nothing was put before us today about the mechanics of such a maximum rate. We are not assured that a 12 per cent interest rate would be feasible and that the agencies lending money today could operate with a rate of 12 per cent. We are asked to assume that they can.
It is true that there are credit unions operating today at a 12 per cent interest rate. May I point out that perhaps they can do this because they do not have the expenses that other lending agencies have. We know of some instances where they do not have to pay for accommodation. There are instances where the people who operate credit unions do so on a voluntary basis. They certainly do not spend the same amount of money in advertising because in most cases their advertising is done by word of mouth or in leaflet form. There is not the extreme type of advertising that was illustrated this afternoon. Therefore they can perhaps operate at a 12 per cent limit whereas it would be impossible in most other instances. May I point out that although credit unions do operate most successfully one will still find that some of the members of various credit unions do take advantage of other sources of credit even though they have available the privileges of the credit union.
[Mr. Danforth.l
We have not heard anything today about the point of view of the lending agencies with regard to the matter of the limiting of interest rates. Where they are so directly concerned I suggest that it would perhaps be feasible to bring them into the discussion in order to present their views in full because I am sure they do not like the publicity that goes with extreme interest rates. It does not help their business a bit to have these cases widely publicized, and such cases are the ones that are widely publicized. I am sure that they would have as much interest as anyone else in seeing that such a situation did not exist and that proper legislation was brought forward to prevent its happening.
I wonder whether the legitimate lending companies do make the extreme amounts that have been portrayed today. If their profits are so high I wonder why there is not a rush to get into the legistimate business of lending money in this way. The numbers of loan companies do not vary to that extent. I should like to quote a paragraph from a speech containing reference to a brief submitted by the Canadian consumer loan association to the banking and commerce committee in 1956, which reads as follows:
They compare profits, before deducting interest on borrowed money and income taxes, expressed as a percentage of employed assets, as between the consumer loan industry and 66 companies representing a cross section of Canadian industry. Included are such industries as utilities, steel, foodstuffs, newsprint, petroleum and base metals. It was found that consumer loan company profits for 1954 adjusted for the rates now in force ranged from 5i per cent to 91 per cent. Profits of the other companies ranged from 61 per cent to 27 per cent and averaged out to 17 per cent.
I wonder whether these loan companies do charge the high rates of interest that have been portrayed. Today we have heard, even though a 12 per cent rate of interest has been suggested, that perhaps this rate could be too high. I am sure that everyone is interested in as low a rate of interest as possible and if everybody was assured that a 12 per cent rate would result in enough capital being placed on the market for creditors to borrow I am sure everybody would be happy with the situation. But there is always the danger that if the interest rate is limited the necessary capital will not be there.
I wonder what would happen to the people if they were not able to borrow the money they need. I have here a booklet entitled, "Three Experiments with Small Loan Interest Rates", reprinted from the Harvard Business Review, in which it is stated that in the state of New Jersey legislation was passed reducing interest rates from 3 per cent to 1J per cent a month. This article deals with what actually does take place when

interest rates are reduced by legislation. I should like to read briefly from the booklet to indicate what did happen in the state of New Jersey.
When the rate reduction bill was passed in May, 1929, the volume of loans outstanding exceeded $20 million; on November 30, 1931, the volume was $5,400,000. The number of licensees declined from 437 on November 30, 1928, to 117 on November 30, 1931.
Chattel loans were reduced from $16,700,000 on November 30, 1928, to $3,400,000 on November 30, 1931, a three-year period. The article goes on to state:
Of the $3,400,000 of chattel loans outstanding on November 30,	1931, approximately $600,000 was
reported by licensees who were making no new loans, and approximately $2,400,000 was reported by the eight offices of the Household Finance Corporation. This company, which had voluntarily reduced its monthly interest rate to 21 per cent in 1928, announced that it could not operate profitably at li per cent a month.
In 1932, after three years of the 1J per cent rate, the New Jersey legislature increased the maximum rate of interest on small loans to 2J per cent a month. I merely bring this to your attention to show that such a thing is possible. It is possible for us to legislate ourselves out of very necessary money.
I should like to put the thought before the house that perhaps those who borrow money are perfectly aware of the interest rates, that they know they are paying more than they would in other cases but feel that their investment is such that they are willing to take the chance in accepting this greater financial burden because they believe it will be a good investment. May I point out that perhaps this extra money would make possible the purchase of the farm next door which perhaps would not be on the market again for a generation, so the necessary money would have to be procured at once and perhaps the size of the necessary loan would not make it possible to borrow from the bank. May I point out that perhaps a fisherman is buying a new car, and suddenly has the opportunity of buying a share in the fishing boat he is operating. Perhaps he needs this source of credit to buy the share which was allotted to him.
There could be the possibility that the home down the street would suddenly be for sale, the one that the gentleman in question wished to buy and perhaps change into an apartment building as an additional source of income. There are many instances in which this capital is necessary, and I am sure those who borrow it are very certain of the interest rates they are obliged to pay and are very willing to pay them.
Interest Act
I have stated before that I am sure every hon. member in this house and the constituents they represent wish to have the opportunity of borrowing money at the lowest possible rate of interest. People do think of their pocketbooks. The bill, as it has been presented, would go a long way in limiting the amount of interest that could be charged. But I wonder if enough thought has been given to the 12 per cent rate. We have no idea whether it should be 12 per cent, 15 per cent or even 20 per cent. We are given 12 per cent as being, in effect, the ideal. I am suggesting that support should be given to the amendment so that the subject matter could be referred to the committee for further study and investigation. We all know that there are circumstances in which exorbitant rates of interest are being charged. These are the ones that we wish to legislate against, not the legitimate businesses that are trying to do a fine job. I am sure that if the officials of these companies were called in for consultation they would offer sound advice as to how such police measures could be introduced.


Mr. A. D. Hales (Wellington South):: I rise at this late hour, Mr. Speaker, in these proceedings to take part in this very interesting debate. I should like to compliment the hon. member for Assiniboia (Mr. Argue) upon the very energetic and sincere manner in which he has introduced this bill. I would think that if the members of his party were in full accord with this bill they would lend more support to him than they have today.


Hazen Robert Argue: We do not want to talk it out; we want a vote.


Alfred Dryden Hales: I think there are only two members in that corner who have taken part in the debate and brought some of these facts to our attention. I feel there are many more complex aspects of this bill than those which are being brought before us by the sponsor of the bill or the other members of his party.
I do not think there is any doubt about the importance of credit. We have all heard this afternoon and this evening about the many important phases of credit in so far as our economic structure is concerned. This has been very forcibly brought to our attention by many of the previous speakers. Since we have changed from an agrarian civilization to a more or less industrial civilization, a change has been brought about in our attitude toward this matter of credit. The suburban type of life that many live today has created a need for credit. The great increase in the volume of money lent by these companies is proof without a doubt of the need for this business of lending money. If it were otherwise I think we would not have seen the great expansion that we have seen in this business.

Interest Act
The government has kept pretty well apace with this expanding business in so far as legislation is concerned. I should like to bring to the attention of the house the various implications of the dovetailing of these two bills, No. C-3 and No. C-5, the amendment to Small Loans Act and the amendment to the Interest Act. I feel they are very closely related. Up until the Small Loans Act was passed in 1939 the only applicable law was the Money-Lenders Act which restricted the rate of interest on loans up to $500 to 12 per cent per annum. No mention was made in that act of the interest rate that might be charged on larger loans and this created a problem which resulted in interest rates of 400 per cent or 500 per cent developing. The Small Loans Act, therefore, was designed to plug the gap by providing for a rate, including all charges of any kind, on loans up to $500.
After a long study in which many interesting witnesses were called from social welfare groups, banks and loan companies, and after discussing it very thoroughly the committee decided that two per cent per month on the unpaid balance was a fair and reasonable rate. However, there was no restriction on loans over $500 until 1956, only three years ago. It was apparent at that time that the Small Loans Act needed overhauling. As a result we have, as you know, rates of interest set at 2 per cent per month on the unpaid balance up to $300; one per cent from $300 to $1,000, and one-half of one per cent from $1,000 to $1,500. Briefly, that is the government's position with regard to the legislation which is in force to protect borrowers in Canada. I feel, Mr. Speaker, this is as far as we should go. It takes care of by far the largest group of borrowers. It takes care of the group that we wish to protect just as much as our friends in the C.C.F. wish to protect them. I feel the low income group is protected by the Small Loans Act today.
Another point I feel we should consider before any changes are made is that this lending business is a process whereby money is bought and sold on the lending market. We all know that the cost of buying money is higher today than it was a while ago. I believe, in fairness to the loan companies, we should mention the fact that their costs of operation have gone up as well. I believe, therefore, it would be improper at this time to make a change, for that reason alone. After all, we should not be asked to legislate to protect people against their lack of good judgment or common sense. I do not believe it is practical to legislate to cover all situations in which people may find themselves. I understood the hon. member for Burnaby-Coquitlam (Mr. Regier) to say that in his

province there was a ceiling imposed on the rate of interest that credit unions could charge. I wonder why the family he mentioned did not go to one of the credit unions to borrow the money because in this way they would have been protected to the same extent this bill suggests we should protect them. I should like to hear more of the facts in that particular case, because it seems rather odd to me that a well established bank would turn down a request for a $2,400 loan when the applicant had a house which was completely paid for and had no encumbrance against it.
The hon. member for Assiniboia told the house this afternoon that the total of all consumer credit outstanding in Canada, as of September, 1958 was $1,947 million, according to the Bank of Canada statistics survey from which he quoted. He also went on to say that, according to that same survey, the banks had done a poor job on the consumer credit basis. He went on to say that they had been doing only about 25 per cent of the consumer credit business. But that business in total is $499 million. This amount of business done by the banks was transacted on the basis of approximately Ilf per cent, or about the same figure that he is proposing in this bill. Of this total amount of business of $1,947 million, the small loans companies did $372 million worth. That is a terrific amount of business which they have done, over and above what the banks have done. These people that use the small loans companies which had this vast amount of business went to those loans companies for various reasons. Maybe their credit rating was not sufficient for the banks; maybe it was a matter of accessibility; maybe some personal reasons were involved. There may have been many reasons why they went to the small loans companies and did $372 million worth of business.
If my hon. friend wishes to take away this opportunity and to make this amount of money unavailable to the people of Canada, where will these people go for their credit? What effect will this action have on our country's economic situation? I have heard hon. members talking, not only in that corner of the house but in other places, about unemployment. If we take $372 million out of circulation on the small loans companies basis, I would think that action would have a direct bearing on unemployment today. What about those thousands of young people who are moving into new homes? How are they going to furnish these homes and equip them with stoves, refrigerators, and such things if small loans are not made available to them?

Business of the House
Then I come to this business of 54 per cent interest on a $20 article which the hon. member mentioned this afternoon. I am not going to say anything about the 54 per cent. I am going to stick to that figure of $2.25 which he used in respect of this particular article. It might be a hot plate; it might be a steam kettle or some other appliance or piece of equipment which is needed. The buyer of this piece of equipment may feel, "It is worth $2.25 to me to have this piece of equipment; we need it and in order to increase our standard of living it is essential". He is therefore quite willing to pay $2.25 for the use of this article. I do not think it is the function of the government to tell that man whether he should or should not have this article, or whether it is essential that he have this product. I do not see why we should be asked to legislate in order to alter people's minds. We must give people some credit for using common sense and good judgment.
There is another way in which to look at this matter. Maybe this particular article was on sale. Maybe he saved two or three dollars by buying it when it was on sale and so saved the $2.25 or at least had that saving coming to him as a result of this special sale. I think there are many occasions when it may be advantageous to the purchaser to use the small loans business which is made available to him. It may be all right for us to pass legislation whereby we tell the lenders that they cannot charge more than 12 per cent for loans. But on the other hand, we cannot tell them that they must lend the money. That is a decision that it is up to the businessman to make, in my opinion. This would not be the case if the socialistic idea were put into force.
This bill would freeze the limit of interest on credit to 12 per cent. On the one hand you would freeze the interest rate on the money lent. But on the other hand, the loan companies must go out and buy the money. On the one hand they are told they cannot charge more than 12 per cent. On the other hand, there is nothing in the act to say that
the price at which they buy this money must be a stable one. You cannot freeze the rate on one side without doing the same thing on the other side. The selling price and the cost price of money must be handled in the same way in either case.
I take the view, Mr. Speaker, that we are operating under a free enterprise system. I am happy to say that I belong to a party which down through the years has promoted free enterprise in business. I feel that money is no different from any other commodity; it is bought and it is sold. In a free market it will seek its own level. If this business of small loans is as lucrative as our friends in the corner tell us it is, I say that many people will get into the small loans business. The more people we get into the small loans business, the more competitive it will become and in the long run competition should control the maximum and control the business. Therefore, Mr. Speaker, I feel that at the present time the situation is well in hand.


Harold Edward Winch: I'll say it is. It is ten o'clock. It surely is well in hand.


Alfred Dryden Hales: At the moment I would not support the principle of the bill but I would go so far as to say that I should like to see it to go to a committee and to have it studied further.
Mr. Speaker, may I call it ten o'clock?


Harold Edward Winch: You surely can.



BUSINESS OF THE HOUSE

Lionel Chevrier: Will the house leader be good enough to indicate what the business is for tomorrow?


Howard Charles Green: Tomorrow, Mr. Speaker, we shall commence with the supplementary estimates. Then we shall take the resolutions on housing, the Trans-Canada Highway Act, the Northwest Territories Act, the St. Lawrence Seaway Act, the National Defence Act and the Fisheries Improvement Loan Act.


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