Todd Doherty says he can’t figure out how banks and credit cards can get away with charging what they do with their interest rates.
While the prime lending rate on Friday was 2.45 per cent, most banks in Canada were charging 19.99 per cent interest on purchases and 22.99 per cent on cash advances.
The COVID-19 pandemic has forced millions of Canadians out of their jobs or on reduced working hours, which radically increases the burden of credit card debt, leaving people with little or no ability to pay it off.
Doherty, the MP for Cariboo-Prince George, worries about what‘s in store for consumers trying to make ends meet as the world shuts down to contain the spread of the virus. He wonders why high-interest rates are even allowed.
“I have the same question,” said Doherty.
“We see a ton of Canadians that get themselves further and further into debt because of these unreal interest rates that just continually to go higher and if you don’t pay it off in time there’s even greater penalties that are on there.”
The Conservative opposition has been pressuring Finance Minister Bill Morneau to force banks and credit card companies to lower card interest rates to help Canadians already reeling from the COVID-19 crisis. Doherty’s party has also been pushing for mortgage deferrals and low-interest loans to help keep business afloat.
“What we need to be doing is protecting Canadians and making sure they don’t get themselves in over their heads during these times, that the financial measures they’re seeking are there for the right reasons,” said Doherty. “There are 1.6 million Canadians out of work at this time and we need to make sure they’re getting those paycheques coming in, whether its Employment Insurance or the COVID-19 Economic Response Benefit, and those benefits start flowing to Canadians sooner rather than later.”
On Friday, three of the largest banks in Canada cut their credit card rates in response to the COVID-19 crisis, following the lead of the Canadian Imperial Bank of Commerce. CIBC dropped its rate to 10.99 per cent for personal credit card clients approved to skip payments.
The Royal Bank of Canada cut in half its card interest rates for people and small businesses on a deferred payment plan and the National Bank of Canada followed suit, lowering its card rates to 10.99 per cent for clients granted deferrals. Credit card clients will still have to apply to qualify for the reduced rates.
The rate reductions come a week after Prime Minister Justin Trudeau said during one of his morning briefings the government was in discussions with banks to lower credit card interest rates. Trudeau’s staff later said the government wasn’t specifically asking for cuts from the banks and credit card companies in their discussions but they were looking for ways to relieve Canadians of the financial burden caused by card interest rates.
Trudeau announced on Wednesday that Parliament will be recalled to amend the bill passed last week to provide a $71 billion economic stimulus. The recall is needed to increase the wage subsidy for small businesses from 10 to 75 per cent.