REDUCING PERSONAL DEBT

Several problems

Personal and household debt in Canada is attaining alarming proportions. Here are some figures :

• There were 79 540 personal bankruptcies in 2001;
• Personal bankruptcies are now clearly the majority (75%) of total bankruptcies (including commercial bankruptcy);
• Consumer debt (including credit cards) increased 22 per cent between 1990 and 1999 to reach its highest level ever ($4584 per person);
• The savings rate is very low, sitting at about 1.4% in 1999;
• As well, Canadian families are using more and more of their income to pay interest on loans.

Over the long term, it is totally counter-productive for a society to tolerate such a transfer of money from the real economy to the financial economy.

On the other hand, bank profits reach new high every year. In 2000, these profits equalled 5.5 billion dollars. We are in fact observing a transfer of wealth from Canadian families to their bankers. This is totally unacceptable.

Part of the problem clearly resides with an overconsuming society that has adopted the slogan " buy now, pay later. " Credit companies have created a real culture of over-consumption and over-indebtedness.

Access to credit is becoming increasinly easy, but it does not rest on the capacity to pay. The poorest in our society are often the most heavily hit by indebtedness.

Some solutions

We will legislate a variety of measures for financial institutions in order to reduce Canadians¹ average personal indebtedness.

Actions to significantly reduce the debt of the average Canadian family should take place on two fronts: legislation and education.

In terms of legislation, better control must be exercised on credit:

• Impose maximum interest rates on all credit cards (for example, a maximum of 8% above the Bank of Canada¹s prime lending rate);
• Increase the minimum payment demanded on credit cards;
• Prevent all financial institutions from emitting credit cards or from unilaterally increasing credit limits;
• Closely regulate pawn-brokers.

As well, we will favour measures permitting the emergence of micro-credit organizations.

In terms of education, we will:

• Lead an awareness campaign on over-indebtedness;
• Provide better funding for consumer associations.