Help and education promised for credit-happy consumers. (Canadian Press)

Canadian consumers and businesses in these cash-strapped times would have less reason to be fearful of getting maxed out on credit under measures in the federal budget tabled Tuesday in Ottawa.

But they also would be guided not to go spending crazy — the budget promises to educate Canadians on “financial literacy,” and protect them from any confusing or unreasonable credit-card requirements.

Following what Prime Minister Stephen Harper's Conservative government is calling “an unprecedented consultative effort,” Finance Minister Jim Flaherty’s 2009 budget would provide up to $200 billion — in existing and new measures — through an “Extraordinary Financing Framework.”

With the help of an advisory committee of users and suppliers of financing as well as other experts that would manage the EFF, the government would make it easier for consumers to get credit for that new house or boat, for instance, and allow businesses to get the funding they need “to invest, grow and create new jobs.”

To put the EFF in place, the government would borrow more, meaning it would increase its debt sold through financial markets. However, the budget paper adds, since this debt would be “matched with sound assets,” the EFF would not result in an increase in federal debt.

Boosting ‘financial literacy’ a goal

How would that translate into giving that credit boost to Canadians?

Take a lobster fisherman in Prince Edward Island who supplies upscale restaurants along the eastern United States, an example noted in the budget, titled “Canada’s Economic Action Plan.”

With sales dropping because of the economic crisis hitting the U.S. and some customers not making their payments, the fisherman is relying more on a line of credit with a bank to keep the business going. As a result, the fisherman seeks — but is turned down for — a credit-line increase because of the bank’s limited financial resources.

But through one aspect of the EFF called the Business Credit Availability Program, the bank would be able to get support from a Crown corporation that would result in the fisherman also receiving financial help.

What about Canadians who hope to get into the mortgage game or want to finally take that expensive trip overseas, but worry about not being approved for financing because of the uncertain economic times?

The budget offers to help Canadians get access to “fair and transparent” credit — by strengthening disclosure requirements on lending institutions that issue credit cards — so “consumers are better equipped to make informed decisions.”

And to help consumers brush up on their financial savvy, the government would establish an independent task force — made up of representatives from business, education, volunteer organizations and academic sectors — to make recommendations for a national strategy on “financial literacy.”

Securing mortgages a priority

On another front, the government would beef up the insured mortgage purchase program (IMPP) — a plan that basically assures “stable long-term financing” to lenders so they can continue meeting the needs of consumers and businesses — to allow the purchase of up to $50 billion more in insured mortgages in the first half of 2009-2010. This would be in addition to the $75 billion, announced earlier, to be purchased in 2008-09.

Other new government measures included in the budget that would fall under the EFF would:

• Provide $13 billion in incremental financing to financial Crown corporations, to allow Export Development Canada and the Business Development Bank of Canada to extend additional financing to Canadian businesses and allow Canada Mortgage and Housing Corporation to support low-cost loans to municipalities. At least $5 billion of the funding would be delivered through the Business Credit Availability Program, involving co-operation between the Crown corporations and private-sector financial institutions.
• Further help small businesses by increasing the maximum eligible loan amount under the Canada Small Business Financing Program for loans made after March 31, 2009, changes that could boost lending by about $300 million a year.
• Provide up to $12 billion for a new Canadian Secured Credit Facility to purchase term asset-backed securities by loans and leases on vehicles and equipment. The facility would help consumers and businesses access financing for such items.