Layton promises to cap credit card rates
NDP Leader Jack Layton said Tuesday he would cap credit card rates and fees as a way to control the household debt of Canadian families.
Layton announced the party's first platform plank at a news conference in Brantford, Ont.
The NDP proposal would cap credit card rates at the prime interest rate plus five percentage points.
That would mean a Canadian with a credit card would be paying closer to eight or nine per cent interest, instead of the common 20 per cent that they are paying now.
The NDP leader also said he would extend powers to federal regulators to control "excessive fees on credit cards."
Layton also said he would make a voluntary code of conduct on transaction fees implemented by the Conservative government a law.
Do you think capping credit card rates will help households? Take our survey
"It will allow banks to recoup a profit while keeping family debt loads manageable," Layton said in his speech.
"And unlike Stephen Harper's latest idea, my plan will help Canadians families now — not in 2015."
Layton's reference to the immediate measure was another shot at Harper's proposed family tax credit that was announced on Monday.
The proposal would allow families with children under 18 to split as much as $50,000 of their income. The policy would not come into effect until after the federal budget is balanced, which isn't expected until 2014-15.
A statement released by the Liberal Party said Layton's policy is poorly thought out and could hurt could hurt low-income Canadians.
The Liberals say evidence from other countries shows credit card companies find other ways to make back the money they lose with lower interest rates, including increases in monthly fees and bigger late charges. They say the regulation could also mean credit card companies stop giving them to high-risk, low-income customers.
Layton said the move is to combat the fact the average family household debt has jumped to more than $100,000 during the recession.
He said many Canadian families are turning to their credit cards to pay for basic needs.
The bond-rating agency said Canadians are showing an ability to handle their credit card debts even though they are holding onto high levels of household debt.
Michael Buzanis, Moody's vice president and senior credit officer in Toronto, said in a statement that Canadians are much better at paying off their card debt than cardholders in the United States.
Canadians pay off 32.8 per cent of their card balances every month, while Americans and the British both pay about 20 per cent of their card balances, according to Moody's.
"We don't see the high consumer debt levels so far morphing into a credit problem. The performance of credit cards and the performance of mortgages doesn't evidence stress yet," he said in a statement.
The NDP's focus on credit card fees and rates is not a new campaign theme.
The party issued similar pledges in both the 2004 and 2008 campaigns.
The party's 2004 campaign platform specifically said the NDP would cap interest rates at five percentage points above the prime lending rate, which is similar to the Tuesday's announcement.
And in 2008, Layton attacked what he called "price gouging" by credit card companies.
Financial institutions doing 'just fine'
The NDP leader contrasted the problems he said many Canadian families are having in paying their bills with the latest bank profits.
When asked whether his plan would eat into those bank profits, Layton said Canada's financial institutions will have to find a way to continue to make money without "gouging people."
"The financial institutions will do just fine. I think some control over the rates that they are charging is absolutely essential," Layton told reporters at his news conference.
"We have very large banks in Canada. There is not a lot of competition one to the other. The result is you need to have a government standing on the side of the people."
Just as he was leaving the podium, Layton was asked by a reporter about how many credit cards he had in his wallet.
"A few, and I try to pay them off every month," Layton said. "And when I read the fine print, it makes me mad."