The Globe and Mail - 27.03.2020

FRIDAY,MARCH27,2020| THEGLOBEANDMAILO NEWS | A

The federalgovernment is in talks
with banks to find ways to alle-
viate the burden of credit-card in-
terest rates for Canadians facing
financial stresses caused by CO-
VID-19, the Prime Minister’s Of-
fice said Thursday.
The Prime Minister said the
government is working on mea-
sures to make credit less expen-
sive for Canadians.
PMO spokesman Alex Well-
stead told The Globe and Mail that
the government is not calling for
cuts to existing credit-card rates.
Earlier in the day, Prime Minis-
ter Justin Trudeau blindsided
Canada’s large banks by saying

that the Department of Finance

was in talks with banks about

credit-card interest rates, which

some interpreted to mean inter-

est-rate cuts, financial industry

sources told The Globe. The Globe

is not identifying the sources be-

cause they were not authorized to

speak on the subject.

Mr. Trudeau made the com-

ments during his daily news con-

ference in Ottawa.

“I can assure you that the Fi-

nance Minister has had conversa-

tions directly with the banks

about credit-card interest rates.

We recognize that they are a sig-

nificant challenge for many Cana-

dians at this point. That is why we

are encouraging them to take ac-

tion to alleviate the burden for

Canadians,” Mr. Trudeau said.

At Ottawa’s urging, Canada’s

Big Six banks have already agreed

to defer mortgage payments for

up to six months for customers

facing financial hardship owing

to the coronavirus and to offer re-

lief on certain credit products,

which could include letting cus-

tomers defer credit-card pay-

ments.

Credit cards are a highly profit-

able product and any move to re-

duce the interest charged on

those cards would eat into banks’

profitability.

Treasury Board President Jean-

Yves Duclos, who is vice-chair of

the cabinet committee responsib-

le for the federal response to CO-

VID-19, said banks have a “social

responsibility” to help Canadians

and that this could include con-

solidating high-interest credit-

card debt into lower-cost options.

“That means that they have al-

so committed to offering ways of

reducing interest rates on some of

the loans that people already

have, including credit-card debt.

So there will be options for clients

such as, for example, taking funds

from credit cards that are high-in-

terest credit cards and taking

them and putting them into other

types of credit that people can

have access to,” Mr. Duclos said.

Maéva Proteau, a spokeswo-

man for Finance Minister Bill

Morneau, declined to comment

specifically on thegovernment’s

approach to credit-card debt.

“Canadian banks have com-

mitted to work with their custom-

ers on a case-by-case basis to find

solutions to help them manage

hardships caused by COVID-19,”

she said in a statement in re-

sponse to questions about Mr.

Trudeau’s credit-card comments.

In times of economic stress,

credit cards, which can have inter-

est rates of 20 per cent or more,

can also be a key driver of loan

losses for banks, because the cred-

it extended through the cards is

unsecured.

Overall credit-card balances in

Canada reached a record high of

more than $100-billion in the sec-

ond half of 2019, according to

credit agency TransUnion Cana-

da.

The average credit-card bal-

ance for Canadians in late 2019

was $4,240, TransUnion said in a

report published in December.

Canadian Bankers Association

spokesman Mathieu Labrèche

said that 70 per cent of Canadians

pay off their credit-card balances

every month, so many are not hit

by interest payments.

“Those that are experiencing

hardship should probably talk to

their banks to help them make

the best choice and pick the most

appropriate product. They can al-

so roll credit-card debt into term

loans, for instance,” Mr. Labrèche

said.

In response to a request for

comment, a Bank of Montreal

spokesman pointed to earlier

press releases that spoke of credit-

card payment deferrals.

National Bank declined to

comment, while the other four

big banks did not respond to re-

quests for comment.

AfterTrudeau’sremarks

sparkconfusion,Prime

Minister’sOfficesays

talksunderwayto

lightenburdenfor

Canadianconsumers

Ottawa,banksdiscusscredit-cardrates

MARKRENDELL
BILLCURRY
JAMESBRADSHAW

AtOttawa’surging,

Canada’sBigSixbanks

havealreadyagreedto

defermortgage

paymentsforuptosix

monthsforcustomers

facingfinancialhardship

owingtothe

coronavirusandtooffer

reliefoncertaincredit

products,whichcould

includeletting

customersdefer

credit-cardpayments.

In normal times, the centres get
11,000 visitors a day, and 95 per
cent of EI claimants apply online.
But people complained the
jammed website didn’t work or
they couldn’t get through on the
telephone. Canadians with limit-
ed means lost access to the in-
ternet as their local libraries shut.
As a result, many went out of
frustration to Service Canada
Centres despite warnings to stay
home. In some cases they braved
lineups to file applications in per-
son. Ms. Warner said tempers
boiled over and staff, who she
said are among the lowest-paid
workers ingovernment, bore the
brunt of it. There were alterca-
tions at Service Canada Centres
in Ontario, Quebec and B.C. after
frustrated applicants became ag-
gressive and violent, she said. In
some instances, she said people
coughed deliberately on staff.
“At some point a lot of our
workers got so scared to come in
to work they called in sick,” she
said, adding “they’re not feeling
safe [and] they’re not safe.” The
union encouraged members to
invoke their right to refuse dan-
gerous work under the Canada
Labour Code and several did.
Ms. Warner credited Conserva-
tive MP Michelle Rempel Garner,
who tweeted last week to Ahmed
Hussein, the Minister of Families,
Children and Social Develop-
ment – and who oversees Service
Canada – that the centres had be-
come crowded and unsafe. She
also retweeted Ms. Warner’s
message that her attempts to
meet with the minister had gone
unanswered. Mr. Ahmed thanked
the opposition MP on Twitter and
asked officials to look into the
matter. In an interview Thursday,
Ms. Rempel Garner said, “we
have to manage the health and
safety of our public servants.
Now the government has to say
how they’re processing” the
surge in jobless claims.
Prime Minister Justin Trudeau
this week acknowledged the de-
lays and frustrations newly un-
employed Canadians are experi-
encing applying for benefits, and
said “public servants are working

around the clock while dealing

with unprecedented demand”

and that an online application

portal will launch “as quickly as

possible.”

The government is shuffling

1,300 public servants, many from

Passport Canada, into roles proc-

essing claims and taking calls. By

Tuesday, it had processed 143,

claims in the past eight days, a

minority of the 500,000 that ap-

plied last week. Mr. Trudeau also

announced a new “Canada emer-

gency response benefit” that will

provide $1,800 after tax to affect-

ed Canadians, replacing two ear-

lier benefits

Mike Maka, a spokesman for

Mr. Hussein, declined to com-

ment on the closing decision.

Earlier Thursday, Mr. Maka told

The Globe and Mail: “Service

Canada endeavours to provide

the best available services for

Canadians, and takes into ac-

count things like absenteeism as

well as weather to make sure the

safety of employees is para-

mount and that we’re still able to

provide the services we need to

Canadians.”

ThisServiceCanadalocationinTorontowasclosedonThursdayasemployeesstayedawayfromwork,fearing
fortheirsafety.CHRISTOPHERKATSAROV/THEGLOBEANDMAIL

ServiceCanada:Staffcomplainedthattheyfelt

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FROMA

O

ne of the many things we’ve learned from the

pandemic crisis is the importance of saving for a

rainy day. Canada has failed for many years to do

so. Now it’s pouring outside, and bothgovern-

ments and individuals will struggle to cope.

For a decade and more, Canadians with means have been

spending as if there were no tomorrow. They spent on ex-

pensive houses, taking out giant mortgages. They spent on

nice cars, using long-term loans and leases to make the

payments feel painless. They spent on vacations and reno-

vations and big-screen TVs.

Banks egged them on, offering giant lines of credit to

anyone lucky enough to own a house. With interest rates at

historic lows, consumers binged on borrowed money.

Household debt as a percentage of disposable income

climbed and climbed. What happens now to all the people

who have been thrown out of work and have bills to pay

and interest payments to make?

Governments have been even more profligate. The big-

gest provincialgovernment, Ontario’s, managed the re-

markable feat of doubling its debt in the course of a decade.

Alberta spent its oil money on highways and hospitals and

hockey rinks instead of putting it aside, Norway style, for

the future. With oil prices crashing, it finds itself in deep

trouble. So does Newfoundland and Labrador, its plight

worsened by the Muskrat Falls white elephant.

The federal government went on a spree of its own. Elect-

ed on a solemn pledge to balance the budget by the time

the next election rolled around, Justin Trudeau’s Liberals

instead kept ramping up spending, taking advantage of a

booming economy to “invest in the future” rather than

tackle the deficit or pay down the debt, much less put aside

money for an emergency. They even gave Canadians a nice

tax cut last year, slicing $6-billion from Ottawa’s annual

revenue.

Their apologists patted them

on the back for their wisdom and

foresight. If Mr. Trudeau had bro-

ken a little promise, what of it?

Everyone did that. And the size

of the debt didn’t really matter

anyway; it was its size compared

with gross domestic product, you

see.

As long as that didn’t soar,

well, not to worry. No rain was in

sight. The sun was shining. While

interest rates were low, why not

take advantage of the good

weather and just borrow and

spend? Which is exactly what the

government did, putting off the

unpopular task of balancing the

books to the indefinite future. So the debt mountain kept

growing. The combined federal and provincial net debt has

reached $1.5-trillion, says a recent Fraser Institute report.

Now we face an awful reckoning. The tomorrow that

would never come is here.For years,governments were

accused of putting the future of our children and grand-

children in jeopardy by piling up debt. It turns out the

danger was much closer. It is we, the current generation,

who are at risk.

It will cost many billions to get us through this unprece-

dented crisis. The $82-billion federal package approved on

Wednesday is only the beginning. With no rainy-day fund to

speak of, Ottawa and the provinces will need to borrow the

money, recording deficits that are bound to dwarf those of

the last recession.

They have no other option. Spending big is the right

thing – no, the only thing – to do. To avoid economic catas-

trophe and ease the pain of this moment, governments

need to help Canadians – especially low-income Canadians

• who are under the gun; buoy up businesses threatened
  with bankruptcy; cover a flood of employment insurance
  claims from suddenly jobless people; and pump money
  into the economy.
  Now is not the time to complain about big government.
  Moments like this arewhat governments are for, which is
  why we want them to have deep pockets and small debts.
  The Finance Minister, Bill Morneau, insists we have the
  “fiscal firepower” for the job. Canada is still a wealthy coun-
  try, after all.
  But once this necessary binge is over, let’s promise our-
  selves not to go on another one when things get back to
  normal.
  Let’s instead dedicate ourselves to living within our
  means, wiping out our deficits, reducing our debts and sav-
  ing for the next rainy day.

Canada’sfailure

tosaveforarainyday

hasputusallatrisk

MARCUS

GEE

OPINION

Foryears,

governmentswere

accusedofputting

thefutureofour

childrenand

grandchildrenin

jeopardybypilingup

debt.Itturnsoutthe

dangerwasmuch

closer.Itiswe,the

currentgeneration,

whoareatrisk.