Federal budget to take aim at banks, credit-card companies

The Canadian Press ~ The News
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Throne speech

The federal budget will give Ottawa an expanded role in the banking industry as the federal government expresses frustration with the performance of lending institutions.

The provisions would affect credit-card companies and commercial banks as the federal government acts upon complaints it heard during months of pre-budget consultations.

Prime Minister Stephen Harper and Gov. Gen. Michaelle Jean prepare for the speech from the throne on Parliament Hill in Ottawa Monday. - Photo by The Canadian Press

Ottawa - The federal budget will give Ottawa an expanded role in the banking industry as the federal government expresses frustration with the performance of lending institutions.

The provisions would affect credit-card companies and commercial banks as the federal government acts upon complaints it heard during months of pre-budget consultations.

The Canadian Press has learned Ottawa would claim the right to regulate when credit-card companies slam customers with unforeseen rate hikes.

Sources say the budget will include legislative measures that force companies to be more transparent about rate changes, and also give the government expanded regulatory powers.

The government will also follow up on frequent complaints about banks from would-be borrowers who say access to credit has dried up at commercial institutions in recent months.

Sources say the government would expand the volume of loans offered to businesses through Export Develop-ment Canada and the Business Deve-lopment Bank of Canada.

The budget will also offer modest tax breaks and a shower of spending that will see Canada sink into a $34-billion deficit following 12 years of surplus budgets.

A senior federal official said the same themes kept coming up during 680 pre-budget consulting sessions between federal representatives, their provincial counterparts and the business community.

"One thing we heard consistently was a lot of frustration with the big banks," he said.

"We'll make credit available to businesses in ways the banks won't be able to obstruct."

He said frustrations with the banks have been myriad that they have been slow to pass on cuts in the overnight rate to consumers, and even the most solid customers have been getting charged high interest rates despite sterling credit records.

The banks have bristled at the criticism and cited data that suggests they've actually increased lending amid the current economic crisis.

Just last week, the Bank of Canada reported that while residential mortgages had declined slightly in December, personal loans and non-residential mortgages had both increased.

The official provided few details about the measures Ottawa intends to introduce.

In the case of credit-card companies, he said customers are often surprised to see their rates skyrocket without warning.

Some card-holders can sign up for a card offering low rates, only to discover that they're stuck paying interest above 20 per cent after missing monthly payments.

"One of the things that we're looking for is more transparency," the official said.

"If you're looking at sudden rate jumps, like if somebody calls and signs you up for a low-interest card and all of a sudden it jumps to 18 points, we want more transparency."

As for credit for businesses, he did not provide a dollar figure for the expanded programs the government intends to announce today.

Officials say the tax measures are aimed primarily at the middle class, and designed to make people spend.

An unprecedented torrent of stimulus measures will wipe out more than a decade of fiscal prudence as the government slides into the red for the first time since 1996.

The deficit is not the biggest in Canadian history, but the fiscal turnaround has been historic in its speed and scope. Just weeks after shrugging off warnings from economists that a recession and deficit were imminent, the Conservatives now agree swift action is needed to stave off disaster.

In the latest stimulus announcement, the government said Monday it would spend $7 billion on public infrastructure - especially "shovel-ready" road, bridge and sewer projects.

That's on top of the billions it has already promised for items ranging from social housing to worker retraining.

The tax breaks may be among the lone surprises left in a budget whose contents were largely divulged by the government over the last several days.

Amid speculation the government could offer spending vouchers to get people back into stores, the prime minister remained coy Monday about what form the tax measures would take.

"Some of those tax initiatives will involve getting money in consumers' pockets," Stephen Harper told CTV.

"So that (way) ordinary people, working class people, middle class people, can spend money."

In addition to the $7 billion for infrastructure, the government has confirmed a number of spending measures in the budget:

$1.5 billion to help train laid-off workers and provide them with new skills.

$1 billion to help the hardest-hit communities adjust to the economic downturn, especially one-industry towns or those dependent on agriculture, mining and forestry.

$1 billion to renovate social housing.

$600 million for aboriginal housing.

$550 million for farmers

$150 million to help the forestry sector develop new technologies and promote the industry abroad.

Billions of dollars in loan guarantees for the auto industry.

Organizations: Bank of Canada, Canadian Press, Conservatives CTV

Geographic location: Ottawa, Canada

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Recent comments

  • Coda
    July 02, 2010 - 13:33

    Neil, I was thinking the same thing.
    I'm going for a tan and an Afro hairstyle, towing a wagon with four small kids. LOL!

  • wayne
    July 02, 2010 - 13:31

    The working middle class never get a break. Even the $200-$300 hundred dollar heating rebate seems to evade me!!! I find it so ironic that the people who live in low income housing who already receive a $1200 yearly heating allowance ( they pay $35 + taxes on their light and power bill monthly ) still get the $200 in addition to this heat allowance!! I just made a little more than the cutoff of $40,000 last year and I decide monthly if I want a warm body or a full stomach. Nothing will ever change. The low income will be 'carried' their whole life and the rich will dine lavishly in their warm comfortable houses!!

  • KWD
    July 02, 2010 - 13:23

    Whats this; the government is going to force the wealthy to unclench their iron grip on socialism, and start helping those in need? I doubt it. Very little of the billions to be spent will end up were it does the most to help those in need.

    Whats next on the gov't agenda; more democracy and less capitalism? Harpers support of consumerism is a pretty clear message that any remnant of democracy we have is on hold and it will probably suffer greater setbacks.

  • Neil
    July 02, 2010 - 13:23

    I don't live in a one industry town, not native, don't live in low income housing, not laid off, don't farm or mine or work in any car factory....Those tax cuts better be good. Retroactive cuts to Jan 1/08 would be good. Put the money in my pocket in March/April....gonna be interesting.

  • Frank
    July 02, 2010 - 13:18

    Those Conserative tax cuts won,t change the lifestyle of Canadians. What it really boils down to is you will end up paying more at the grocery store as prices will surge. Remember, the employer will have to pay his employees as well, so he ups the price of everything. Until there is a law to control pricing in this country, there won,t be too many pennies to rattle in your pocket in 2009.
    It is not always the gouvernment to blame for this, they try to run the country, but the businessman digs as much as he can into the pockets of the rich and poor alike. How can the gouvernment stop this?

    There should be a fine for businessmen who gorge on the pockets of others who are trying to survive in difficult times. Hold onto the pennies you have and spend wisely.

    I,m sure this will be a good budget, and the opposition will not support it, especially Jack Layton who is becoming more and more discusting every time he talks to the media. Don,t depend on Gilles Duceppe as he wants to destroy everything that is Canadian. To survive this crisis, you have to be Conserative or Liberal minded Canadians. Also, we can,t afford an election now, there are better ways to spend our tax dollars.

    Frank Blackwood

  • John
    July 02, 2010 - 13:10

    We once had surpluses thanks to hard working Canadians. Now we got billion dollar deficits. Might it have something to do with the 70 billion dollar bail-out of the banks? Huh? They are laughing all the way to THEIR banks with our money. Now big spender Harper tells us he is going to get tough with these guy?!? Well its all window dressing folks. He works for them. This is how capitalilism works. Its the same as socialism but the poor get nothing. And the shrinking middle class get bribed with paltry tax cuts so they will keep their mouths shut about all this theft. The newspaers have a business section. But what about a section for the people getting robbed? The working poor who do all the work?

  • Coda
    July 01, 2010 - 20:22

    Neil, I was thinking the same thing.
    I'm going for a tan and an Afro hairstyle, towing a wagon with four small kids. LOL!

  • wayne
    July 01, 2010 - 20:19

    The working middle class never get a break. Even the $200-$300 hundred dollar heating rebate seems to evade me!!! I find it so ironic that the people who live in low income housing who already receive a $1200 yearly heating allowance ( they pay $35 + taxes on their light and power bill monthly ) still get the $200 in addition to this heat allowance!! I just made a little more than the cutoff of $40,000 last year and I decide monthly if I want a warm body or a full stomach. Nothing will ever change. The low income will be 'carried' their whole life and the rich will dine lavishly in their warm comfortable houses!!

  • KWD
    July 01, 2010 - 20:08

    Whats this; the government is going to force the wealthy to unclench their iron grip on socialism, and start helping those in need? I doubt it. Very little of the billions to be spent will end up were it does the most to help those in need.

    Whats next on the gov't agenda; more democracy and less capitalism? Harpers support of consumerism is a pretty clear message that any remnant of democracy we have is on hold and it will probably suffer greater setbacks.

  • Neil
    July 01, 2010 - 20:07

    I don't live in a one industry town, not native, don't live in low income housing, not laid off, don't farm or mine or work in any car factory....Those tax cuts better be good. Retroactive cuts to Jan 1/08 would be good. Put the money in my pocket in March/April....gonna be interesting.

  • Frank
    July 01, 2010 - 19:59

    Those Conserative tax cuts won,t change the lifestyle of Canadians. What it really boils down to is you will end up paying more at the grocery store as prices will surge. Remember, the employer will have to pay his employees as well, so he ups the price of everything. Until there is a law to control pricing in this country, there won,t be too many pennies to rattle in your pocket in 2009.
    It is not always the gouvernment to blame for this, they try to run the country, but the businessman digs as much as he can into the pockets of the rich and poor alike. How can the gouvernment stop this?

    There should be a fine for businessmen who gorge on the pockets of others who are trying to survive in difficult times. Hold onto the pennies you have and spend wisely.

    I,m sure this will be a good budget, and the opposition will not support it, especially Jack Layton who is becoming more and more discusting every time he talks to the media. Don,t depend on Gilles Duceppe as he wants to destroy everything that is Canadian. To survive this crisis, you have to be Conserative or Liberal minded Canadians. Also, we can,t afford an election now, there are better ways to spend our tax dollars.

    Frank Blackwood

  • John
    July 01, 2010 - 19:46

    We once had surpluses thanks to hard working Canadians. Now we got billion dollar deficits. Might it have something to do with the 70 billion dollar bail-out of the banks? Huh? They are laughing all the way to THEIR banks with our money. Now big spender Harper tells us he is going to get tough with these guy?!? Well its all window dressing folks. He works for them. This is how capitalilism works. Its the same as socialism but the poor get nothing. And the shrinking middle class get bribed with paltry tax cuts so they will keep their mouths shut about all this theft. The newspaers have a business section. But what about a section for the people getting robbed? The working poor who do all the work?