SENATORS’ STATEMENTS — Consumer Debt Index
June 23, 2020
Honourable senators, in March of this year, almost half of Canadians sampled by the MNP Consumer Debt Index said they were $200 away from insolvency. While Canadians are struggling through this unprecedented economic disruption, they are not catching a real break from some of the wealthiest companies in Canada, the Big Six banks.
In January, the unemployment rate was 5.5%. This May it was 13.7%. For youth, it was more than 29%. We put the economy on ice to manage the spread of COVID-19. Canadians have and continue to dutifully play their role in altering their lives to mitigate the spread of the virus. Canadians are spending their savings or borrowing more to make ends meet, but Canadians already carried among the highest consumer debt in the world before COVID-19. This June, StatCan reported that for every $1.00 of disposable income an average Canadian household held, they had $1.77 in debt. This debt includes mortgage debt, credit card debt and line of credit debt.
Between 2000 and 2017, average median hourly wages in Canada rose 7.4%, but in the past two years, CEO compensation at the Big Six banks has increased 13.5%. Today, average big bank CEOs’ compensation averages out to around $10.5 million per year. This is above 200 times the per capita income of a Canadian.
What have the big banks done for Canadians during COVID-19? Mortgage deferrals were implemented. This allowed homeowners not to pay their mortgages for up to six months without penalty. However, homeowners are on the hook to pay the interest that accrued on their deferred payments. The federal government has negotiated temporary cuts to credit card interest rates for consumers and small business owners. However, like the mortgage deferrals, interest, including a punitive additional interest on many cards, will accrue on the outstanding balances of the credit card and will be payable once the deferral period expires, which is very soon. That means those who are financially vulnerable are going to see their debts growing larger and larger as they must stay home.
Royal Bank recorded $9.6 billion in profits last year alone; TD, $11.6 billion; Scotiabank, $8.7 billion; BMO, $6.2 billion; CIBC $5.4 billion; National Bank, $1.6 billion. As CEO compensation, stock prices and dividend yields expand during a time of economic growth, the banks should not be profiting from the hardship of Canadians.
Prime Minister Trudeau and Finance Minister Morneau said all the way back in April that banks need to be doing more, but what is the federal government doing to prevent our richest corporations in the finance sector from profiting off of Canadians’ pain?