FINA Committee Meeting

STANDING COMMITTEE ON FINANCE

COMITÉ PERMANENT DES FINANCES

EVIDENCE

[Recorded by Electronic Apparatus]

Monday, June 1, 1998

• 1539

[English]

The Vice-Chair (Ms. Paddy Torsney (Burlington, Lib.)): I'll call this meeting to order, with your cooperation.

Appearing before us, pursuant to Standing Order 108(2), a study on tied selling, we have Ms. Annie Bélanger.

[Translation]

Welcome, Ms. Bélanger. I'd ask you to say a few words to us in English or in French, your choice, after which we'll go to questions.

Ms. Annie Bélanger (Individual Presentation): First I'll introduce myself. I'm Annie Bélanger. I've been a financial security planner for 10 years. I'm here today as an individual because I was the victim of a tied sale last year and I wanted to tell you about it.

• 1540

Last year, my husband and I wanted to buy a boat and needed financing. We went to our usual bank where we do our banking and we submitted a personal loan request to buy the boat in question.

After a credit check which was positive, the bank answered that to get the said loan we had to transfer all our investments and our mortgage to the branch itself. You must understand that my husband and I earn our living selling insurance and other investment vehicles. I had a low-interest mortgage with my employer because, as you know, insurance companies often offer mortgages to their employees at a preferential rate. I was enjoying a rate 2% lower than the market rate.

So I was being asked to break my mortgage contract during its term—we were halfway through it—to pay the penalties and, to top it all off, to accept that my mortgage rate be 2% higher than what I was already paying.

On top of that, as our investments are held in insurance companies and mutual funds and since we sell our own investments, we were getting a commission. Once again, we were being asked to transfer all that to the institution in question and pay penalties besides.

Of course, we refused that offer. The lady at the bank told us, "It's not complicated, no transfer, no boat." We were told that our assets were not real assets if they weren't with the branch itself. It's a bit insulting to be answered like that because, in our mind, they were assets anyway. So we were refused the loan and we had to start shopping around in other institutions.

I don't know if you know this, but the more requests for credit you make, the more points you lose at the credit bureau. When you start shopping around, any time you make a new request for credit, your credit rating gets worse. We had to visit a number of institutions to find financing and we were losing points each and every time. The longer it lasted, the worse our credit file got until an institution finally consented to our request for a loan.

The institution that granted us the loan was a bit more understanding than the first bank. We were told: "We'll grant you the loan, we understand that you don't want to transfer your mortgage but, on the other hand, you have investments and we'd like to have a slice of them." I finally accepted to transfer half my investments and it cost me 6% in penalty fees. We were also forced to buy life insurance covering the loan even though we're insurance brokers ourselves and carry out transactions like that every day. We didn't have any choice; those were the two conditions we had to meet to get the loan. Finally, at the end of our tether, we accepted and that's how we got our loan.

That's the broad outline of what I wanted to tell you. Do any of you have any questions?

The Vice-Chair (Ms. Paddy Torsney): Mr. Harris.

[English]

Mr. Dick Harris (Prince George—Bulkley Valley, Ref.): Welcome, Ms. Bélanger.

Ms. Annie Bélanger: Thank you.

Mr. Dick Harris: I just have a couple of quick questions. In the first instance, are we talking about a bank, as we know it, or a credit union?

Ms. Annie Bélanger: Yes. The first one was the TD Bank—not to name it—and the second institution was the Caisse populaire Notre-Dame d'Ottawa.

Mr. Dick Harris: That's like a credit union, right?

Ms. Annie Bélanger: Yes.

Mr. Dick Harris: Okay. With respect to the TD Bank, they do the credit check, of course, and then they check out the ability to repay, or to service the loan. Most banks use a 40% ratio of your gross income.

Ms. Annie Bélanger: That was not in question.

Mr. Dick Harris: I'm assuming you were well within that ratio.

Ms. Annie Bélanger: We were well within the ratio. She said straight out that the ratio was not in question, nor the ability to pay the loan. It was just that they wanted to have our business entirely.

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Mr. Dick Harris: So they said to you “Either you do this or we will not give you the loan”, regardless of your credit history or your ability to re-service the debt.

Ms. Annie Bélanger: Right. One thing you have to understand is that since we do our own investments, as insurance or mutual funds brokers, they're never going to get that business, and they know that. We only use the banks for banking and credit. They had a problem with the fact that they would never see our investments in their bank. She wanted them.

Mr. Dick Harris: In my opinion, one of the most blatant tied selling examples is the one you mentioned regarding the loan insurance. I know this was brought to my attention a number of years ago by someone who had just taken out a loan. As they were signing the loan, the other paper for the insurance was being pushed across the table to be signed. So the person took it because they thought they were obligated, only to find that if they had gone to a life insurance company they could have bought the same coverage at half the price. We didn't really know the term “tied selling” or hear it back then, but it was sort of like a little bit of coercion.

Ms. Annie Bélanger: That was the last time it was brought up, the morning we signed the paper work for the loan. All through the process of going through the credit check, ratios and all of that, they never brought up the insurance portion of it. It was only the morning we showed up there to sign all the paper work as far as the loan was concerned that he finally said “By the way, you're required to take the life insurance to have the loan”, and that was it.

Mr. Dick Harris: I assume you and your husband are probably classified as independent business people.

Ms. Annie Bélanger: At the time I had a salaried position, so he was self-employed but I wasn't. I was making a fairly decent income.

Mr. Dick Harris: Sometimes that makes a difference with banks too, if you're an independent contractor or a small business.

Ms. Annie Bélanger: But that wasn't the question, since I had a guaranteed position with a guaranteed income and a contract. They were provided with all of that.

Mr. Dick Harris: Okay. We've heard a number of examples of tied selling. I don't have any other questions. You've explained yourself pretty well. I appreciate your comments.

Ms. Annie Bélanger: Thank you.

[Translation]

The Vice-Chair (Ms. Paddy Torsney): Mr. de Savoye.

Mr. Pierre de Savoye (Portneuf, BQ): As you've probably guessed, we've already heard everything you've told us. You mentioned that you dealt with several banking institutions and that you started off with the Toronto-Dominion Bank, if I've understood you correctly. You went to several other banks and finally found one that would lend to you, although it did "extort" a life insurance policy from you. Which is the last institution you did business with?

Ms. Annie Bélanger: The Caisse populaire.

Mr. Pierre de Savoye: Between the first and last institutions, how many others were there?

Ms. Annie Bélanger: There was the Laurentian Bank, that's all.

Mr. Pierre de Savoye: So you went to see the Toronto-Dominion Bank, the Laurentian Bank and finally the Caisse populaire, which was the least demanding.

Ms. Annie Bélanger: That's it.

Mr. Pierre de Savoye: Did the Laurentian Bank have the same requirements as the Toronto-Dominion?

Ms. Annie Bélanger: Yes.

Mr. Pierre de Savoye: And the same attitude?

Ms. Annie Bélanger: Yes.

Mr. Pierre de Savoye: For the same reasons?

Ms. Annie Bélanger: Yes.

Mr. Pierre de Savoye: Did the Caisse populaire start off with the same requirements and finally consent to soften them?

Ms. Annie Bélanger: No. When we first went to see them, we explained the constraints that the other two institutions were imposing. We told them that as we earned a living making our own investments and selling insurance, there was no way we'd transfer whatever mortgage or investments we had because of the penalties that would be imposed. So, right off the bat, the Caisse knew that transfer wasn't negotiable.

Mr. Pierre de Savoye: But the other institutions must have known that they'd lose you as a client if they didn't accept to soften the conditions they wanted to impose. They preferred losing you as a client rather than...

Ms. Annie Bélanger: Yes, because for them, we never would have been good clients. As we work in the area, they knew that we'd never transfer our investments to them, whatever they might be.

Mr. Pierre de Savoye: Your perception is that, for a bank, a good client is a client that gives all the business to that bank. Just doing your banking and borrowing there isn't good enough to be a good client.

Ms. Annie Bélanger: It's not profitable enough for the institution.

Mr. Pierre de Savoye: Despite that, the Caisse populaire asked you to consent to taking out life insurance with them.

• 1550

Ms. Annie Bélanger: Yes.

Mr. Pierre de Savoye: I imagine you tried to negotiate that too, but it was a sine qua non condition. In other words, if you had not accepted it, you would have had to go and see another institution again.

Ms. Annie Bélanger: That's it. We were conscious that starting the whole process all over again would be very bad for our credit rating at the Credit Bureau, at the end of the day. As the life insurance represented an extra expenditure of $5 a month on top of our monthly payment, we figured: well, let's go for it. We're not going to start the whole thing all over again.

Mr. Pierre de Savoye: So you bought peace of mind for $5.

Ms. Annie Bélanger: Exactly.

Mr. Pierre de Savoye: Thank you for your excellent testimony.

Ms. Annie Bélanger: Thank you.

Mr. Pierre de Savoye: Thank you, Madam Chair.

The Vice-Chair (Ms. Paddy Torsney): Mr. Brison, in French.

[English]

Mr. Scott Brison (Kings—Hants, PC): Thanks for appearing before us today.

Have you pursued this issue with the banks' ombudsman office?

Ms. Annie Bélanger: No.

Mr. Scott Brison: Were you aware of the banks' ombudsman and this service for complaint resolution?

Ms. Annie Bélanger: I am aware of it, but after you've been through that for a couple of months, as the gentleman said, you just bought peace and you want to move on.

When this questionnaire came across my desk, I was so happy that I had a chance to testify as to what happened to me, because I had heard different situations from clients in the past, but I finally had one where I was involved personally, so that was my own way of making this public.

Mr. Scott Brison: Your input is valuable. So you were not aware of the banks' ombudsman service.

Ms. Annie Bélanger: I was, but I chose not to exercise my right or do anything because we got busy with different things. After it was done, we just decided to forget about it because we had got what we wanted.

Mr. Scott Brison: It strikes me there is a complaint resolution process in place now within the TD Bank, and the Canadian Bankers Association has an ombudsman service as well. I guess I'm a little confused that you wouldn't have pursued that complaint.

Ms. Annie Bélanger: Well, I guess we felt like victims and felt we didn't have too much power. We do our banking there and everything was fine before. We have a credit line there, so we just didn't want to jeopardize that. We said we wanted financing for this boat and we got it. Maybe if we couldn't get it anywhere we would have pursued this to a complaint level, but we ended up getting what we wanted, so that's why we stopped at that.

Mr. Scott Brison: Okay, thank you very much.

The Vice-Chair (Ms. Paddy Torsney): Thank you, Mr. Brison.

Mr. Szabo and then Mr. Valeri.

Mr. Paul Szabo (Mississauga South, Lib.): Do you have any recommendations for the committee as to what we could or should do as legislators?

Ms. Annie Bélanger: I was really insulted that we were told our assets weren't real assets as long as they didn't belong to the bank. That's pretty much how she put it, and that was the most insulting thing in the whole process.

Whether your assets are with a bank, a mutual fund company, an insurance company or wherever, they are still assets and they should take that into consideration.

They charge us substantial fees to do the banking. We pay interest on loans. The fee you pay when you get a loan is the interest. They should leave it at that. That's their compensation for getting us the loan. If they want more out of it, I think that's where the ball should stop, really. They're compensated with the interest for the loan and they should stay with that.

Mr. Paul Szabo: I want to understand. What exactly are you recommending to us?

Ms. Annie Bélanger: They should have guidelines that wherever the assets are, they're still assets and they have to calculate them into your net value. They shouldn't tell people, “If you don't have your mortgage here, it's like your house doesn't exist”. It's not only the assets you have with that institution that should be taken into consideration.

Mr. Paul Szabo: With regard to options, you also went to the caisse. Would other banks have been available?

• 1555

Ms. Annie Bélanger: Yes. We went to Laurentian Bank. We have a network of banks we work with for other things, so we went through those contacts to try to get the loan. We used Laurentian Bank because that's an institution we use for other things. Then we dealt with a mortgage broker, who suggested we go to the caisse populaire.

Mr. Paul Szabo: In your experience, would it be not to your advantage to try to deal with another institution with whom you had no previous relationship?

Ms. Annie Bélanger: That's what we ended up doing. Sometimes it's for the best, because when you walk into a new institution you've never dealt with, they want your business, so they're more aggressive. If you deal with someone you had dealt with in the past, they don't perceive you as new business, so they're not as aggressive to get your business.

Mr. Paul Szabo: Thank you.

The Vice-Chair (Ms. Paddy Torsney): Thank you.

Mr. Valeri.

Mr. Tony Valeri (Stoney Creek, Lib.): Thank you, Madam Chair.

I have a couple of questions and some points of clarification. I sensed you were somewhat concerned about going to a number of institutions.

Ms. Annie Bélanger: Yes.

Mr. Tony Valeri: You mentioned that you went to a few. You also stated that when you apply for credit, your credit rating is...?

Ms. Annie Bélanger: Affected.

Mr. Tony Valeri: So that is what you said. I wanted to make sure of that. I personally was not aware of that. I don't know if other members were aware of that.

Ms. Annie Bélanger: We learned a lot through that experience, believe me.

Mr. Tony Valeri: But if you were denied a loan, essentially there would have been no risk.

Ms. Annie Bélanger: But still, you're affected. As soon as you fill out a credit application with anyone, whether it's a bank, credit card company, or store, where you pay in twelve months, it's run through the credit bureau. They have a grid, or a points calculation system, in banks. If you made 12 applications, let's say, in the last year, and you shop for a car, for example, and you sign with two different dealerships to have the best price, and you end up signing an authorization to check into your credit, every time it goes into your credit bureau file. When you apply with a bank for any type of credit, they'll look at how many inquiries you've made, and that affects your grid.

Mr. Tony Valeri: I want to pick up on what you've said. I'm shopping for a vehicle. I go to a particular shop, and I think this is the car I want. I negotiate a deal and sign a credit authorization. He's going to let me know. I drive down, stop into another shop, and say, well, let me go and talk to this gentleman for a second. I sit down, and all of a sudden I think, okay, this is not a bad deal, and I sign a credit authorization.

Do you mean to say when the second shop checks my credit, it will be different from when the first shop checked it?

Ms. Annie Bélanger: The credit won't be different, but you have another entry at the credit bureau. The more entries you have, the more points you lose.

Mr. Tony Valeri: So it could affect my obtaining or buying a product.

Ms. Annie Bélanger: Yes. Let's say every year you change your car. Every year you have a new entry. They keep the last seven years on your record, so the more entries you have, you look like someone who's always looking for credit.

Mr. Tony Valeri: Okay.

An hon. member: They've got your number.

Voices: Oh, oh.

Mr. Tony Valeri: That's why I'm asking.

Ms. Annie Bélanger: It's surprising, I know. We were stunned when we learned that. They have this evaluation grid and they work out a number of points. That's why you cannot go around to 12 different banks, because you're going to ruin your credit record.

Mr. Tony Valeri: I guess it would have more relevance if you were a marginal risk than if you were a lower risk. That's one thing.

The other point I wanted to make was this. Have you ever seen before this statement on tied selling from the Canadian Bankers Association?

Ms. Annie Bélanger: Yes.

Mr. Tony Valeri: You have seen it?

Ms. Annie Bélanger: Yes.

Mr. Tony Valeri: Where would you have seen it?

Ms. Annie Bélanger: I got it through my mail at the office.

Mr. Tony Valeri: You got it through the mail?

Ms. Annie Bélanger: Yes. I'm a member of CAIFA, and I think we were provided with a copy of that. I saw it in a branch, too.

Mr. Tony Valeri: A bank branch?

Ms. Annie Bélanger: Yes.

• 1600

Mr. Tony Valeri: I want to pick up on what Mr. Brison was asking earlier. Given the experience you've had and given that you've come into contact with this statement on tied selling by the Canadian Bankers Association, wouldn't this have motivated you enough to get in contact with an ombudsman and file a complaint?

Ms. Annie Bélanger: When I saw that, it was a year after we got the loan.

Mr. Tony Valeri: Okay.

Ms. Annie Bélanger: When you're a year past all of your troubles.... I didn't act on it.

Mr. Tony Valeri: Yes.

The reason for me asking the question is that when we had the ombudsman before us he really didn't give us a sense that there were a lot of complaints about people feeling coerced into tied selling, and I wondered what your reason was. Your reason was the time delay between when it happened and you coming into contact with us.

Ms. Annie Bélanger: Yes.

Mr. Tony Valeri: First, you're here as a private citizen?

Ms. Annie Bélanger: Yes.

Mr. Tony Valeri: Given that you've read this now, if you were to experience what you'd gone through again, would you treat it any differently?

Ms. Annie Bélanger: I guess we're always debating how bad this is going to affect me if I do make a complaint. Let's say I need more credit in the future; is this going to affect me? That's the worry we have, and that's probably why most people don't do anything, I would say.

Mr. Tony Valeri: Okay. Thank you.

The Vice-Chair (Ms. Paddy Torsney): Mr. Pillitteri, did you have any questions?

Mr. Gary Pillitteri (Niagara Falls, Lib.): No.

The Vice-Chair (Ms. Paddy Torsney): I have a question. Do you think when you were given the forms to fill out for your credit approval that one of these statements or information on that particular bank's ombudsman should have been given to you and that there should be some hours or day or something to get the approval process so that you have the time to read through this information?

Ms. Annie Bélanger: That's certainly a good suggestion. I think most citizens just go to the bank and we're all—

The Vice-Chair (Ms. Paddy Torsney): Sheep.

Ms. Annie Bélanger: —at their mercy, so to speak, because we want something and we need their financing to do it. A lot of people go to the bank and they're willing to do anything to get the financing they're looking for. So that would probably give a good balance.

The Vice-Chair (Ms. Paddy Torsney): Okay.

Does anyone else have any questions?

Thank you very much for coming and presenting to us today. It's good to have some real-life examples so that we know what we're talking about. We wish you all the best with your business and with your boat.

Ms. Annie Bélanger: Thank you.

The Vice-Chair (Ms. Paddy Torsney): Take care.

Is Kit Bright in the room? Terrific.

I'll suspend for about two minutes.

• 1602

• 1607

The Vice-Chair (Ms. Paddy Torsney): Our next witness is Katherine Bright, who's come from Calgary to be with us today. Thank you. Ms. Bright has a statement, and we'll have some questions and answers afterwards.

Ms. Katherine Bright (Individual presentation): To begin with, I feel I should give you a little background regarding my history.

I am a sole proprietor of a small consulting company in Calgary. I've been in business since February 1995 and have operated solely on a flow-through bank account—that is money in and money out. I have five full-time employees, so I am responsible for paying them twice a month, whether I get paid by the clients or not. As some clients have a 60- to 90-day turnaround in paying my invoices, this can leave me quite short of cash. Promises to the bank of cheques going into my account are exactly that—just promises—until I receive a cheque and deposit it.

In early December I happened to be in such a situation. I had over $10,000 in outstanding invoices and had to pay my staff. I called the bank, the Laurentian Bank of Canada, and asked if I could get my line of credit increased to $7,500. My payroll exceeded my then line of credit. I received a call from the bank two days later saying they would up my line of credit to $17,000. I was delighted, as this would ease my cash worries considerably.

But there was a catch. I had to bring all of my investments to the bank to receive the higher line of credit. I thought this was a ridiculous idea. I asked the young woman why I would bring my investments to the bank and end up losing interest along the way. This would have resulted in penalties—back-end load—for my mutual funds. Also, Laurentian's investment alternatives didn't appear anywhere near as attractive on rate of return, past performance, etc., compared to my previous returns. I would have incurred a transfer penalty on my investments that could have amounted to $5,000 or more. This would have severely hindered my retirement objectives and plans.

The young woman stated that the requirement for the higher line of credit was based on my bringing my investments over. I asked her what my line of credit could be raised to without the transfer of my investments. This turned out to be only $7,500, which was what I had originally asked for. This was quite a difference from the first amount. I stated that this practice was considered illegal, and she stated that all of Laurentian Bank's directives come out of Montreal, and this was their directive for me.

As I needed the $7,500 at the time, I took the line of credit. I am still angry that the bank could try to enforce such a practice, which I consider to be authoritative manipulation. I've read that all banks practise tied selling, and feel that their clients are the ones being exploited when requesting basic bank services. I have been very lucky that I've kept my company going without help from the bank when I absolutely required it.

• 1610

Thank you for giving me an opportunity to express my concerns and disappointment over the bank's dealing with the situation.

The Vice-Chair (Ms. Paddy Torsney): Thank you, Ms. Bright.

Now we'll have questions from Mr. Harris.

Mr. Dick Harris: Thanks for coming, Ms. Bright.

First of all, were your investments to be used as security or collateral?

Ms. Katherine Bright: Yes.

Mr. Dick Harris: Do you think that because you are a self-employed businessperson, that is the reason the bank wanted to add to their security for your line of credit?

Ms. Katherine Bright: I'm not really sure, because they never said anything about that at all.

Mr. Dick Harris: Banks tend to treat self-employed, small-business people sort of like second-class citizens—

Ms. Katherine Bright: Yes.

Mr. Dick Harris: —as you've probably found out. If you're working for someone and making $30,000 a year, chances are you can get a car loan far easier than a small-business person who is maybe making $50,000 a year. This might have been just one of those instances where, because you were a small-business person, they simply wanted to shore up their security.

I don't agree with what they've done, I'm just trying to rationalize whether this is actually tied selling or not.

Ms. Katherine Bright: I had kept a balance of the same amount they were willing to give me, $17,000, until I had a shortfall. When they knew I always carried from $13,000 to $17,000 in an account, I don't think they were going to lose out a whole bunch.

Mr. Dick Harris: Yes. I don't have any more questions. Thank you.

[Translation]

The Vice-Chair (Ms. Paddy Torsney): Mr. de Savoye.

Mr. Pierre de Savoye: You're in business and you have a payroll to meet. I know all about that because I was in business and had employees myself. Of course, every two weeks you have to write your paychecks but you don't necessarily get the payments from your clients at the same speed. So you need an understanding bank manager. If a bank manager stops being understanding, he can lead you directly into bankruptcy. Did you get the impression that your banker's lack of understanding was putting your business at risk?

[English]

Ms. Katherine Bright: I never talked to the bank manager until after this happened, I just talked to the young woman who did the loans and line of credit for the bank. I did talk to the bank manager later. He said he knew the practice was illegal and he didn't understand why the bank was doing it.

Mr. Pierre de Savoye: Did you perceive this practice, when it happened, as having the potential to put you out of business?

Ms. Katherine Bright: Yes, it could have put me out of business.

Mr. Pierre de Savoye: Are you worried about such circumstances happening to other people, like you, who are in business?

Ms. Katherine Bright: Yes, it could happen to quite a few people. There's always a cash shortfall. If you have some big company that won't pay for 90 days and you have to pay upfront, it depletes any money you're holding there in an awful hurry. I was really short at that time.

Mr. Pierre de Savoye: So basically you're telling us this tied selling practice is not only a nuisance to you as an individual, but it could also mean that some organization could just go bankrupt without any sense to it.

• 1615

Ms. Katherine Bright: There are many people who don't have the kind of money I usually have in my account. I think if I were only going from somebody paying me to the next pay cheque, I would have been out of business a long time ago.

[Translation]

Mr. Pierre de Savoye: Thank you.

[English]

The Vice-Chair (Ms. Paddy Torsney): Thank you very much, Mr. de Savoye.

Mr. Brison.

Mr. Scott Brison: I have a similar question to the one I put to the previous presenter. Were you aware of the ombudsman—

Ms. Katherine Bright: No, we knew nothing about it.

Mr. Scott Brison: If you had, would you have pursued that course of action?

Ms. Katherine Bright: Once I had talked to the bank manager, I felt I had no other choice. I needed some money, so I took it and ran. If I'd known, I might have, but I don't think so.

Mr. Scott Brison: Okay. Thank you.

The Vice-Chair (Ms. Paddy Torsney): Mr. Szabo.

Mr. Paul Szabo: I have a small question. How did you come to be here?

Ms. Katherine Bright: That little sheet of paper came across my desk, too, asking if I had a beef about tied selling. I filled it in, never expecting to hear anything back because a lot of things go into never-never land, and the next thing I knew I got a call asking if I would appear.

Mr. Paul Szabo: So the system works.

Ms. Katherine Bright. It does.

Mr. Paul Szabo: Your case is kind of interesting. I guess the security issue certainly is one aspect to be considered. As one who is self-employed in the service sector, you have basically no inventory to speak of, or anything else that would require invested capital to inject into your business just to make it ready to go. For a service industry, even providing terms or having customers mandate terms to you, there is a cost of doing business there, which presumably is built into your rates as well.

Ms. Katherine Bright: Yes.

Mr. Paul Szabo: If you don't take all of these things into account, then over the long term you don't make money.

Ms. Katherine Bright: That's right.

Mr. Paul Szabo: You understand that cashflow is probably the biggest vulnerability to small businesses, but that's part of doing the business. Working capital loans are difficult enough to get, even for long-term businesses.

I wanted to ask you the same question I asked a previous witness. You appear to have a general understanding of the concept of tied selling, and it certainly didn't strike you as helpful at a time when you needed help from the banks.

Ms. Katherine Bright: No.

Mr. Paul Szabo: And I suppose it would be easy to bash the banks, generally, simply for not being there for you when you really needed them. But the important thing for us is to determine whether or not you have an idea of what you would like to see happen, or what you would like us to do as legislators. There are certain things we can do. We can't tell banks how to run their business, but we can certainly set some fair and reasonable guidelines under the Competition Act and also under the Bank Act regarding general banking practices, etc. Do you have any thoughts about what you would suggest we should do to address the situation, as you see it?

Ms. Katherine Bright: I didn't even know there was a little brochure until that other lady was talking. Those should be available at the bank too, and we should also know about the ombudsman. Otherwise, where do we turn? Where do small businesses turn? Can you mandate that they have those things available in the banks for us to pick up? I mean, that is something that would have helped me.

Mr. Paul Szabo: I'm not sure if we can tell the banks what to produce, but there may be something with regard to general policy being published and put on the wall or something like that, so that anybody dealing with an institution that is under the jurisdiction of federal legislation would know that such a requirement exists.

Ms. Katherine Bright: I knew nothing about tied selling until about a week before I applied for my line of credit. I read it in the paper.

Mr. Paul Szabo: Okay, thank you.

• 1620

The Vice-Chair (Ms. Paddy Torsney): Thank you.

Before I turn to Mr. Valeri, I'll remind all committee members, as I needed to be reminded, that when we heard from earlier presenters from CBA and from CAIFA and a couple of other organizations, there were a couple of stories that appeared in the newspaper, and it gave our chairs e-mail and there were some examples brought forward. That is where our witnesses have come from today, both from CAIFA, who undertook to do a study—I think that's perhaps where you filled in a form—and that's where some of the examples have come from.

Remember, we had Mr. Clark, who had a well-documented case, and some people felt at the time, when we were doing the earlier hearings, that we needed to hear from some other real people to find out what's going on out there. So that's where Kit Bright has come from.

Mr. Valeri.

Mr. Tony Valeri: Thank you, Madam Chair.

The Vice-Chair (Ms. Paddy Torsney): Did you remember all that?

Mr. Tony Valeri: I'm sure I can read it in the transcript.

I have a couple of questions. I picked up one point when you indicated that a bank manager said that this was illegal. He was making reference to what had happened to yourself—is that right?

Ms. Katherine Bright: Yes, to the tied selling.

Mr. Tony Valeri: You mean he was saying that tied selling was illegal.

Ms. Katherine Bright: And he didn't know that Laurentian Bank practised tied selling.

Mr. Tony Valeri: Was he from the Laurentian Bank?

Ms. Katherine Bright: He had just come over from CIBC, but I thought all banks did it.

Mr. Tony Valeri: Okay.

Ms. Katherine Bright: I don't think this was any news to him.

Mr. Tony Valeri: I want to read to you a couple of clauses that are in some existing legislation and get your reaction to them to see where your particular situation may fit in. Is that okay?

Ms. Katherine Bright: Yes.

Mr. Tony Valeri: One is:

A bank shall not impose undue pressure on or coerce a person to obtain a product or service from a particular person, including the bank and any of its affiliates, as a condition for obtaining a loan from the bank.

The other would be:

A bank may offer to make a loan to a person on more favourable terms or conditions than the bank would otherwise offer to a borrower where the more favourable terms and conditions are offered on the condition that the person obtain another product or service from any particular person.

Which of those two would your example—

Ms. Katherine Bright: I'd say the first one.

Mr. Tony Valeri: You feel that you were coerced.

Ms. Katherine Bright: They tried.

Mr. Tony Valeri: Even though when you asked for a $7,500 increase in your line of credit, ultimately you were given that without any transfer of security.

Ms. Katherine Bright: I think they tried to. What small-business person wouldn't want $17,000 as a line of credit? So they kind of lure you, they throw out a hook. I was glad to get the $7,500, honestly, but the thing was it was a lure, it was a trick.

Mr. Tony Valeri: But you weren't denied the loan.

Ms. Katherine Bright: I thought I would be if I didn't take—

Mr. Tony Valeri: Are you saying you thought you would be?

Ms. Katherine Bright: Yes, I did.

Mr. Tony Valeri: The $7,500 was given to you. Did you end up transferring assets?

Ms. Katherine Bright: No.

Mr. Tony Valeri: You did not.

Ms. Katherine Bright: No. I think it was probably after I said I'd try another bank that they decided to give me the $7,500.

Mr. Tony Valeri: Okay. I don't know, and I may be repeating myself—I wasn't following the other questioning—but are you familiar with this Canadian Bankers Association's statement on tied selling?

Ms. Katherine Bright: No, I've never seen it. I've never heard of it until today.

Mr. Tony Valeri: Okay. Was the condition of your loan any different, with respect to the $17,000 or the $7,500? Was the interest rate different on condition that you transfer assets?

Ms. Katherine Bright: Not that I know of. They didn't say anything that there was an either/or.

Mr. Tony Valeri: Okay, thank you.

The Vice-Chair (Ms. Paddy Torsney): Thank you.

May I clarify? It sounds like it was or could have been a situation where it was a bit of a bait and switch. We have this great product for you, and there's no discussion that—

Ms. Katherine Bright: That's what I felt, because she said $17,000 is.... What she said was “I've got good news for you: $17,000 has been approved for your line of credit.”

The Vice-Chair (Ms. Paddy Torsney): Then you switch your assets. But there wasn't some discussion such as “Okay, we've got $7,500, but we could go to $17,000 if...”

Ms. Katherine Bright: Yes.

The Vice-Chair (Ms. Paddy Torsney): It was straight up to the $17,000 and then the demand and then.... Okay.

Mr. Tony Valeri: Do you mean that when they made the offer of $17,000, the bank did not say on condition of transfer of your assets to this institution?

Ms. Katherine Bright: Yes, they did.

Mr. Tony Valeri: They did.

Ms. Katherine Bright: Yes.

Mr. Tony Valeri: Okay.

The Vice-Chair (Ms. Paddy Torsney): Did they tell you that you would have, without the transfer, $7,500?

Ms. Katherine Bright: No.

The Vice-Chair (Ms. Paddy Torsney): Not until you threatened to go to another bank and then they told you.

Ms. Katherine Bright: Yes.

The Vice-Chair (Ms. Paddy Torsney): Okay.

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There was no investigation of who the $10,000 invoices were from or what their payment history with you was?

Ms. Katherine Bright: I usually call up and say that I have an outstanding invoice and payroll is today but I'll have a cheque in on Monday. They've been excellent that way. That's why when this came up like this I was so disappointed in them, because I'd never had anything like that happen before.

The Vice-Chair (Ms. Paddy Torsney): This was in early December. Certainly that's a particularly sensitive time, as people are getting ready for Christmas and your employees would be not happy about having to wait for a cheque or anything.

Ms. Katherine Bright: I try not to let them wait. It's not fair.

The Vice-Chair (Ms. Paddy Torsney): All right.

Thank you very much for coming to us today. We wish you continued success in your business and in that employment prospect for all those individuals.

Unless anyone else has any other questions, we wish you a good afternoon in Ottawa.

Ms. Katherine Bright: Thank you.

The Vice-Chair (Ms. Paddy Torsney): Thank you.

Colleagues, this meeting is adjourned until Monday.