The credit crunch is hitting fast and furious.
Just ask Six Pack Jack, the guy I wrote about who'd rather buy beer than invest in an RRSP, hides his money under the bed because he doesn't trust banks and laughs at all of us who've worked hard to build up an investment portfolio.
Jack muses that by the time this meltdown is over our net worth will all be the same.
Well, yesterday Jack had a rude awakening. He got a call from the bike shop where his motorcycle was being repaired. The owner said "come and get it, I'm out of business."
Problem is it's not just this Burlington bike shop that's in trouble. Two others in the area are also shutting their doors, after their banks cut back on credit.
"We used to be able to get a line of credit up to 20% of the cost of parts for repairs, then repay it when the work was done and we got paid," said one owner.
"Not any more. We can't get any credit."
Liberal consumer critic Dan McTeague warns more and more small businesses -- Canada's biggest job creators -- are complaining that lines of credit and loans are drying up as Canada's big banks brace for more fallout from a growing global meltdown, which is also sinking our real estate markets.
"It's right across the entire business spectrum right now. I've heard from many businesses who've been told on your own," said the outspoken Liberal MP who promises to deliver hundreds and hundreds of Sun protest coupons demanding a probe into the high cost of credit.
Readers are angry that rates are being hiked on credit cards, while days of grace dry up and fees go up.
David of Belleville complained not only is the annual fee on his Scotiabank Visa jumping from $8 a year to $37 -- a 462.5% hike, but the rate charged on cash advances jumps from 18.59% to 21.99%.
Small business owners have also been complaining about a rise in merchant fees for credit card transactions -- which has led Senator Pierrette Ringuette to table a motion for a new probe into credit and debit card systems in Canada. Both MasterCard and Visa want into the lucrative debit card market, while Interac has begun talks with the Competititon Bureau to dismantle its "not-for-profit" mandate.
Ringuette said the new investigation would try to "expose the impact of rates and fees on businesses and consumers."
'WORST OF TIMES'
Meanwhile, McTeague complains cutting off credit to small businesses is "the worst decision at the worst of times," especially after billions of our tax dollars were pumped into our banking system, while $75 billion in CMHC-insured mortgages were wiped from the bottom line of the Big Six, which raked in $12.15 billion in combined profits in fiscal 2008.
"If anything lending institutions should be helping small firms," said McTeague.
He also complains many struggling consumers trying to pay down record household debt at $1.3 trillion are also getting whacked, with rising rates of interest eating away at their ability to repay. Some have hiked rates from 18.99% to 19.5% and for late payers to 24.75% and 26%. "The banks are cutting the ability of people to get out of debt, leaving them in a vicious cycle of indebtedness," said McTeague.
Now overly-indebted consumers can no longer count on rising home equity to bail them out, as latest numbers from the Canadian Real Estate Association show real estate is sinking with house prices falling another 10% last month and sales tanking by 12.3% to 27,743 sales -- the lowest level in nearly eight years. Alberta led the slump with sales off 14%, followed by 31.5% in B.C., 12.4% in Quebec and 12.1% in Ontario.
"The report underscores that the Candian housing correction continued in earnest in November," said Millan Mulraine, economics strategist with TD Securities.
Last week, the Bank of Canada -- which cut its key rate by 0.75% to 1.5% -- warned Canadians may soon start losing homes and defaulting on credit. McTeague blasted the banks for not passing along all the savings and cutting their prime lending rate by only 0.50% to 3.5%. Fixed-term mortgage, though, dipped by up to 0.20%.
To join our protest, go to torontosun.com and fill in the Stop the Gouging coupon.
