By Jordan Press
THE CANADIAN PRESS
OTTAWA _ Harsh penalties for defrauding the Canada Emergency Response Benefit are needed because organized crime and identity thieves are trying to scam the program, a House of Commons committee was told Thursday
A Canada Revenue Agency official said federal systems have already flagged a number of potential fraudulent applications for the $2,000-a-month CERB, including people involved in criminal activity that have now targeted the pandemic-aid program.
Ted Gallivan, the agency’s assistant commissioner in charge of compliance, said about five people already under a joint police-CRA investigation for other reasons are now being looked at for CERB fraud as well.
The agency is receiving leads on possible fraud and has “a number” of joint operations with local police, but Gallivan told the finance committee that it wants the power to go after fraudsters.
Earlier this week, the Liberals were unable to get unanimous agreement from the opposition parties to swiftly pass a bill that included fines and possible jail time for CERB fraud. NDP Leader Jagmeet has argued that the penalties will hit Canadians who mistakenly applied for the benefit, despite government assurances that they’re intended to deal only with those who knowingly and deliberately defraud the program.
Gallivan said the measures being sought would target people who have filed hundreds of fraudulent claims, such as those who have reportedly gone into retirement homes to have seniors sign up for the benefit.
“We do think it’s important to have a criminal sanction at the end of that,” Gallivan said during an Thursday evening committee video conference.
“Criminal sanctions being sought are really to deter people operating at scale because merely asking them to pay the money back won’t have the deterrent effect we need.”
Gallivan said the system that doles out the CERB was set up to flag possible fraud, such as someone changing their direct deposit information a day before applying for the benefit, or someone filing thousands of claims on behalf of clients.
Figures released last week by the agency showed that 190,000 benefit payments had been repaid online as of June 3.
NDP finance critic Peter Julian said new powers aren’t needed because criminal penalties already exist for fraud or people misusing social insurance numbers. He noted that criminal investigations are already under way without the additional powers.
Demand for the CERB has surpassed federal expectations, pushing its budget to $60 billion from $35 billion.
The most recent figures show that $43.51 billion in benefits have been paid out as of June 4 to 8.41 million unique applicants. But those numbers include $20.56 billion from the employment insurance account to 3.96 million EI-eligible workers who exhausted their benefits and couldn’t find work due to the pandemic.
In a recent interview, Conservative employment critic Dan Albas said the spending raises questions about whether EI premiums will have to go up in the future.
“There’s a lot of different things in play here,” Albas said. “There’s the overall spending trajectory of the government, there’s the current state of finances, particularly with the EI fund and because there’s been no budget, we just don’t know its status.”
Finance Minister Bill Morneau was pressed anew during his appearance Thursday at the finance committee about when the government would provide a budget or fiscal update. But he again said that won’t be possible until there is greater economic certainty.
The total spending package on pandemic-related aid now tops $153.6 billion, not including tens of billions more in loan programs, as detailed by the Finance Department in its latest report to MPs.
A commercial rent relief program has doled out $39 million in loans to landlords as of June 8, representing help to more than 5,000 tenants. Delivered jointly with provinces, the federal government provides almost $3 billion to the program.
Morneau said application numbers have gone up in recent days after provinces announced eviction bans.
“That is starting to change the activity between tenants and landlords,” Morneau said, adding a moment later: “There are very encouraging signs that this program can have a big impact on commercial tenants.”
By Tara Deschamps
THE CANADIAN PRESS
TORONTO _ Canadians looking to borrow money for a home purchase a home are in for some extra challenges after the Canada Mortgage and Housing Corporation announced changes to its lending standards on Thursday.
The country’s national housing agency is increasing the qualifying credit score for mortgage insurance to 680 from 600 and limiting gross and total debt servicing ratios to their standards of 35 per cent and 42 per cent, respectively.
“COVID-19 has exposed long-standing vulnerabilities in our financial markets, and we must act now to protect the economic futures of Canadians,” CMHC head Evan Siddall said in a statement.
“These actions will protect homebuyers, reduce government and taxpayer risk and support the stability of housing markets while curtailing excessive demand and unsustainable house price growth.”
Under the changes effective July 1, CMHC will also no longer treat non-traditional sources of down payment funding, such as a personal unsecured line of credit, as equity for insurance purposes.
It will also suspend refinancing for most multi-unit mortgage insurance.
The move comes just weeks after Siddall appeared before the Standing Committee on Finance in Ottawa to warn of trouble ahead for the housing market.
‘Our support for homeownership cannot be unlimited,” he said.
“Homeownership is like blood pressure: you can have too much of it. Housing demand is far easier to stimulate than supply and the result, as we’ve seen, is Economics 101: ever-increasing prices.”
The majority of mortgages insured by the CMHC will not be affected by the more stringent qualifications.
In the fourth quarter of 2019, the average debt servicing ratios were well below the 35 per cent and 42 per cent thresholds, and depending on the metric, between 63% and 82% of all qualifying mortgages were below the limit.
Spokesperson Leonard Catling said the changes “were not made because of our current book of mortgage insurance business, rather to maintain its integrity.
“High household indebtedness continues to be a concern and the COVID-19 pandemic has exposed the long-standing vulnerabilities in our financial markets.”
The CMHC forecasts a decline of between nine per cent and 18 per cent in average house prices over the next year because of higher mortgage debt and increased unemployment.
Siddall warned the finance committee a growing debt deferral cliff could be headed Canada’s way in the fall, when some jobless Canadians will need to start paying their mortgages again after deferrals run out, and as much as one-fifth of all mortgages could be in arrears if the economy has not recovered sufficiently, he warned.
“We need to avoid exposing young people and through CMHC, Canadian taxpayers to the amplified losses that result from falling house prices,” he said.
“Unless we act, a first time homebuyer purchasing a $300,000 home with a 5 per cent down payment stands to lose over $45,000 on their $15,000 investment if prices fall by 10 per cent,” he said.
This report by The Canadian Press was first published June 4, 2020.
By Jordan Press
THE CANADIAN PRESS
OTTAWA _ The Bank of Canada says there are signs in the country’s financial markets that suggest concern about the ability of companies to weather the COVID-19 economic crisis.
The central bank has spent the last two months making a flurry of policy decisions that has seen it slash its target interest rate and embark on an unprecedented bond-buying program to ease the flow of credit.
The report suggests these measures have helped ease liquidity strains and provide easy access to short-term credit for companies and households.
But it is warning this morning that a cash-flow problem for businesses seeing sharp revenue declines during the crisis could soon develop into a solvency issue.
The Bank of Canada’s review of the country’s financial system says market prices point to a concern that defaults are likely to rise.
The report also raises concerns that household debt levels are likely to rise and become acute for households whose incomes don’t fully recover from the pandemic.
“We entered this global health crisis with a strong economy and resilient financial system. This will support the recovery,” bank governor Stephen Poloz is quoted as saying in the review.
“But we know that debt levels are going to rise, so the right combination of economic policies will be important too.”
Aside from what is now approaching $150 billion in direct federal aid, the central bank over the course of March alone slashed its target interest rate to 0.25 per cent from 1.75 per cent.
It has also snapped up federal bonds to effectively provide low-cost financing to Ottawa to cover a massive spike in spending.
The bank’s balance sheet has more than tripled to $392 billion since early March, as part of an expansion larger and faster than during the financial crisis of 2008 and 2009 when its balance sheet increased by 50 per cent.
But the longer the economic shock from COVID-19 lasts, the more it drives the risks of consumer insolvencies, the central bank says.
The number of vulnerable households that putting more than 40 per cent of their income to cover debt payments “is likely to rise,” the bank says, and fall behind on loan payments even with deferrals to some 700,000 households so far.
The central bank’s review also suggests financial institutions may be much less capable of responding to and containing a cyber security incident while many employees work from home.
“There is evidence of increased phishing and malware attacks designed to take advantage of the growth in remote work and the public appetite for information related to COVID-19,” the report said.
“Cyber criminals are also using public interest in new government support programs to lure users to malicious websites.”
This report by The Canadian Press was first published May 14, 2020.
The excerpted article was written by Lawyers Financial
Your hard work is paying off and your legal career is taking shape. The sacrifices you made are beginning to bloom and your personal goals might include buying your dream home, getting married, and starting a family. This is the time for imagining everything that’s possible. As you look forward, ask yourself what you want to build and how you will protect it so that your loved ones will enjoy security, comfort and peace of mind if anything happens to you.
Growth and protection go hand in hand as your assets grow, your income rises, and you begin to establish yourself in the legal community. Understanding your options is step one.
Mortgage insurance may be one answer
Your bank may have offered you insurance when you took out your mortgage. If you accepted it, you know that your entire outstanding balance will now be paid off in the tragic event of your death. You can take comfort in that decision but now may be the time to cross-examine the benefits of that coverage and consider the limitations and drawbacks:
- No money is paid to your family. The bank is the owner and beneficiary of the insurance policy. That means the proceeds go straight to the bank to pay off your mortgage, regardless of how little is owed.
- Coverage declines but your payments do not. Your insurance coverage pays off the outstanding balance on your mortgage so the less you owe, the smaller the payout.
- Little underwriting is done so healthy homeowners may be paying more than necessary for insurance.Worse still, your claim may be denied later based of your medical history. In the case of a large claim, there may be added incentive for the insurer to dig deeper into your health status.
Achieving greater peace of mind
Term life and permanent life insurance coverage such as Term 80 Life Insurance and Non-Par Whole Life Insurance are guaranteed to pay full benefits to your beneficiaries. The money is theirs to use as they see fit. They may choose to:
- Pay off part of the mortgage to lower the monthly payment.
- Top up education savings accounts.
- Take some time off to plan their next steps.
With cash in hand, they have options. That’s why many people in the early stages of life and career choose the flexibility of life insurance over mortgage insurance.
What’s right for you?
We can help you decide. Contact your Lawyers Financial Advisor and explore your options for protecting your loved ones should anything happen to you.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
By Christopher Reynolds
THE CANADIAN PRESS
John Shmuel knows firsthand what financial openness and secrecy can do.
By the third date, his fiancee knew his income and savings. A year later they’d agreed to focus on saving for a condo before getting married.
“We were quite transparent from the start,” said Shmuel, a 33-year-old Toronto-based content strategy director who cites financial honesty as an essential ingredient in the couple’s relationship.
“My dad had debts and he didn’t disclose his financial situation. It created conflict in the household,” he recalled.
His parents are much more open about money now, but only after he sat down with them to stress full disclosure, he said.
“The money conversation is one of the toughest conversations in a relationship, one of the biggest conflict points.”
Amid soaring real estate prices and persistently high household debt levels, financial transparency plays a bigger role than ever in solidifying romantic partnerships, experts say.
A recent survey by Credit Canada, a non-profit credit counselling agency, found that financial dishonesty is the leading money-related reason Canadians would or have cut ties with their partner, with more than 70 per cent citing the sticking point as a potential deal breaker.
Dishonesty can include making secret purchases and hiding debt, income or bankruptcy. But transparency means more than the absence of deceit and requires putting numbers as well as goals and priorities on the table.
“It’s almost taboo to talk about money,” Shmuel said. “So what ends up happening is a lot of people just keep the status quo and maybe don’t mention that massive credit-card debt that they’re carrying.”
A hefty debt load or sagging credit score can lead to a rude awakening at the car dealership or the mortgage broker’s office.
“There’s no guide posts for when you should have these conversations,” Shmuel said, adding that there’s no set point in a relationship, but that a discussion before moving in together seems sensible.
About 85 per cent of Canadians with partners said that similar financial goals and habits were a prerequisite to a healthy, long-term relationship, according to a Royal Bank of Canada poll last month.
“It’s not always an outright deception, it’s just that one might want to spend a whole lot and…one might be a big saver. So how do you resolve that tension?” asked Amy Dietz-Graham, a portfolio manager and investment adviser with BMO Private Wealth.
“That tends to be the trickiest one.”
An approach to avoid is spying on your beloved to see if they’re concealing cash.
“I don’t think it’s going to be very productive to go snooping around in your partner’s credit card statement and try to old, ‘Ah ha, I got you,”’ Shmuel said. “That’s going to be a source of conflict.”
Instead, concerned spouses can watch for red flags _ spending sprees or an aversion to discussions of debt, for example.
“Those should be a catalyst to say, ‘Hey, I just saw this new set of golf clubs you have in the closet. You didn’t tell me you were buying this. I know it’s your money, but we have this decision to buy a car together in two years. I really want to make sure we’re on the same page. Can we talk about our finances?”’ Shmuel advised.
A common budget spreadsheet is a basic way to keep track of spending. Many spouses set up joint chequing accounts or combine virtually all of their finances, while others keep them totally separate, Dietz-Graham said.
“There’s no right way. It’s more important just to understand what you’re doing with money and who’s responsible for what.”
Sitting down with a financial adviser offers a “more comfortable setting so that it doesn’t feel like you’re judging your partner or putting them on the spot,” she said.
Topics that often get overlooked even by diligent couples include insurance, wills, retirement savings and secondary properties, she said.
“So sit down and just have a conversation,” Dietz-Graham said. “It will make you feel a lot less of a burden about money.”
More active financial role, good health and good earnings are all reasons underpinning their positivity