11/07/2011 06:26 EST | Updated 01/07/2012 05:12 EST

Canada Household Debt: Gail Vaz-Oxlade, TV Show Host, Says Banks Hooking Canadians On Credit

Gail Vaz-Oxlade is, in her words, "seriously pissed." The author of the best-selling Debt-Free Forever and host of the popular TV show Til Debt Do Us Part is on the warpath against what she calls "irresponsible" lending practices of banks — those financially robust institutions that are behind the tens of millions of credit cards we Canadians now hold.

"I'm tired of the crap I'm seeing in people's paperwork," she says, referring to the credit card statements she comes across in the course of preparing her shows.

She's pressuring the country's lenders to radically rework the way they make credit decisions. As part of that campaign, she's calling on Canadians to put away their credit cards and pay only with cash during Credit Education Week (Nov. 13-19).

It's no coincidence that this event, designed to promote financial literacy, is largely sponsored by banks and credit card companies.

We spoke to her recently about her credit strike campaign to find out exactly what's got her so upset. Here are excerpts of that conversation:

CBC: What kinds of problematic lending practices are you seeing?

Vaz-Oxlade: What I'm seeing is that lenders are no longer using the lending criteria they used to use in handing out credit. They used to use the "five C's of credit" which included things like your character and your capacity to repay, along with things like your credit history, your collateral and your capital, or how much money you've accumulated. That's given way to the credit score. The credit score is now being used almost as the defining tool for granting credit, particularly when it comes to credit cards.

Initially, the credit scoring system was designed as a marketing tool used to highlight customers who were the most profitable for credit card companies. That's why the credit score gives more credence, and more points, to people who only make the minimum payment on their credit card, as opposed to people who pay their balance off in full. If you look at a credit score, it's just one piece of the picture. But if you're relying totally on the credit score, then you're actually rewarding the wrong behaviour.

Here's another one you'll like. You remember when we went through the last credit crunch? Credit card companies were reducing people's credit limits. I know; it happened to me. What that does is that it pushes up your credit utilization [the percentage of your available credit limit that you are actually using]. That drops your credit score. What that does is give the credit card company justification for raising your interest rate. How's that?

Is there a role here for governments to take a more active consumer-protection role?

What I want people to do as part of this whole push that I have right now is I want people to send a letter to their member of Parliament. I want them to take the credit score off the table as the credit adjudication tool of choice.

The other problem we have with the credit score is that it's gained a huge foothold in the U.S., and it's trending the same way here in Canada, and it's dangerous. For example, I now have people writing to me saying that they have employers who want to check their credit scores before they hire them. What the hell is that about? In the U.S., you can't get health insurance if your credit score is crappy. What is that about?

You'd think it would, ultimately, be in the banks' best interests to make sure that they don't overload their customers with debt.

Yes, absolutely … But now what's happening is that financial institutions are giving people so much rope that they're actually hanging themselves. So, what am I seeing? I've seen a 21-year-old man, making $24,000 a year, with a credit card from a Canadian bank that gave him a $15,000 limit. They could never imagine that he could pay that back if he used it. Their argument is that he shouldn't use it. Then you shouldn't have given it to him.

You're also calling on Canadians to boycott credit card use during Credit Education Week.

[The banks] think they're going to teach us all about credit. We want to turn this back on them and say, "OK, we want to teach you that we're not going to put up with your bad lending practices any more."

So, I want everybody to put away their credit cards from Nov. 13 to Nov. 19. If you are saying to yourselves, "I can't do that," you need to give your head a shake. If you cannot [do without] your credit card for one week, you have a problem that's bigger than this, and you should wonder how you got yourself into this big a mess.

Do you think banks will really get the message?

They have pretty thick skins, and this is not something that will be solved just Nov. 13 to 19. There are a bunch of things they're doing that are wrong…

How about if we made a really big stink about the fact that financial institutions are putting credit hooks in our children's mouths on the first day they step on a university campus? This is all irresponsible … I am seeing young people getting credit limits of $5,000 and $6,000 and $7,000. Why? Do they really expect them to use $6,000 a month in credit? And if they do, what's that saying about the message they're sending about not having to make the money you need before you spend it?…

Show me what a financial institution is doing to help people get out of debt. Nothing. They're not educating them. They're not telling them the truth….

So don't even bother with the "blah, blah, blah" about how much you [the banks] are supporting financial literacy. Because what you're actually doing is supporting financial ignorance. The ignorant customer is your best customer….

Like, I am seriously pissed!