By Graeme MacKay, Editorial Cartoonist, The Hamilton Spectator – Friday December 11, 2015
Payday loan industry comes under microscope
The province is moving to protect vulnerable people from cash stores and collections agencies — but a local councillor calls the efforts “half-hearted.”
If passed, new legislation by the Ontario government promises to increase protections under the Payday Loans Act, Consumer Protection Act and the Collection and Debt Settlement Services Act. The aim is to provide safeguards such as a cap on the rates charged by cheque-cashing services, a grace period for repayment for customers of rent-to-own services and reasonable costs for optional insurance on instalment loans.
It would also offer longer repayment periods for repeat payday loan borrowers, and expanded rules against unfair collection practices from businesses that purchase and collect overdue debts.
But Ward 3 Coun. Matthew Green says the legislation “doesn’t go nearly far enough in terms of really tackling the core elements and the predatory nature of this industry.”
There are 813 licensed payday lenders in Ontario — more than there are McDonalds restaurants. Roughly 35 of those are in Hamilton, according to the ministry’s online database.
For starters, Green wants to see the “ridiculous” interest rates on payday loans slashed.
Green put forward a motion this summer to limit and regulate these stores at a municipal level, which would have made Hamilton the first city in the province to do so.
In the meantime, he and a working group made up of local agencies, including credit unions, are actively researching a model for a market alternative low-cost loan service.
Tom Cooper, director of Hamilton’s Roundtable for Poverty Reduction (HRPR), says he’d like to see provincial legislation that enables municipalities to license lenders at the local level.
He agrees there’s more work to do on this.
“At the end of the day … these services are predatory by nature and they’ll continue to take advantage of people who run into desperate financial situations,” he says.
According to a survey of 500 Ontario payday loan users earlier this year, more than half of the borrowers surveyed said they are using the service for recurring expenses, not crisis situations.
Of those surveyed, 27 per cent reported making less than $30,000 a year. (Source: Hamilton Spectator)