Saturday March 6, 2021

March 13, 2021 by Graeme MacKay

Editorial Cartoon by Graeme MacKay, The Hamilton Spectator – Saturday March 6, 2021

Payday lender lines of credit and instalment loans at 47% create debt traps, critics say

Patricia Edwards of Toronto wanted to help her two adult daughters when they fell behind on bill payments at the rented townhouse they share.

October 18, 2006

She has few assets and a poor credit history, but she was employed at the time, so she went to a payday lender — not for a payday loan, but for an ongoing line of credit.

“I was like, OK, let’s see if I qualify for the loan because I’m working.”

Edwards, 53, was able to borrow $1,500 early in 2019 from Cash Money. But then she lost her job, and in 2020 came the pandemic. She’s had to refinance the loan twice, and went to another lender, Money Mart, for an instalment loan that could be repaid over two years.

Now she’s close to $5,000 in debt, all in, paying nearly 47 per cent interest on both loans.

December 6, 2014

Her predicament, and that of many other Canadians like her, has a chorus of voices calling for industry reform. Activist groups, elected officials and even some smaller lending companies say financially vulnerable people are too often lured by payday lenders’ low bi-monthly payments on longer-term loans without realizing how the costs will add up.

“I’d love to get a bank loan,” said Edwards. “But I don’t have a car, I don’t have a home, I don’t have any assets. I don’t qualify.”

Payday lenders argue that’s exactly why their services are essential. They provide money to people in need who otherwise would be unable to borrow.

December 11, 2015

In a statement to CBC News, the Canadian Consumer Finance Association, which represents close to 1,000 high-interest lenders across the country, said unsecured loans are expensive to provide, and that its members’ interest rates are government-approved.

Acorn Canada, a national organization that advocates for low-income people, has taken aim at large payday lenders, organizing protests across the country and calling on the federal government to take action.

Donna Borden, vice-chair of Acorn’s East York chapter in Toronto, said the pandemic has forced more Canadians to turn to high-interest lenders.

September 11, 2015

“A lot of people are using or taking these loans to buy food, to pay their rent,” she said. “And especially now with COVID, it’s even worse.”

Instalment loans, where regular repayments are scheduled over a number of years, were the fastest growing segment of lending among payday companies, according to the results of a limited online survey conducted by Acorn in February. It found that the number of survey respondents who reported taking instalment loans had jumped from 11 per cent in 2016 to 45 per cent in 2020.

Independent Sen. Pierrette Ringuette of New Brunswick has sponsored two bills to have the Criminal Code amended to lower the maximum interest rate that lenders can legally charge from 60 to 20 per cent plus the overnight bank rate. Neither bill moved forward due to prorogations and election calls, but Ringuette said she intends to sponsor another one.

“Canada is like a gold mine to these institutions because of the current state of legislation we have in place,” she said. (CBC)

Wednesday December 20, 2017

December 19, 2017 by Graeme MacKay

Editorial Cartoon by Graeme MacKay, The Hamilton Spectator – Wednesday December 20, 2017

Payday lenders squeezed by new regulations

After more than two decades in the payday-loan industry, Anthony Piet faces his most difficult year in the business.

February 16, 2017

Mr. Piet operates eight Money Mart franchises sprinkled across Canada, located in small towns such as Banff, Alta., and Timmins, Ont. Legislative changes in numerous provinces – including Ontario, to take effect on Jan. 1 – have squeezed payday lenders, in particular smaller players such as Hamilton-based Mr. Piet. New rules reduce how much they can charge and put restrictions on lending.

“Tough,” says Mr. Piet of his 2018 outlook. “Really tough.”

December 11, 2015

The much-maligned payday-loan industry sells short-term loans at a high cost, mostly to lower-income Canadians. If a person doesn’t have access to credit, but is short on money in between paycheques and needs to cover something essential, such as the hydro bill, a lender such as Money Mart is an easy and fast place to get cash. The loans are generally repaid quickly, but the fees, which long stood at more than $20 for every $100 borrowed, added up to an annual interest rate of 500 per cent and more.

December 6, 2014

Provinces across Canada have tightened the rules that govern the industry. Payday lenders insist they provide an essential service, but they have been widely criticized for exploiting vulnerable customers and charging too much. Now they say their margins are being squeezed so badly that they’re fighting for survival.

September 11, 2015

The number of payday lenders operating in Canada has been on a downward trend for several years, in part because of the new legislation. In 2017, there are an estimated 1,360, down 5 per cent from 1,434 in 2015.

For Mr. Piet, with one Money Mart in Alberta, he has taken pragmatic measures. He has reduced hours of operation, cut advertising and pulled back on community contributions. He called his Banff store’s future “tenuous.”

In Ontario, where his Money Marts are in Timmins and Simcoe, Mr. Piet doesn’t feel the new rules in the province foretell looming closures but feels like he is in a vise as he draws up budgets for the coming year. “Everything is under the microscope,” he said. (Source: Globe & Mail)

Friday December 11, 2015

December 10, 2015 by Graeme MacKay

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.

Staff is now looking into the feasibility of that.

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)

Friday September 11, 2015

September 10, 2015 by Graeme MacKay

By Graeme MacKay, Editorial Cartoonist, The Hamilton Spectator – Friday September 11, 2015

Hamilton looks to crack down on payday loan industry

Hamilton councillors unanimously approved a motion seeking from the province the ability to limit the locations of payday loan and cheque cashing outlets, while also strengthening the Payday Loans Act.

“This is predatory economic violence,” said Ward 3 councillor Matthew Green, who introduced the motion at council’s Sept. 9 meeting. “(They) are targeting our most vulnerable, indebted people. It’s legalized loan sharking.”
Green’s motion targeting the industry, which was revealed earlier this summer, includes forcing these businesses to post their rates on their walls, provide information about debt counselling, and having Hamilton staff identify all the payday loan businesses in the city.

Also contained in the motion was a request to the province to toughen the Payday Loans Act.

The act regulates the industry allowing outlets to charge $21 for every $100 people borrow. Green says desperate people use these businesses, and they end up having to go to another payday loans outlet to pay the loan of the first one.

“This is usury, this is criminal,” said Green. “I’d love to see (the places) outlawed.”

Tom Cooper, director of the Hamilton Roundtable for Poverty Reduction, says municipalities need the power to regulate a business that is taking advantage of vulnerable people.

“We deem the industry as predatory in nature because its practices and slick marketing campaigns lure vulnerable consumers into transactions where there is nowhere else to turn in a financial crisis,” said Cooper.

Based on the payday industry’s own information, for every new customer loan, 15 are repeats, said Cooper.

Stan Keyes, president of the Canadian Payday Loan Association, headquartered in Hamilton, stated in an email letter sent to councillors Sept. 8 that “council should not pass bylaws to ban industries providing services that consumers demand.”

He said the province does enforce the existing regulations, including levying fines, and revoking licenses “which they have done with non-compliant lenders.”

Keyes, a former Liberal MP, stated the industry is already heavily regulated since 2009. In 2012 there were 42 outlets in Hamilton, now there are 34. (Source: Hamilton Spectator)