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.
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.”
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.
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.
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)