Ontario Government lets payday lenders off the hook

From Richmond Times Dispatch.
From Richmond Times Dispatch.

After dragging its heels for months, the Ontario Government has finally acted on a promise to do something about the huge rates charged by the payday loan industry in this province. As readers in Weston / Mount Dennis are painfully aware, these stores have proliferated in our communities and prey mainly on the poor, charging as much as 21% for a two-week loan; an eye-watering annual rate of 14,299%.

All of this was made possible in 2006 by the lovely Vic Toews, then Minister of Justice and Attorney General of the late lamented Conservative government. His bill made it legal for companies to charge more than (the then) usurious rate of 60% annually by giving provinces the power to regulate their own loan rates. Ontario opened the flood gates in 2008 and the payday loan industry hasn’t looked back.

The provincial Liberal government, instead of taking leadership, has listened to the Payday Loan lobby and rather than lowering rates drastically, they have decided to take the line of least resistance. They are quietly proposing that as of January 2017, rates for a two-week loan drop to 18% and then in January 2018, rates will become 15%, matching those of Alberta. While this is a good start, there is nothing in the legislation that addresses the dire plight of people forced to borrow at such appalling rates. 15% may sound better, but it is still 3,724% compounded annually.

Here is John Oliver’s take on Payday Loans.

Does Ontario have to go this route? Quite simply, no.

Quebec has taken the lead and they cap annual loan rates at 35%. As a result, there are no payday loan companies in that province.

That is the example that Ontario needs to follow and would help poor in our province dig their way out of poverty. In addition, some pressure on our hugely profitable banks and credit unions to provide loans to the poor would not go amiss.

If readers would like to comment on the proposed changes to the act, the Ontario Government isn’t making things easy. The contact page is here and a written submission may be sent via email or snail mail.

MPP Laura Albanese’s contact information is here and her constituency phone number is 416-243-7984.

 

2 thoughts on “Ontario Government lets payday lenders off the hook”

  1. I sent the following to the contact page. Readers are invited to cut and paste, amend and delete where necessary:

    “Payday loan companies are a blight on this province as they exploit the poor by charging huge rates of interest. Reducing loan rates from 21% every two weeks to 15% will not do enough to end this exploitation.

    Payday Loan companies hide their true rate of interest by expressing it over the short amortization period of two weeks. This is misleading and should be changed to an annual rate so that consumers can more easily compare rates charged by banks or credit cards. Patrons often take out a payday loan from a second company to pay off their original loan. This leads to further indebtedness. There should be a safeguard in the legislation against people having to do this. This could be achieved by charging a much lower interest rate (perhaps an annual rate of 5%) for overdue loans.

    Quebec has capped its maximum lending rate at 35% per annum. That’s what Ontario should do and this would save thousands of people from becoming trapped in a cycle of debt.

    There should also be legislation to force banks and credit unions to devote a percentage of their lending to low income people at reasonable rates.

    This is what thoughtful and compassionate legislation should do. It should not simply accede to the wishes of the Payday Loan lobby.”

  2. Thanks for all the information, and making adding our own protest so easy.
    If only the government would recognize this as a priority, our neighbourhood and the victims of this cash money scamming would benefit greatly. I’ve added my voice, and hope others will too.

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