Payday loan companies; blight or blessing?

One of Weston’s many payday loan outlets

Do you know the difference in rates between a credit card cash advance and a payday loan? Payday loan companies (PLCs) say that they have independent surveys that show their customers are aware of the costs of loans and that people choose PLC services because of the convenience.

Critics say that PLCs prey on the poor and rather than helping people escape poverty, they encourage a cycle of dependence. Others wonder at the ethics of making money from the plight of poor people. Provincially regulated since 2008, the cost of a loan must not exceed $21 per $100 borrowed. In practice, costs are lower and first time customers are often able to borrow $200 for a fee of $20. Even this lower charge for a two week loan works out to an annual rate of 480%. PLCs contend that because a typical loan is for around $300 and is usually paid back within a month, interest costs to customers are worth the convenience.

Using city of Toronto statistics, the cost of borrowing $300 is compared among various sources in this chart:


Because PLCs are provincially regulated, the City of Toronto is powerless to control their proliferation other than ensuring that they follow zoning regulations.

Interestingly, the legislation mandated the establishment of:

the Ontario Payday Lending Education Fund, made up of mandatory financial contributions from the industry, to promote understanding of the Payday Loans Act, 2008 and general financial planning

A corporation was set up to administer the fund, calling itself the Ontario Payday Lending Education Fund (PLEFCO). The corporation has had a president since December 2010. Director of Government Affairs with the Institute of Chartered Accountants, Christopher May is the man in charge – according to his Linkedin bio page. Ministry of Consumer Services Spokesperson Bryan Leblanc told WestonWeb that,
“the role of PLEFCO was reconsidered in light of the resources and the many programs already in place in support of financial literacy.”

This means that PLCs have been excused from financing PLEFCO although the organization appears to have existed since 2010.
WestonWeb then spoke to Former Hamilton Liberal MP, the Honourable Stan Keyes, President of the Canadian Payday Loan Association representing 42% of the 1800 Payday Loan outlets across Canada. Stan naturally sings the praises of the industry and likened the annual interest rate on a payday loan to the annual cost of a hotel room and said that both are irrelevant as the loans, like a hotel room, are only for a short period. When asked about the proliferation of PLCs in poorer areas of the city, Stan claimed an Environics survey indicated Payday Loan customers have incomes of $45000 or higher.
He said that PLEFCO was disbanded in October 2012 because ‘after some soul searching, the government decided there are lots of high profile (payday loan information) initiatives out there’.

Which leaves us with the question of PLEFCO – an organization that apparently has existed for two years but hasn’t yet done anything. PLEFCO President Christopher May did not respond to requests for an interview. Follow-up questions to the Ministry of Consumer and Corporate Affairs about PLEFCO staffing levels and President Christopher May’s role (presumably he wasn’t a volunteer) have gone unanswered although the Ministry’s pages on payday loans were subsequently amended to remove all references to the fund. Perhaps Minister Margaret Best will consider recommending lowered loan rates in lieu of PLEFCO payments.

Incidentally, the store pictured at 1931 Weston Road will be moving at the end of January as its lease is expiring.

2 thoughts on “Payday loan companies; blight or blessing?”

  1. Payday loans prey on people with few other resources, helping to add another layer of debt. We are blighted by their presence.

  2. To answer your question Mr. Murray, I think you need to direct it toward Premier McGuinty. Oh wait, he seems to have left the roost so he no longer has to answer any questions. Silly me….

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