Ban on New Payday Loan Outlets?

From somos.presente.org

Councillor Frances Nunziata is attempting (with council colleagues) to freeze the number of payday loan companies in Toronto through a Council by-law that would stop licensing new ones.

Payday loan outlets have expanded exponentially and have tended to cluster in lower income areas. Weston has more than its fair share of them.

Payday loan / check cashing companies began in the U.S. in the 1990s thanks to repeal of usury laws there. It was the Harper Conservatives who opened the door to payday loan companies across Canada. The maximum interest rate under the Criminal Code was (and still is) 60% annually before the Tories opened a Pandora’s Box loophole in 2007. Provinces were allowed to regulate their own rates after that. The Wynne Liberals tightened the rules slightly (nothing the industry couldn’t drive a truck through) and lowered the rates to the current astronomical level.

Why do payday loan companies exist? Especially when they charge loan-shark levels of interest. Without customers, PLCs would have gone out of business long ago. The chart below illustrates some of the reasons offered by customers.

Reasons for using a PLC. Financial Consumer Agency of Canada.

There are three reasons for PLCs’ continued existence:

One reason is the failure of Canada’s banking quintopoly™ to make their more affordable services known and widely available to low-income Canadians. Also by closing branches, they have been allowed to shirk their moral obligation to provide banking and financial education to the poor. Many people don’t realize how much a payday loan costs – $15 interest per $100 borrowed over two weeks is an annual interest rate of 391%.

Relative costs of borrowing $300 for 14 days. . Financial Consumer Agency of Canada.

The second reason PLCs exist is a systemic poverty that prevents people from getting ahead. Ontario’s minimum wage is $14.00 an hour or about $29,000 annually. This is about $2000 lower than it should have been thanks to Premier Ford cancelling the planned January 1 minimum wage increase to $15.00. Ford (and others including the Ontario Chamber of Commerce) claimed that a higher minimum wage would kill jobs, lower profits and trigger inflation. When the min-wage was increased from $11.60 to $14.00, none of the dire predictions came true. Ford was dead wrong. Yes, For The People indeed.

Lastly, our living costs are astronomical. An income of over $100,000 is needed to afford the payments on a one-bedroom condo apartment in Toronto. Rental units are rising too. Toronto’s public housing has a 7 to 10-year waiting list and is in a state of chronic disrepair and neglect. Gangs, cockroaches and bedbugs are allowed to operate relatively unfettered inside their confines.

Thanks once again go to dear leader, Premier Ford who dismantled Ontario’s successful Cap and Trade program that was set to provide billions towards public housing, school repairs and upgrades. All together now: For the People.

Although banking is a federal matter, York South-Weston MP Ahmed Hussen has been silent on the banking industry despite being prodded to make some remarks on the topic. He represents one of the poorest ridings in the country (not that he actually lives here) yet fails to be moved by the plight of people victimized by the failure of our current banking system.

There are alternatives to PLCs. Anyone in Canada can open a low cost bank account that can charge a maximum of, $4.00 in monthly fees. Account holders are allowed up to 12 debit transactions a month and other features. Account holders can gain access to financial advice.

Even better, Luminus Credit Union has a branch at 2011 Lawrence Ave W unit 11 ( 416-243-0686). They have a zero-fee, zero minimum-balance checking account.

Of course we can (and should) stop new PLCs in Toronto but that’s not going to fix the predation caused by existing ones, idiotic legislation, low wages and costly housing.

This is a lucrative  industry with well-placed and well-financed lobbyists. Let’s see if Councillor Nunziata and Toronto City Council can begin the process of eliminating the scourge of payday lenders from Weston and the rest of the city. If they can do that, then they can move on to bigger actions.

From Richmond Times Dispatch.

Learn more about payday loan companies here.

TD Canada Trust closing Weston branch.

TD Canada Trust bids farewell to Weston and hundreds of potential new customers.

TD Canada Trust has officially announced the upcoming closure of its Weston branch at 1979 Weston Road. Adam broke the story last year. The bean counters at TD Canada Trust have decided that closing the Weston branch will save them more money than the potential loss of clients. According to the bank handout regarding the closure,

Prior to making a decision to close a particular branch and move customer accounts to another branch, TD Canada Trust always undertakes a thorough review of the customer impact of the move. If our review indicates that the move may result in some particular concerns for all or a certain group of the affected customers, TD Canada Trust will hold an information session to discuss our plans and how we propose to deal with those concerns.

From September 21, Weston customers who stay with TD will be expected to schlep along to 2547 Weston Road at the 401. It’s another example of the banking industry reaping huge profits while abandoning their customers. This also makes room for payday loan companies to fill the void; unconscionable in a community with a fair number of vulnerable residents.

There is a ray of hope via a federal government agency called ‘The Financial Consumer Agency of Canada‘ (FCAC).  According to the blurb that came with news of the closure,

“You should know, however, that under the regulations, the Commissioners of the FCAC may require TD Canada Trust representatives to hold and attend a meeting with FCAC representatives and interested parties, in order to exchange views about the closure of a branch IF:

  1. An individual from the area affected by the closure of the branch submits a written request to the FCAC for the meeting; and

2. TD Canada Trust has not adequately consulted the community about the branch closure; and

3. The request is not frivolous or vexatious.”

I’d like to know who the bank consulted with before deciding it was ok to close the branch. My wife has an account at the branch and this is the first she’d heard about the closing.

If you feel you haven’t been consulted enough about the move, submit your non-frivolous written request to:

Financial Consumer Agency of Canada
427 Laurier Avenue West, 6th Floor
Ottawa ON K1R 1B9

Phone contact for TD Canada Trust: 1-866-222-3456

Phone contact for FCAC: 1-866-461-3222

Perhaps this is where York South-Weston’s non-resident MP, Honourable Ahmed Hussen could get involved. Scotiabank’s closing was seemingly ignored by Mr. Hussen – a self-described social activist. I contacted his office and a staff member said they would pass my concerns about the latest bank closing to the minister.

Ahmed Hussen MP: 416-656-2526

 

Another bank closes

In the ongoing story of banks bailing and gutless governments, the CIBC at Weston and Eglinton has permanently closed and ‘merged’ with a branch 3 km away.

A TD, Scotiabank, and an RBC branch have already closed in York South–Weston. The TD bank at Weston and Church is slated to close by the end of 2018.

The bank closures are not for want of profits: there are at least 15 payday loan shops in the riding.

Province seeking input on payday loan shops

Frances Nunziata is asking for you to give the province input on payday loan, rent-to-own and cheque cashing stores—what she calls “predatory lenders”. The proposed changes would make payday loans less attractive.

financial institutions
A search for cheque-cashing shops

For payday loan shops, province is considering

  1. Extended payment periods for repeat borrowers
  2. Lowered lending limits
  3. An extended, six-day waiting period
  4. Clear display of the cost of borrowing and credit counselling information

Most intriguingly, the province is also asking that credit unions be exempt from these regulations.

You can provide feedback on all the proposed changes.

 

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.

 

Alberta Clips Payday Loan Companies

source: angelafee.tumblr.com
source: angelafee.tumblr.com

As readers are painfully aware, the Weston / Mount Dennis area is plagued by a large number of payday loan companies. These pseudo banks prey on the poor by charging high rates thus continuing the cycle of poverty that poor people (and those with a low credit rating) often find themselves in. Scotiabank’s recent departure from Lawrence and Weston didn’t help and it seems that computerization will encourage more banks to close their branches.

Each year, approximately 400,000 Ontarians take out a payday loan

There are 796 payday loan licensed locations in Ontario, operated by 249 different businesses

Approximately $1.1 – $1.5 billion in payday loans are issued each year

The average payday loan is $460 and has a two-week term

Sources: Estimates developed by Deloitte and Ministry of Consumer Services payday lending licensee database

Alberta is going through some tough times lately and to help stem the exploitation of people with a poor credit rating, the NDP government there has cut the interest rates that PLCs can charge. Alberta will now have the lowest rate in the country at $15 for every $100 borrowed over a period of two weeks.

In Ontario the rate is $21 per $100 which compounded annually is a startling 14,299%. There has been talk of lowering the rate but a bill to amend the laws around PLCs has been languishing in a committee that was supposed to report this spring. Payday loan companies have a fairly well-connected lobby group fronted by Tony Irwin of the Canadian Payday Loan Association. Irwin maintains that if rates go down, some PLCs will close thus driving lenders to loan sharks. From what I can gather, in the days before PLCs put loan sharks out of business, loan sharks charged around 6% to 10% a week. Slightly less than today’s PLCs. Collection tactics were a bit more assertive however.

So, Ontario – the ball is in your court. Where is the committee report and legislation that will curb predatory lenders? Where are the banks and credit unions in all of this and why are they not making better efforts to reach the poor?