CITY PLANS TO TREAT PAYDAY-LOAN SHOPS LIKE STRIP CLUBS WITH NEW REGULATIONS
Payday lenders might be treated like strip clubs in Ottawa by the end of the year, restricted to a few parts of the city and gradually squeezed out of downtown.
“They bring nothing to the streetscape of our communities,” Mayor Jim Watson said in a city council meeting on Wednesday where councillors voted unanimously to ask city planners to work up zoning restrictions that would keep new payday lenders from opening.
It’ll take about nine months, the city’s general manager of planning, Steve Willis, said. His department has already started research.
Our councillors really, really don’t like payday lenders, and the rules the planners draw up probably won’t go as far as many of them would like.
Payday lenders specialize in extremely short-term loans — a couple of hundred bucks for a week or 10 days, till your next payday. Ontario lets them charge $15 for every $100 a customer borrows — not a lot in actual dollars, but that can work out to sky-high annual interest rates, especially if someone rolls one loan over into a new one. They’re much, much worse terms than you’d get on even a high-interest credit card.
But lenders have proliferated as major banks have withdrawn from low-profit workaday business and closed branches in small towns and poorer neighbourhoods. More and more of us have also maxed out our consumer credit.
Governments have tolerated them because they’re preferable to loan sharks. They have premises and headquarters and presidents. Over the past decade, they’ve been forced to be blunter about the terms of their loans and had to reduce their fees.
This year, the province gave cities the power to say where payday-loan shops can and can’t open, and how many can be in permitted areas. There are exactly two categories of businesses Ontario’s Municipal Act gives this treatment. The other is adult entertainment establishments such as strip clubs, rub-and-tug parlours and peep shows.
The new law explicitly does not give cities the power to ban payday lenders, though: Any laws a city makes “shall not prohibit the operation of all payday-loan establishments in the municipality.” That’s an asterisk that doesn’t apply to adult entertainment establishments. Cities can effectively ban those, but Ottawa still has five strip clubs, including in the By Ward Market and on Montreal Road. They haven’t been shut down or pushed entirely into spaces between scrapyards and industrial garages.
So, like strip clubs, payday lenders remain legal businesses — cities’ new power to regulate them is built on the idea that too many of them can blight a commercial strip, not that what they do is inherently objectionable. Cities can prevent new financial red-light districts from forming but they can’t forbid payday lending outright.
Ottawa has 55 payday-loan shops, according to Willis, and although they’re sprinkled in a lot of neighbourhoods, there are clusters on Montreal Road and downtown Bank Street.
“The issues are directed at very specific locations. I could probably come up with most of them right now,” Somerset Coun. Catherine McKenney said. “Vanier, Bank Street, St. Joseph — there are probably about five or six ( business) areas where we have predatory lending establishments that are concentrated.”
She wants to consider an “interim control bylaw” to temporarily ban new payday lenders while Willis’s department makes up permanent restrictions. Willis advised against the idea. Interim control bylaws are big legal hammers city councils occasionally use, mostly to freeze unexpected rushes of redevelopment applications. Because they’re so powerful, any given part of the city can only have one applied to it every three years.
“We do appreciate the urgency of the issue and we’d like to make it a priority,” Willis said. All the same, let’s save interim control bylaws for emergencies.
The mayor agreed, saying he thinks Ottawa is just about saturated with payday lenders as it is. If more suddenly open ahead of new restrictions, he said, maybe an interim bylaw would make sense.
Coun. Riley Brockington said he’s no fan of payday lenders but pointed out that restricting them might have a perverse result.
“Even if you reduce the number of establishments in the neighbourhood, they’re still going to exist,” he said. “And maybe even with the lack of competition in some neighbourhoods, things might actually get worse.”
He hopes provincial or federal governments will further restrict payday lenders or get traditional banks back into the low-margin market payday lenders now dominate, he said. “I think this is the missing piece that’s causing a lot of hardship for many people.”
But as he acknowledged, that’s the other governments’ responsibility. The power to zone is what the city government has here, and it’s limited.