New bylaw aims to cap payday lenders at 15 outlets in city

Plan calls for limiting them to one per ward; existing would be grandfathered

The city is drafting a new bylaw that would cap the number of payday loan outlets in Hamilton at 15, and prevent them from setting up shop in low-income areas.

“I believe these businesses target vulnerable people in ways that are predatory,” said Coun. Matthew Green.

The payday loan industry has been criticized for preying upon the desperate and poor, trapping them in debt by charging exorbitant rates.

The president of the Hamiltonbased Canadian Payday Loan Association said the organization represents “responsible financial services businesses” who offer services to “customers who have no other credit options.”

“We look forward to reviewing the proposed bylaw, but wonder how the city arrived at 15 stores and why they think this is necessary when it could make accessing credit more difficult,” Tony Irwin wrote in an email.

The city’s proposed changes are meant to build on council’s previous efforts to protect customers of payday operations in 2016, when lenders were made to pay an annual licensing fee of $750.

The businesses also had to post their interest rates, show how they compared to bank rates and provide credit counselling information.

But as of Jan. 1, the Ontario government has allowed municipalities to restrict where payday lenders can open.

In Hamilton, a new radial separation rule would cap the total number of payday loan businesses and where they can operate.

Existing ones would be grandfathered.

Rob Ustrzycki, project manager in the city’s municipal law enforcement office, declined to say what the cap will be or which parts of the city will be off limits until a staff report is presented to the planning committee on Feb. 20.

But Green said the total number will be 15 businesses for the entire city, essentially one per ward.

The idea is to prevent the businesses from hanging out a shingle in low-income areas, such as his Ward 3, he said.

That lower-city ward and neighbouring Ward 2 are home to the “vast majority” of the city’s payday loan shops, Green added.

There are 30 licensed payday loan businesses in Hamilton, Ustrzycki said, noting about a year ago, there were roughly 22.

While the measure won’t pluck current payday lenders from the landscape, it will see them diminished in the long run, said Tom Cooper, director of the Hamilton Roundtable for Poverty Reduction.

“I think over time it will certainly cut down on the number of payday loan outlets in the community.”

Under the new provincial regulations effective Jan. 1, payday lenders must now also cap the costs of their loans at $15 for every $100 borrowed. Before Jan. 1, the maximum fee was $18.

Cooper said the federal and provincial governments need to do more to rein in the payday loan industry, which operated in an oversight “vacuum” for years.

That could include a crackdown on misleading advertising to lure customers in the door before trapping them in debt, he said.

Banks also have a role to play in opening up their credit services to customers they’re now turning away, Cooper added.

“People are using payday loan outlets because they really don’t have any other choice.”