Activists rally against predatory loan terms
At the Toronto rally held outside Finance Minister Bill Morneau’s constituency office, a 46-year-old man was holding the loan he got in August from a payday loan company and was trying to get pedestrians to look at it.
He took out a $5,500 loan to pay his rent in August, to be paid back at 60 per cent interest by 2020.
Don didn’t want to share his last name because he was embarrassed by the loan. He knows it looks bad, but he says he had no other choice. He worked part time in retail and only recently got a full-time job. He’s been with Scotiabank for 20 years, but they wouldn’t give him a loan.
“You do what you got to do to survive,” said Don, who feels that he should be in a position to own a house and survive on his own means. “What’s world-class about a city where its students and residents have to borrow money for food or a bus pass?” Don is a member of the grassroots activist group called Association of Community Organizations for Reform Now (ACORN), and one of thousands of people who, on Tuesday, rallied across Canada demanding fair banking.
“A lot of people don’t understand why people go to (payday loan companies),” said ACORN leader Donna Borden, who is demanding that the government create anti-predatory loan strategies and encourage banks to provide low-interest loans to lowincome communities.
For years, ACORN has fought predatory lending practices in Canada and the U.S., broadly defined as any practice that imposes unfair or abusive loan terms on the borrower, such as high interest rates and fees, or a disregard for the borrower’s ability to repay.
ACORN has found that 15 per cent of Canadians don’t have access to basic credit and can’t get small loans.
These are the people who are living on the margins, Borden said, living pay cheque to pay cheque.
Canada’s Bank Act is set to undergo reforms in 2019 and the federal government just ended its second round of consultations on this. In an email, afederal Finance official said that the Financial Consumer Agency of Canada is reviewing bank sales practices, as is the Office of the Superintendent of Financial Institutions.
“The results of the reviews will help inform whether further adjustments to the consumer protection frame- work are warranted,” wrote the Finance official.
The regulation of payday lenders falls under provincial jurisdiction, and while most provinces have developed comprehensive regimes for payday lenders, Borden argues there is no oversight in Ontario.
The province is home to more than 800 payday storefronts, more than half of those in Canada.
Many of these outlets charge customers about 500 per cent in annualized interest rates. A 2016 survey done by ACORN of its members showed that the reasons they use for these services included the fact that they had no credit card, no lines of credit and no overdraft protection to allow them to cover payments temporarily when they have no funds to do so. Thirty per cent of those surveyed said the loans were for food, 17 per cent said housing and 16 per cent said they were for bills.
In an email, a spokesperson for the Ontario Ministry of Government and Consumer Services said they have worked to reduce the cost of borrowing a payday loan from $21 to $18 per $100 on January 1, 2017, and will reduce it to $15 per $100 on January1, 2018. The Ministry is also working on regulatory proposals that would help improve these services, including an extended payment plan for repeat payday loan borrowers.
This would help payday borrowers such as Jeffrey Stern, who for 20 years has tried to survive every month with a $1,200 disability cheque. Even though Stern lives in a subsidized housing unit in Toronto, his cost of living goes up every year.
“By the third week of the month, you realize you have $5 in your account or pocket,” Stern said. “Where do you go? Who do you turn to?”
Stern, 57, tried to go to his bank to try and get a credit card, but was declined. He didn’t have any assets as a part-time painter for a non-profit organization. So he went to payday loan companies, such as Cash4You and MoneyMart.
“It’s the weak and powerless that succumb to (these services),” Stern said. He describes the experience as a catch-22: it’s great when he borrows the money, but then he has to keep paying it back.
Stern has $1,200 in loans from three such financial services, all taken mainly to make ends meet. He has to pay $20 per $100 on top of this.
“I just wish my bank was a little more supportive,” he said. “They know I have a steady income, even if it’s just ODSP, so why can’t my bank loan me some money?” With files from Dana Flavelle