Gentili: Mastering Payday Lenders and Nothingburger The Ledo

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Kudos to the board for fending off payday lenders. Also, if you come up with a development and refuse to reveal who you are, why should someone take you seriously?

The city council receives a lot of criticism, and rightly so, but when it comes to Ward 4 Country. Geoff McCausland the member’s motion directing staff to find ways to curb payday lenders in the city, they made the right choice.

If you are not familiar with what exactly a payday lender is, here is a brief description, like provided by the Government of Ontario. Operating from storefronts, payday lenders offer low value loans for short periods, usually between pay days. The loans are unsecured and the borrower cannot post collateral or secure the loan in any other way.

Most payday lenders do not perform a credit check, but instead require the borrower to prove that they have continuous employment, provide proof of domicile, and have a checking account.

As McCausland pointed out in his successful pitch to council (council supported the motion with only Ward 3 Country. Gerry Montpellier voting against), the interest rate these outfits charge is way (far, far, far) higher than what you find in a bank or get from a credit card company – like 390 % (no, not a typo) annualized.

Critics of these businesses point out that they are often located in working-class neighborhoods, which is not surprising since this is where most of their customers are located. 2016 figures collected by Statistics Canada and highlighted by the Toronto Star in April showed, again unsurprisingly, that payday loans are most often used by people who are already “economically vulnerable” because they are the ones who most often need the money and are often the same people who have been refused credit cards or lines of credit.

But high interest loans for people who are already strapped for cash can easily go wrong, and too many people may find themselves using their payslip to pay off their loan and then need to get another loan to hold them until payday. It is a cycle that many people find themselves unable to break out of.

To circumvent the legislation which prohibits a borrower from taking out a payday loan amounting to more than 50% of their take-home pay, desperate people will take out payday loans from several lenders, which the legislation does not prevent.

Not only can financially vulnerable people be locked in a vicious cycle, payday lenders are increasingly becoming a place of last resort for those struggling to stay solvent. Rather than providing the help that a person needs, however, payday loans offer a new hole that borrowers can fall into.

A 2019 Personal Ontario Exam insolvencies through Insolvency Trustees Hoyes, Michalos & Associates found that the percentage of insolvent debtors who took out payday loans increased from 12% in 2011 to 39% in 2019. J. Douglas Hoyes, one of the principles of the company, argues in a separate article than those insolvencies were in fact caused by easy access to payday loans, which pushed people into debt so far that there was no way out.

If this is true, and the data seems to confirm it, it means that a third of all insolvencies in the province are linked to payday lenders. Let me repeat that, a third of all insolvencies. If that’s not a problem, I don’t know what it is.

These places advertise themselves as offering a helping hand when people need it, but the data strongly suggests that rather than a helping hand, payday lenders are pushing people down.

Greater Sudbury’s decision to curb these predatory lenders is not without precedent. Toronto bans issuing new business licenses for payday lenders in 2019. A story from the Toronto Star points out that the city has as many payday lenders as Tim Hortons. Let it flow.

Quebec has taken a particularly tough stance, capping interest rates at 35 percent, effectively making it uneconomic to operate most of these locations.

I’m curious what recommendations the staff will come back to protect Sudburois predatory practices of these joints. We will be keeping an eye on this story.

And finally, a little word on the Le Ledo project. The pitch for the $ 40 million project that prides itself on transforming the downtown core came out of nowhere in early October.

Under the proposal, the current The do The hotel would be reassigned and integrated into a three-story brick and glass building with the addition of a 14-story tower above, clad in copper and glass, and providing 150,000 square feet of retail space.

There you have it, the project has a spokesperson, Chris Tammi, a local real estate broker. It’s unclear how he relates to the proposal, as he didn’t say when we asked him. Whoever is involved in the idea is a mystery, as they lack the courage of their convictions to put their name on it.

Based on statements made in the initial press release and subsequent interviews with Tammi, the Le The do group opposes the Kingsway Entertainment District and for the renovation of the Sudbury arena.

I have no problem with their idea; I have a problem with their secret. Say what you want from Dario Zulich and his KED idea, for better or for worse, at least he’s prepared to take the slingshots and arrows of criticism by putting his name out there.

If the mystery team behind Le The do is actually serious (and all of this is not some sort of waterfall or red herring, which is entirely possible), put your money where your mouth is and stand up to be counted.

Otherwise, The The do is a nothing burger and it’s not worth talking about.

Mark Gentili is the community editor of Sudbury.com.

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