From now on, Toronto will no longer issue new licenses for payday loan outlets, fearing that businesses are “predatory” on low-income residents.
The major regulatory change was approved by a 20-0 unanimous board vote on Wednesday night, alongside a recommendation package regarding the city’s controversial payday loan industry.
“We have heard over and over again stories of how people’s lives have been ruined, leading to depression, broken families, and even suicide, because they have fallen victim to these predatory payday lenders and parasitic, ”said Coun. Josh Matlow said in the boardroom ahead of the vote.
“People can never escape the vicious cycle they enter because they can never get out of having to pay off these debts,” he added.
Customers who borrow money from payday loan points can end up with 390% fees, much higher than a credit card, a report from the city noted in 2018.
During Wednesday’s debate, the council. Kristyn Wong-Tam argued that lenders are targeting vulnerable and low-income residents while charging these “exorbitant” fees.
“You lock people into a web of debt forever,” she said.
Councilors then voted in favor of asking the province to cap annual interest rates at 30 percent or less, while asking the federal government to cap all loan fees at $ 15 on every $ 100 loaned and to amend the Criminal Code to lower the maximum interest rate from 60 to 30 percent.
Other recommendations that have received a seal of approval include a requirement for all payday loan outlets to provide city-sanctioned information on credit counseling services and a ban on stores offering credit counseling services. advertising on city properties.
About 200 outlets are currently open in Toronto.
Payday loans may be the ‘only option’
This discussion of changing the city’s approach to payday lenders has been going on for more than a year, after provincial regulations began giving municipalities more power to regulate the locations of loan stores. on payday, which prompted other cities like Hamilton and Ottawa to explore the traffic jams.
“These powers are good,” said Brian Dijkema, vice president of external affairs for the non-partisan, faith-based think tank Cardus. “Cities should be able to make decisions about businesses in their city.”
But research from the Hamilton-based organization, he said, suggests that capping the number of stores has a major downside: When stores close, there’s just an increase in market share for the larger ones. large players, which encourages these companies less to operate with a consumer. Friendly way.
“The consumer is in fact the one who loses… You will effectively give a monopoly,” Dijkema warned.
Cost of payday loans
He also stressed that there was some truth on both sides in this ongoing debate: As advisers have suggested, the tariffs are too high for many people to handle, he said. But he added that the stores also provide a necessary service, because industry marketing suggests.
“If you’re on the poorer end of the income scale, you don’t have access to the same types of credit as a middle-class or upper-class person,” Dijkema said.
This means that payday loan outlets are sometimes “the only option” for some struggling people.
“The question of how to expand credit options for low-income people [bracket] is an extremely important question to ask ourselves, ”said Dijkema.