Posted June 13, 2016
When Joseph’s car broke down a week before his paycheque he needed fast money to pay the $1000 repair bill. Without savings, available credit or a network of family and friends who could help him financially, he decided to go to a payday advance loan agency (think Money Mart, Cash Money, etc.).
Like using a credit card, Joseph figured there would be little to no interest if he paid back the loan on time. When he went to pay back the $1000 loan two weeks later, he was charged $300 (30%) in interest.
Based on his experience Joseph expressed concern for others, “It’s a vicious cycle. A person could easily end up needing a payday loan to pay back a payday loan. I would never go back.”
Enter Rohan. Living with a disability and in his fifties, Rohan felt reborn when he fell in love and was happily planning a wedding. Without available funds to pay for even a small celebration, a friend suggested he get a payday advance loan.
Rohan ended up borrowing from three different lenders to pay the minimum payment for his growing debt. After borrowing from friends and scraping by for two years, Rohan was able to pay back what he owed.
Such experiences are common for many residents in our community where the number of payday advance lenders roughly equal the number of Tim Horton’s. In desperation, individuals and families often turn to them for help, only to make their financial situation far worse.
Association of Community Organizations for Reform Now (ACORN) has taken a lead role in the fight against ‘predatory lenders’.
ACORN’s spokesperson on this campaign, Donna Borden, has personally experienced the bottomless pit of high interest debt when she took out a $10,000 installment loan. Five years later, Donna had paid back $15,000 and still had to pay $8,000 to clear the debt.
“The loan never gets paid off because there are additional charges and then at the end you are still paying the cost of the initial loan.” said Donna. ”The terms were changed several times without my consent.”
The provincial government is currently reviewing legislation around payday advance and other forms of high interest lending, but organizations like ACORN want to ensure that any changes will prioritize the needs of the public rather than the lenders.
ACORN (www.acorncanada.org) demands include reducing the criminal rate of interest, instituting a minimal distance between such lenders, an enforceable complaint process for consumers, public banking (through Canada Post) as an alternative (visit www.cupw.ca), and the creation of an independent loan database to prevent different payday lenders to loan to the same borrower (called concurrent loans).
Quickcheck Canada, a company that provides software to payday lenders agrees with ACORN on the need for an independent loan database.
“If we do not adequately address the issue (of concurrent payday loans) we will have a lot of desperate people taking out multiple payday loans on the strength of a single paycheque.” says Roy Toker, Executive Vice President of Quickcheck Canada.
Presently, concurrent payday loans are illegal however, lenders ask desperate borrowers to simply sign a waiver stating they have no other payday loans. Roy says that this loophole could be closed by requiring payday lenders to register each payday loan with the proposed database. Lenders would then see if a borrower had an outstanding payday loan and therefore have no excuse to lend.
In March 2016, City of Toronto Council voted to ask the province for better regulation of predatory lenders. Local Councillors Maria Augimeri and Anthony Perruzza were in favour of better legislation.
Both Donna and Joseph hope the government will act quickly in strengthening laws to protect individuals from predatory lending while Rohan’s focus is elsewhere. “As long as struggling families have to pay more than half of their salary on rent and other basic needs, people will always be in a desperate situation.” he concluded.
Article by Tom Rakocevic for the Downsview Advocate