Posted December 6, 2016
When she didn’t qualify for a loan from a traditional bank, Giovanna Scarpa turned to a payday loan company to get a quick infusion of cash a few years ago.
She was able to pay the money back, eventually, but not everyone is so lucky.
“The interest was very, very high,” the Toronto woman said. “Once you get caught in the cycle it’s impossible.”
A new report from the Canadian Centre for Policy Alternatives is again sounding alarm bells about people’s dependence on high-interest, short-term loans offered by private lenders.
Published Monday, the think tank’s report surveyed 268 low to moderate income members of the anti-poverty group ACORN.
About 47 per cent of survey respondents, nearly all of whom were from Ontario or B.C., said they use high-interest financial services to access money for food or housing. Another 45 per cent said they turn to such services because they had no overdraft protection on their regular bank account.
“This report is showing what ACORN has been saying for years, that people are using high interest loans as a last resort because they have no other alternative, “ said Donna Borden, a spokesperson for ACORN’s predatory lending campaign.
The group wants to see mainstream banks make it easer for low and moderate-income people to get traditional loans, Borden said.
The campaign also aims to cut fees for payments cancelled due to insufficient funds, have banks provide more overdraft protection and get the government to put stricter limits on the maximum interest rates lenders can charge.
Trish Hennessy, director of the Canadian Centre for Policy Alternatives, said it’s a problem that’s only going to get worse as more people are trapped in precarious jobs and have trouble qualifying for traditional loans or run short on cash.
“The banking system basically has a double standard,” she said. “If you’ve got lots of money, they’ll serve you.”
By the numbers
- 52 per cent of respondents say they’ve taken out a payday loan.
- About 30 per cent of respondents say they’ve used a payday loan to buy food.
- About 17 per cent said they used one to pay for housing.
Article by May Warren for Metro News