Mississauga.com: Peel ACORN wants federal government to act on predatory lending
Posted December 9, 2022
Posted on December 2nd, 2022
Lydia Lorno turned to a high-interest private lender to pay for car repairs — she needed the vehicle to get to work and her bank declined a line of credit request — the decision left the Mississauga resident driving uphill financially to pay off a $5,000 loan.
She took out the loan in 2016. At the time, her bank refused to give her a line of credit, but offered to increase her credit card limit by $500.
She had just started a job in Burlington and required the car to commute. She needed those car repairs and had few options but to turn to an instalment loan from a private lender.
“I went in with two pay stubs and my ID and I was able to get $5,000. Instantly,” she said.
The instalment loan payments came directly out of her account, $306 a month. After a year, she felt like she must be close to having it paid, however, after 12 payments she still owed $4,200.
“Yes, it was my fault for not paying attention to all the fine print, but I couldn’t imagine it would be that bad,” she said. “I saw the advertisement for it, and I had no choice. But after a year, I had only paid $800 to the principal.”
Lorno knew she was in trouble, and how much she would end up paying the business if she let it continue. She picked up extra shifts and within a little less than two years saw the loan paid off.
“I won’t ever go back to them again,” she said. “I had to pick up a lot of shifts and work really hard to pay it off.”
Her story is not uncommon.
The federal government recently completed a consultation on predatory lenders. Now Peel ACORN (Association of Community Organizations for Reform Now), a group that advocates for fair housing, is calling on the government to act on recommendations.
ACORN member and Mississauga resident Marcia Bryan was a small-business owner and needed startup money when she turned to a payday loan provider.
Again, the bank wasn’t an option, however, when she applied for a payday loan she was told she could have $2,700, and in four months refinance and be entitled to $3,000 more.
“I thought wow, I do need the extra money,” she said. “Christmas was coming, and I needed more.”
When she returned and was told she could apply for even more and receive up to $12,000, Bryan began to look inside the numbers.
Her payments were $545 a month plus insurance for the loan, bringing the total payment to more than $700.
After six months of payments, she had only taken a few hundred dollars off her loan principal and soon learned she could end up in an endless cycle.
“Five-hundred and something dollars a month for six to seven months, I should be paid down to maybe $4,000 from my $6,000 loan, right? No. When I spoke with other ACORN members and they brought it to my attention, I realized oh no.”
Bryan put her head down as well and worked extra hard to pay her loan off.
According to a Ministry of Finance spokesperson, the 2021 budget included plans to examine lowering the rate of interest in the Criminal Code of Canada applicable to, among other things, instalment loans offered by payday lenders.
The recent consultation process gave interested members of the public an opportunity for input from August to October 2022.
The government said feedback will be considered alongside analysis from economists. And while the formal consultation has concluded, Canadians are welcome to share ideas and comments with the Department of Finance at any time.
Bryan, Lorno and their fellow ACORN members are calling on the federal government to act on their demands. They want the interest rates lowered from averages of 60 per cent to 30 per cent, or 20 per cent plus the bank rate. They would also like to see the charged rates cover related costs including insurance.
They also want lower non-sufficient funds penalty fees and the government to address bank loan requirements, so lower-income people can obtain loans when needed.
“It is a hard fight, but we can hope the federal government is going to do something,” Bryan said.