Toronto Star: Canada Post, TD discontinue consumer loan program — and new report finds vulnerable Canadians will be left with few options

An initiative by TD Bank and Canada Post to offer small consumer loans at post offices across the country has come to an end, leaving another vacancy in the landscape of lending options for low- and moderate-income Canadians.

The Crown corporation and TD launched the MyMoney program nationally last fall, billing it as a way to fill the gap between payday loans and the much lower-interest loans traditional banks offer to customers with better credit ratings.

But about two months later, they put the program “on pause” and now, Canada Post confirmed to the Star, MyMoney loans “will no longer be offered.”

When the MyMoney program was paused in November, TD said it was because security monitoring detected an apparent attack (the bank said no customer information was compromised). But months later, neither Canada Post nor TD would provide a reason for ending the program.

“Following a comprehensive review, we have now jointly decided to pause the MyMoney Loan application indefinitely,” Canada Post spokesperson Lisa Liu said in an email. TD directed questions to Canada Post and did not answer followup queries about how many customers applied for or received the loans.

News of the loss of the consumer loan program comes as a new report from anti-poverty advocacy group ACORN highlights the lack of affordable lending options available for Canadians struggling to meet budget shortfalls.

The report, which ACORN is publishing on Thursday, concludes that “short term, low-cost credit alternatives in Canada” are “extremely limited.”

A scan of short-term, low-cost credit options offered in recent years found only two available nationally: the now defunct TD/Canada Post program and Accord D financing offered by Desjardins. (The latter requires a chequing account and credit card with Desjardins.)

“While (regional) credit unions are playing an important role and so are programs such as rent banks/rent grant programs, these remain too few and limited in reach,” said the report. “Given the lack of financial inclusion, many low- and moderate-income people are being forced to borrow from predatory lenders,” the report said.

By the time Geoffrey McFadden tried to apply for a small loan with the Canada Post/TD program after struggling to pay for groceries and gas late last year, it was already too late.

“It was a very sudden blow to ask about it and be told they no longer carried it,” said McFadden, who lives in a Halifax suburb.

McFadden, who is an ACORN member, had to file for bankruptcy after taking out payday loans in the 2010s. He was getting his finances back in order when the pandemic left him without work. He said he’s applied for hundreds of jobs without success and the fear of eviction is a “major stressor” in his life.

ACORN’s policy proposals outlined in the new report could help, McFadden said.

They include creating a federal “fair credit benefit” to give low-income people access to affordable loans in an emergency and requiring banks to lower the fees they charge when people don’t have sufficient funds in their accounts to pay bills (known as “NSF” fees).

The report also calls on the government to support “postal banking,” the expansion of day-to-day financial services at post office locations. Versions of postal banking have been used in other countries such as the U.K. and France.

Jan Simpson, national president of the Canadian Union of Postal Workers, said postal banking could help address a lack of financial services, particularly for rural and Indigenous Canadians.

“Canada Post has over 6,000 locations across the country and that would assist people who are underbanked,” Simpson said.

Canada Post’s Liu said the corporation is considering its options on that front but has nothing to announce at this time: “We remain strong in our belief that our postal network across the country and our history of delivering for Canadians will allow us to expand Canadians’ access to financial services.”

ACORN has also lobbied the government to lower the maximum criminal rate of interest on loans, which Ottawa did in the budget this spring, slashing the maximum allowable interest to 35 per cent, down from 47 per cent (the budget bill received royal assent last week).

The government is consulting on whether that amount should be lower. It is also seeking input on the exception to the law that allows for payday loans. Those are smaller and must be repaid over a shorter time period than typical loans but come with ultra-high interest when calculated on an annual basis (close to 400 per cent in Ontario).

Asked about postal banking and the general lack of low-cost lending options, Katherine Cuplinskas, spokesperson for Minister of Finance Chrystia Freeland, did not respond directly but pointed to the government’s work on the consultations and change in the criminal interest rate.

Melissa Giles, managing director of the BC Rent Bank, said organizations like hers are another important option. The BC Rent Bank expanded significantly after a 2019 funding agreement from the provincial government and helps people avoid homelessness by offering interest-free loans to cover rent.

Similar initiatives exist in other parts of the country (Toronto has a long-standing rent bank program), but Giles wants to see them expanded more broadly across the country.

“If people don’t have that option, where do they turn?” Giles said. “It’s credit cards and high-interest lending institutions. We need an alternative.”

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Article written by Christine Dobby for the Toronto Star