Toronto.com: Scarborough man says instalment loan is ‘sucking the life out of me’

After borrowing $6,000 two years ago, he’s paid the company nearly $9,000, and yet he hasn’t touched the principal yet.

 

“And I’ve paid every two weeks, without fail,” he said.

 

Members of the Association of Community Organizations for Reform Now (ACORN) believe Costa is far from alone.

 

Ontario and the City of Toronto moved to restrict payday lenders, they say, but do little to curb instalment loans which are unsecured personal loans offered in larger amounts than payday loans and repaid over a period of time with a set number of scheduled payments.

 

Often, payday lenders offer instalment loans, too.

 

Costa’s troubles began, he said, the moment he blacked out taking a tray of chicken nuggets from the oven.

 

Costa broke his ankle, went on Employment Insurance and was off work three months.

 

“I fell behind on bills. The bills don’t change,” he said.

 

He doesn’t qualify for bank loans because he filed for bankruptcy over student loans.

 

Costa knew family could help him out, but he’d loaned money from a relative before, and “you can only go to the well so many times,” he said.

 

Desperate, he found EasyFinancial.

 

Costa thought he needed $2,000. When he got to the lender’s branch in Scarborough Village, he said, friendly, fast-talking staff put papers in front of him and told him he was eligible for $10,000.

 

“I don’t know how they talked me up to six from two, but they did.”

 

Costa agreed to a $6,000 loan on Dec. 5, 2018.

 

“You’re desperate to pay your rent, so you sign, like an idiot, you sign,” he said.

 

“It’s easy to get the loan, but that’s where the nice part ends, and the financial nightmare begins.”

 

Before the 42-month term is finished, Costa says he will have to pay EasyFinancial more than $15,000.

 

That’s not including optional insurance, called Loan Protection Plan coverage, which he paid until he asked the company to cancel it last year.

 

At $57.67 every two weeks, the insurance was $1,500 a year.

 

“This thing is sucking the life out of me because all I do is work,” said Costa, a former film location scout and restaurant manager who turns 58 in March.

 

Lenders advertise instalment loans as an alternative to payday loans, which cannot exceed $1,500.

 

EasyFinancial didn’t respond to messages last week asking for comment, but its website claims the company says “yes to Canadians when banks are not an option,” and “with rates way lower than payday loans, (instalment loans) can help get you on track toward a stronger financial future.”

 

The company states interest rates start at 30 per cent, but Costa said his rate is 41.

 

East Yorker Donna Borden said she spent 10 years paying off a loan from another lender after her mother died, leaving her in debt.

 

“They charge what they want and there’s no transparency, either,” she said.

 

“I took out a $10,000 loan. I paid $24,000, and they still said I owed them $7,000.”

 

Toronto now requires licences for payday lenders, and caps the number of licences.

 

But the city confirmed its bylaw and licensing regulations don’t extend to lenders offering instalment loans.

 

ACORN wants Ontario’s Conservative government to restrict instalment loan interest to 30 per cent or less.

 

New Democrat MPP Doly Begum also wants the government to act. “It’s deeply concerning and upsetting to hear Sal’s story of being forced to pay thousands of dollars extra,” said Begum, who represents Scarborough Southwest.

 

“The government should be doing everything in its power to protect Ontarians from predatory lending practices. That means reviewing legislation, regulation and enforcement practices to ensure cases like Sal’s cannot happen in future.”

 

A spokesperson for Ontario’s government and consumer affairs ministry wasn’t available for comment.