Posted December 10, 2015
Ontario is taking fresh aim at payday lenders, rent-to-own outlets and cheque-cashing services to protect low-income consumers.
Customers can expect measures including a cap on fees for cheque-cashing services, grace periods for repayments from rent-to-own shops and stricter controls on collection agencies that buy debts and collect the money, Consumer Services Minister David Orazietti said Wednesday.
Details will be worked out over the next year in consultations with social service agencies, the payday loan, debt collection and rent-to-own industries and other groups with the hope new regulations will be in place for 2017.
Orazietti said consultations are the best way to get the “most effective” rules in place to provide “greater protections for consumers” who deal with what the government calls alternative financial services companies.
“This speaks to the evolving nature of the sector,” Orazietti told reporters, also promising broader enforcement powers.
“These companies continue to put products on the market that attempt to drive their profits . . . our intent is to create a fair, a balanced marketplace for consumers in Ontario.”
The Canadian Payday Loan Association said it will comment after reviewing the legislation.
Texas-based Rent-A-Centre, a major U.S. company with a small presence in Canada that retails furniture, appliances and electronics on a weekly payments system, said it is aware of the government’s plan.
“We’re in favour of transparency,” spokesman Xavier Dominicis said from Dallas.
“If you can’t continue to pay (for an item), you simply return it. We’re not in the credit business.”
Easy Home, which has 180 stores in Canada and also does lending, says on its website that products carry an annual percentage rate for financing of 29.9 per cent. A 55-inch curved Samsung TV is listed in its latest flyer as costing $29 a week for 156 weeks. That brings the total cost to $4,524, more than double the cost of paying cash at a major electronics chain.
EasyHome officials could not be reached for comment about Ontario’s plans to regulate the rent-to-own industry.
One anti-poverty group said action is “desperately needed” from a government that first began regulating the payday loan industry in 2008 and announced a review of the Payday Loans Act in 2013.
“We need stricter laws,” said Donna Borden of ACORN, the Association of Community Organizations for Reform Now.
“With rent-to-own, if you bought an $800 TV, you could end up paying $3,000 to $5,000 by the time you finish,” she told the Star.
A Money Mart store in the west end of Toronto said it charges 3.2 per cent of the face value of a cheque from a major company, for example, plus a $2.99 fee. That means cashing a $40 cheque would cost $4.27, almost 11 per cent.
Deputy NDP Leader Jagmeet Singh said the government has waited “far too long” to take more action after seven years ago capping payday lending fees at $21 per $100 borrowed.
Unregulated costs imposed by alternative financial companies make it easier for the poor to get deeper into debt.
“People who are already struggling are put in a more difficult position, it makes life harder,” Singh said. “There needs to be some limitations.”
Progressive Conservative Leader Patrick Brown said he was disappointed in the lack of specifics in Orazietti’s announcement and is looking forward to more detail.
“I think government has a role to play to make sure people aren’t taken advantage of,” Brown said. “There’s certainly a lot of people making successful returns in the financial sector.”
Article by Rob Ferguson for the Toronto Star