Toronto Star: Opinion: Loan sharks are pulling Canadians under

Posted March 29, 2022

Among the cruelties left in the pandemic’s wake — it lurks and may pounce again — lingering ill-health and punishing debt are at the top. Imagine having to deal with both long COVID and the payday loan you took out that charges interest between 30 and 60 per cent.

This is Canada, not Appalachia. How is this legal? It’s not a loan as we know it; it’s more like extortion.

Debt usually refers to mortgages, a particularly fraught subject at the moment, or to the horrendous credit card interest rates many of us pay because, you know, the house. Next comes those kind online offers to let you carve your already small purchase into smaller sectors. Miss a payment and your credit card goes into a coma, a blessing in disguise perhaps.

But the worst are payday loans, short-term and smaller but with extortionate interest rates. And further along the pain line are instalment loans, which are bigger loans paid in instalments over a longer time span.

The Star’s Christine Dobby has mapped it out via a new report from ACORN, which advocates on behalf of lower-income Canadians. If you have bad credit, you can borrow up to $15,000 in instalment loans at annual interest rates of up to 60 per cent.

All instalment loan stories are sad and confusing. Dobby offered the example of a dog-walker whose work dried up during the pandemic. She had to fly her children, abroad with their father, back to Canada. It cost her $2,500 — a sum that will balloon to $6,000 in the years it takes her to pay it off.

It means she will forever be behind.

Financial breakage stories are like immigration stories: so many unanswered questions, and protagonists who tend to be judged meticulously by readers every step of the way. Why were the children away? Why didn’t the father pay? Did she get CERB?

Immigration: Why did you file the wrong document? Didn’t you check the bona fides of the fraudulent school to which your parents paid huge unaffordable tuition? Are you studying for a degree that will get you a job?

These are all good questions. But the answer is so often this: people are human. They make tiny mistakes. They make huge mistakes. They take wild chances. They love their children and put a child’s welfare over their own even when their needs are as one, inextricable. And they end up in a debt hole so deep they can’t see sunshine.

Ottawa gives way to provincial governments that regulate payday loans. But as rates rise beyond 60 per cent, ACORN suggests Ottawa should set a 30 per cent cap across Canada for all such loans, including instalment loans. (Ontario did this for payday loans in 2020.)

This seems high. But my credit card charges 22.97 per cent interest, even though I prepay credit card debt each month so my balance is always zero.

Yes, it’s silly. But my card issuer doesn’t laugh. It knows my situation could easily change.

My bank carefully lured me into a home equity line of credit I didn’t want or need. It knows the day might come when my life goes so bad that my credit line will become their cash cow.

You may never need a payday loan. But you might, and you might not judge yourself as harshly as you judged others.

Financial terror is handed down generationally. My Scottish mother raised us in conditions so minimal that until I was 13, I thought we were poor.

But she survived the Depression when, as Margaret Atwood points out, plastic hadn’t been invented, which is why I wonder if we should start saving plastic bread bags again as my mother did.

We are at financial sea right now. Some of us retreat, live on beans; some spend lavishly, live with regret; some tread financial water. Please don’t give loan sharks legal permission to drag them under.

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Opinion by Heather Mallick for the Toronto Star

 

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