Posted February 29, 2016
Rohan Jagroo borrowed $300 from a payday lender to help pay for his 2013 wedding, launching him into a three-year vicious cycle of high-interest borrowing.
When the loan plus interest — $21 for every $100 he borrowed — came due two weeks later, he didn’t have the money. He borrowed from a second payday lender to pay the first, then a third to pay the second. Jagroo receives about $1,000 in disability support each month, but owed between $1,200 and $1,400 every month to the various lenders.
Jagroo shared his story at a Saturday forum hosted by anti-poverty group ACORN, which is fighting to end the concentration of payday lenders — the most expensive type of consumer loan — in low-income neighbourhoods. It’s a fight some councillors are vowing to join with a new bylaw to be proposed next month.
“For basic necessities, people go to these payday lenders to borrow money, and at the end of the month what happens is, instead of being $20 or $40 short, next month it will be double that because of interest,” Jagroo said.
All three payday lenders he used were on the same block of his Weston Rd. neighbourhood, where short-term loan outlets are more ubiquitous than Tim Hortons.
Such clustering is an issue Toronto has been slow to deal with compared with other Canadian cities, Councillor Kristyn Wong-Tam told the meeting’s 75 attendees.
“There’s no reason why there should be 12 of them or 13 of them along Weston Rd.; that is just predatory, because they’re coming into the communities where you’re not able to access good banking services,” she said.
Wong-Tam plans to introduce a motion at the March city council meeting for a bylaw that would create a minimum distance between payday lenders, as other cities have done. Councillor Frances Nunziata is backing the motion and is also fighting to license payday lenders at the city level.
High-interest lenders have slipped through the cracks because their oversight is a municipal, provincial and federal issue, Wong-Tam said.
The Criminal Code prevents lenders from charging more than 60 per cent interest, but a federal law introduced in 2006 allows provinces to exclude payday lenders if they regulate the industry at the provincial level.
Ontario limits the amount payday lenders can charge to $21 for every $100, which translates into an annual interest rate of more than 500 per cent.
It also prevents rollover loans, meaning borrowers can’t roll what they owe into a second payday loan from the same lender. But that doesn’t prevent people from turning to another short-term lender, pushing them deeper into debt.
Other cities across the country, including Barrie, Winnipeg and Surrey, B.C., have minimum separation distance bylaws in effect. Hamilton passed a motion earlier this month that will force payday loan operations to be licensed with the city, post their interest rates, show comparative bank interest rates and provide credit counselling information.
While payday loan regulations are largely outside the city’s jurisdiction, enforcing a minimum distance between the issuers is something within the city’s tool box, Wong-Tam added.
“These companies have literally ruined lives, and there’s no way to describe it other than ‘predatory,’” she said.
“Forcing them to apply for zoning means that it goes to a public review and public screening,” she said, which will help create a dialogue about whether they are beneficial to neighbourhoods.
Wong-Tam said that if the motion is not adopted by the city right away, it could be deferred to the planning and growth committee she sits on. The bylaw would apply only to new outlets applying to set up shop.
The clustering of payday lenders makes it easier for vulnerable people to get trapped in a cycle, said Donna Borden, spokesperson for ACORN’s anti-predatory lending campaign.
The concentration encourages lenders to send borrowers who can’t afford repayments to borrow from another to cover the initial debt, she said.
“Having them further apart means they can’t grow as much and can’t send people across the street to another one to pay up,” she said.
“We want people to have choice; at this point the only choice is the payday lenders.”
ACORN’s push to stop the proliferation of payday lenders is part of a broader campaign against high-cost financial products such as cheque cashing, instalment lenders and car title loans that cater to financially vulnerable people with few other options.
Ontario is also planning to introduce new legislative measures to crack down on payday lenders, rent-to-own outlets and cheque-cashing services.
Article by Sunny Freeman for the Toronto Star