Posted October 10, 2019
Standing on a Weston street corner before a rally for fair banking on Sept. 20, activist Bob Murphy pointed to a payday loan store he could see and rattled off a list of the ones he couldn’t.
“If you look down the street here you have Money Mart,” he said. “Then seven businesses north you have a Kash Z Way lender, then there’s another payday lender.”
There are more than twice as many payday lenders in Weston as there are chartered banks, owing to both the proliferation of the stores and the closure of several bank branches there in the previous three years. Now there are three bank branches left within Weston’s boundaries, and seven payday loan stores.
“Scotiabank left … and TD moved up the street. Then BMO closed up,” said Marcia Stone, a Weston resident, fair banking advocate and former payday loan client.
While they can't make the banks come back and they don't want to see all alternative lenders leave, Weston residents want more accountability and transparency in payday lenders — and fewer of them.
So the Association of Community Organizations for Reform Now (ACORN) has focused on the area in its Toronto campaign for fair banking, hosting a rally there on Sept. 20 and bringing delegates like Murphy and Stone to city hall to campaign for more regulation.
Payday loan companies are alternative lenders that charge high fees for small, short-term unsecured loans. They often concentrate in low-income neighbourhoods and serve people in need of emergency loans who are underserved by, or have limited access to, banks.
These high fees and interest rates can quickly ensnare borrowers in a cycle of debt. When storefronts are clustered together, clients who owe more on payday than they earn will sometimes borrow from one store to pay another nearby.
This is how Murphy became trapped in a cycle of debt from 2014 to 2015 after a subarachnoid brain hemorrhage forced him to quit his full-time job. Still, he doesn't want to see the stores go away entirely; he believes they fill a need for short-term loans banks currently don't meet.
“I don’t think the solution is closing the stores," he said. "I think the solution is reducing the number of stores and reducing the interest rates that the vulnerable are being charged."
The city put some measures in place to limit the number of payday lenders in Toronto through attrition in 2018. In April that year, council adopted an interim requirement for Toronto’s 212 payday loan stores to apply for a new category of business licence. Of those existing stores, 187 applied and the rest either closed or moved their services online. Because licensees are not allowed to sell or transfer their businesses, the process reduced the number of stores in the city from 212 to 187.
Nelson Belchior is president and co-founder of Pay2Day, a payday lender in Weston. He believes that small, new businesses will be disproportionately affected by increased regulation compared to established companies with storefronts across the country.
“A lot of us, we’re not big (banks) ... we’re individuals who are small businesses trying to help the community and we’re trying to do it the right way,” he said during a General Government and Licensing Committee meeting to discuss payday loan regulations on Sept. 4.
“We are the competition that will improve this industry and we are the very people you guys are stopping from getting in here and making this product a better product for the consumer.”
At the end of that meeting, the committee recommended that the city stop issuing payday loan licences altogether, along with a suite of other recommendations.
On Oct. 2, council voted to approve the recommendations. The city will no longer issue payday loan licences and will require payday lenders to provide city-sanctioned information on credit counselling services and financial empowerment.
The city will ask the province to limit the annual interest rate for all payday loans to 30 per cent. It will also urge the federal government to cap all payday loan fees at $15 on every $100 loaned, lower the legal maximum interest rate to 30 per cent from 60 per cent, and require chartered banks to have branches in low-income neighbourhoods and offer credit lines to low-income customers at fair rates.
Starting in January 2020, the licensing committee will consider creating a minimum separation distance between payday loan stores and create a process whereby a councillor can veto the relocation of a payday loan store within the same ward.
Article by Megan Delaire for Toronto.com