By Joel Wittnebel/The Oshawa Express
For some, it is a last resort, the only option when in a pinch. For councillors, it is “predatory practices.”
City council has unanimously endorsed a motion requesting the premier to amend the Municipal Act to allow municipalities to license payday loan establishments and to limit the number of these businesses in a particular area.
Brought forward by Councillor John Neal and seconded by Councillor Amy McQuaid-England, the motion, which was originally passed in Ottawa, states that the high interest rates and fees associated with these types of loans can sometimes be more than the loan itself, and the “clustering” of these are generally in areas where financially vulnerable people reside.
“In the end, it costs them dearly,” says Councillor Nester Pidwerbecki.
“Is anybody looking after these people at all?”
McQuaid-England added that licensing would be an important discussion for this sector.
“They have predatory practices,” she said, noting the payday loan establishments in the south end of the city. In Oshawa, there are approximately 14 businesses offering these services.
“I think it’s a really important step. I hope the province hears it.”
However, Tony Irwin, president of the Canadian Payday Loan Association (CPLA), says these businesses are already required to be licensed by the province, a practice that carries with it an annual fee of $990. The license requires every business to display posters explaining the financial impacts of a payday loan compared to other options and they are subject to inspections by ministry officials.
“We certainly think that is an effective means of licensing and ensuring compliance, which, I would say is certainly a high degree of compliance within our industry,” he tells The Oshawa Express.
In total, the CPLA represents 18 member companies who hold lending licences for approximately 962 stores and online platforms across the country, 493 of which are in Ontario.
CPLA was formed in 2004 by industry members who believed some form of regulation was needed.
“(To) ensure that consumers of this product are protected, while at the same time, allowing for a viable industry to exist,” Irwin says.
Irwin says any level of municipal licensing would more than likely be a duplicate of what is already required by the province, and that these businesses go above and beyond to inform users of the impacts, providing credit counselling and financial stability literature in their storefronts.
“We believe it’s important for consumers to have the information, understand that maybe there are some cases where they need the assistance of a credit counsellor, those are all things under our code of best business practices as an industry that we believe in,” he says.
Irwin also does not agree with the statement that payday loan services are predatory and targeting certain areas. These businesses are only doing what any other business would do, he says.
“Our members locate their stores based on a number of factors, certainly a lot of it to do with finding areas with heavy traffic, not unlike other retail businesses. They locate where people are and where people can get to,” he says.
Payday loans are the most expensive form of loan available in Ontario. Regulated under the province’s Payday Loans Act, these companies are allowed to charge a maximum of $21 for every $100 loaned out.
Compared to a credit card advance, a $300 loan for two weeks from a payday loan service would cost an additional $63 compared to only $2.65 from a credit card with a 23 per cent interest rate.
The Payday Loans Act also prohibits “rollover” loans, meaning a lender cannot issue a second loan to pay off a first one, and under new legislation proposed earlier this year, regulations and inspection measures could become more stringent for those found in violation.
The motion endorsed by council asks for any amendments to be made in order to have licensing practices in effect by the end of the first quarter of 2017.
A letter from Patricia Nokes, the executive administrative assistant for the mayor’s office, detailing the city’s resolution, was on the agenda for the latest meeting of the region’s finance and administration committee. The results of that meeting – including whether the letter was received for information or if it a further endorsement was passed – were unavailable as of press time.