Pushing for change
Acorn Canada, a national organization that advocates for low-income people, has taken aim at large payday lenders, organizing protests across the country and calling on the federal government to take action.
Donna Borden, vice-chair of Acorn’s East York chapter in Toronto, said the pandemic has forced more Canadians to turn to high-interest lenders.
“A lot of people are using or taking these loans to buy food, to pay their rent,” she said. “And especially now with COVID, it’s even worse.”
Instalment loans, where regular repayments are scheduled over a number of years, were the fastest growing segment of lending among payday companies, according to the results of a limited online survey conducted by Acorn in February. It found that the number of survey respondents who reported taking instalment loans had jumped from 11 per cent in 2016 to 45 per cent in 2020.
“There has been a significant and sustained drop in the number of loans taken out by Canadians,” the CCFA said in its statement to CBC News.
“We’re still down 35 to 40 per cent,” he said new online payday loans Yellow Springs, referring to the level of demand he sees. “Things are coming back a little bit, but people aren’t spending as much and they don’t need to borrow.”
‘A gold mine’
Independent Sen. Pierrette Ringuette of New Brunswick has sponsored two bills to have the Criminal Code amended to lower the maximum interest rate that lenders can legally charge from 60 to 20 per cent plus the overnight bank rate. Neither bill moved forward due to prorogations and election calls, but Ringuette said she intends to sponsor another one.
“Canada is like a gold mine to these institutions because of the current state of legislation we have in place,” she said.
She said a number of American states have put a lower cap on interest rates charged by payday lenders, yet they continue to be profitable.
“If they can serve in the U.S. states where, on average, you would have a 10, 12 or 15 per cent capped interest rate, they can serve Canadians at 20 per cent very well,” she said.
But Ringuette said it can take years to get bills through the Senate and then more time to have them passed into law. She said the Trudeau government could take action much more quickly, perhaps even announcing a crackdown in the upcoming federal budget expected in April.
“It can be done within three months, and it has to be done within three months,” she said. “I hope for everyone that it is in the budget.”
Trying to escape the debt trap
Patricia Edwards said she worries she may never escape her debt trap. She is left searching for a solution. For example, though it’s not an option in her case, she has even thought about how credit card borrowing could help solve her 47 per cent interest rate problem.
“If I could get a $10,000 Visa card for 19 per cent, I would get the Visa card to go pay them all off,” said Edwards, “and then I’ll only owe 19 per cent on the Visa card.”
Many consumers complain credit card rates are far too high, but compared to what payday lenders charge on some of their products, those rates could look like a bargain.
“They saw what was coming, then they started pushing the lines of credit and instalment loans,” he said. “They figured, ‘Keep it under 60 per cent and then we don’t have to worry about feds coming after us.'”