Proponents of poverty reduction are calling on the federal government to curb “predatory” lenders

0

Article content

Low-income families are in the middle of a “critical” season as anti-poverty advocates again urge the federal government to lower the mandatory maximum interest rate to curb “predatory” lenders.

display

Article content

Association of Community Organizations for Reform Now (ACORN) members held a national day of action earlier this month with demonstrations at payday lenders where people shared personal testimonies that they were “trapped in a debt cycle,” said Bader Abu-Zahra, Chair of the Vanier EICHEL Chapter.

Vanier has one of the highest concentrations of payday lenders in Canada, Abu-Zahra said, and the pandemic has only increased demand.

“At that time, during the pandemic, people will have emergencies and they will be forced to go to these lenders,” said Abu-Zahra. “They can’t get a bank loan because they don’t make enough money, so they have to go to these payday lenders – not because they want to, but they are forced to take that money.”

display

Article content

Once they took out a loan, Abu-Zahra said he heard dozens of stories of “excessive” phone calls, either to offer more credit or incentives, or to add to existing loans.

“They say they make excessive phone calls, call (lenders) to offer services, offer credit, and they also call and harass them to collect money.”

ACORN conducted a nationwide survey of its members and found that more than half have an individual annual income of less than $ 20,000, and 70 percent of respondents said they took out a high-interest loan with interest rates between 45 and 60 percent to have.

Of the 376 survey responses collected earlier this year, 30 percent said they had taken out a loan in the previous 12 months, while 13 percent said they had taken out more than ten loans in the same period.

display

Article content

The organization gathered testimonials from people around the country, including Grace, an Ottawa mother who is still paying off a $ 5,000 loan she borrowed from a payday lender four years ago.

“Everything went well, but then I lost my job because of COVID-19,” she wrote.

Without a job, she turned to Ontario Works and the federal CERB program, but faced enormous financial difficulties with two daughters and one at university.

Worse, Grace wrote, were the incessant “drone” calls.

“They keep calling me, harassing me, and keep telling me that they want to start over,” she wrote. “I can’t, I don’t have any money. I don’t care about my credit, I have to think about myself, my children. I have too much stress, I don’t want to fall into depression.

display

Article content

“The interest rate on these loans is just too high,” she wrote. “The remaining amount I owe is much more than what I have been taking off for some time despite regular payments.”

A “vast majority” of respondents (80 percent) said they had taken out loans to cover daily living expenses such as rent, groceries and electricity bills.

Others said they need loans to cover medical expenses, illnesses, and car repair bills, and in particular that 22 percent of respondents took out loans because they were told it would help pay off other loans to improve their creditworthiness .

“People don’t always know the legal terms or read the contracts. And (with) this lack of understanding, I believe, people are being exploited, ”said Abu-Zahra.

display

Article content

There are often hidden costs associated with loans that inflate the overall loan interest rate and increase payments.

“So they can sign a single interest rate and they don’t know that there are additional borrowing costs, fees and insurance that make the actual interest rate much higher,” said Abu-Zahra.

The Canadian Consumer Finance Association, which represents companies that provide retail financial services, said in a statement that its members are already “heavily regulated and licensed” under various provincial laws across Canada.

“Payday loans are heavily regulated and the fees are set by the provincial governments based on their analysis of the cost of offering the product,” said a statement from the CCFA.

display

Article content

“Many hardworking Canadians have no access to short-term or long-term loans from banks, credit unions, and trusts. Government studies have shown that people are responsible for using these member credits for necessary expected and unexpected expenses.

“We would all like to pay less for products and services, but governments shouldn’t further restrict the interest rates a lender can charge. If so, the only result would be that a larger cohort of Canadians would be denied access to credit, or at least credit from a government-regulated lender. “

Credit demand would not change, the CCFA stated, “and would simply switch to illegal unlicensed online lenders“.

ACORN said agencies offering online lending “present some of the same risks to consumers as retail credit, but could potentially expose them to additional risks as many online lending providers are unlicensed or regulated”.

display

Article content

ACORN is calling on the federal government to cut the maximum interest rate from 60 percent to 30 percent, amend the criminal code to include a specific language for payday lenders, and urge banks to lower the insufficient funds (NSF) fee to $ 10.

Most importantly, the organization is calling on the government to reform banking legislation to ensure that basic financial services are available to all Canadians.

“The federal government must mandate banks to provide affordable credit to low- and middle-income people supported by the Canadian government,” ACORN said, “so they can avoid predatory lenders in times of personal financial crisis.”

[email protected]

twitter.com/helmera

display

Remarks

Postmedia advocates a lively but civil discussion forum and encourages all readers to share their views on our articles. It can take up to an hour for comments to be moderated before they appear on the site. We ask that you keep your comments relevant and respectful. We turned email notifications on – you will now receive an email whenever you’ve received a reply to your comment, there’s an update on a comment thread you’re following, or when a user follows a comment. Please refer to our Community Guidelines for more information and details on how to customize your email settings.

Share.

Comments are closed.