REGENT PARK TV: Curbing Interest Rates On Pay Day Loan Companies

By Dimitrije Martiniovic
Dimitrije is a staff journalist with FOCUS Media Arts centre.

A Private Members Bill C-274 (Mar 11, 2021) tabled by National Democratic Party (NDP) finance critic MP Peter Julian, is calling on the Federal Government to close loopholes allowing Pay Day companies to charge criminally high interest rates. In Regent Park where we have one of the most diverse neighbourhoods in Toronto, and where many people have been struggling during the pandemic, this kind of change could be a welcome sign of relieve to struggling people in the area. Regent Park TV News invited NDP MPP Suze Morrison the Provincial representative for Toronto Centre to delve into the matter, and to explain what the bill entails.

The Pay Day loan industry has been called unsustainably expensive, predatory, pernicious, and inordinately targeting low-income people. And yet in spite of the negative public opinion, Pay Day loan companies  continue to proliferate - seemingly unaffected by criticism.

The Pay Day loan industry business model is alluringly simple, get cash advance fast, with few preconditions, no credit checks for example, and as an unsecured loan, in which a lender can’t seize your property as a consequence of default of payment.

On the other hand, the actual costs are deceptively masked behind advertising such as  “Get your money today,  approval in 30 minutes, and up to 16 weeks to repay your loan”. Whereas the underlying reality is far from this rosy picture. The Government of Canada, for example has extensive coverage on Pay Day Loans:

* a payday loan costs $17 per $100 that you borrow, which is the same as an annual interest rate of 442%.

As way of comparison:

* a line of credit includes a $5 administration fee plus 8% annual interest on the amount you borrow

* overdraft protection on a bank account includes a $5 fee plus 21% annual interest on the amount you borrow

* a cash advance on a credit card includes a $5 fee plus 23% annual interest on the amount you borrow

The NPD’s bill seeks to cap interest at 30%, and to enable alternate forms of borrowing  such as non-profit and lending circles, both of which would go a long way in providing Canadians with access to short-term loans without the crippling interest rates.

In what is perhaps the most sobering account of what and how Pay Day loans work, and why people would turn to that solution, I would like to offer Suze Morrison’s own experience:

“I remember as a kid, my mom would often rely on these pay day loans to get us through short-term financial crunches. What ends up happening is the interest rates are so high that you end up in cycle, you borrow against next week’s  pay-check, and then when next week’s paycheck comes and then you have to pay that loan back with astronomical fees, that pay check goes even less further than the one before and you end up in this endless cycles of pay day loans that you just can’t get out of. It’s incredibly heartbreaking and it’s the most vulnerable folks in our community that are being targeted by these predatory practices. People have no other choice, they may know and understand the risks, but if you have no other choice and if your kids are hungry, and you need to buy groceries, and the cupboard is bare, or if you’re $200.00 short on your rent, and you know that your landlord is immediately going to file an eviction notice, and put your family at risk of their home in a pandemic. You can understand the risks and still not have any other choice. You know I grew up in poverty here in downtown Toronto, daughter of a single mom used these pay day lenders, when you’re experiencing poverty you are just navigating one crisis situation to the next, and there’s no time to think what the long-term consequences of solving this immediate pressure here? How is solving this immediate crisis, maybe ineffectively and with risks through a pay day loan, well that’s tomorrow’s problem. That’s the problem of the next crisis. I can’t feed my kids tonight and have to put food on the table, so I’m going to do what I have to do as a single mom with  kids, as my mom was.”

A quick glance will tell you that there are at least 10 Payday Loan Companies within an easy walking distance from Regent Park, an indication of their wide use among low-income people in the area.