Province proposes safeguards for payday loan borrowers (Chris Cobb, Ottawa Citizen)

The Ontario government has introduced legislation it says will increase protection for people using payday loan outlets and other “alternative financial services.”

Canada’s multi-million-dollar payday loan industry, regulated provincially, has been accused of preying on the most financially vulnerable and sucking them into a cycle of high-interest loans that many are unable to repay.

Under the new legislation, consumers hounded by collection agencies — often agencies that have bought the debt from the original lender — will be protected against “unfair collection practices.”

It doesn’t define “unfair” but consumers chased for debt repayment have complained that collectors cast a wide net to include family members in their efforts to get money.

The provincial government is also proposing longer repayment periods for repeat payday loan borrowers and a limit on the amount that can be charged to cash government-issued cheques.

There are more than 800 licensed payday lenders in Ontario.

“Our government is committed to protecting consumers, and that includes protecting consumers from a cycle of personal debt,” said Ontario’s minister of government and consumer services in a statement.

Payday loan outlets are also the targets of Ottawa councillors Tobi Nussbaum and Mathieu Fleury, whose wards include Vanier, where payday storefronts proliferate.

The provincial legislation is a “positive step,” said Nussbaum.

“I’m 100-per-cent supportive, but doesn’t mean that other steps shouldn’t be taken,” he said. “If part of this is about decreasing the easy availability of payday loans, then there is a role for us in the city to look at the density of storefront payday loans on our streets.”

The councillors have asked city staff to report back to the January planning committee meeting on whether bylaws can be fashioned to restrict the distances between the payday shop fronts.

There are 16 payday outlets in Vanier — about one for every 1,000 Vanier residents. A single kilometre-long stretch of Montreal Road has eight outlets.

According to one study, that’s 16 times the provincial average and 24 times the national average.

“(The proposed legislation) is positive but geared to ensuring that those already using payday loan services are not taken advantage of,” said Nussbaum.

“We want to make sure that those who haven’t yet entered the bubble are aware of all of the alternatives and aware of what they are getting into,” he said. “That includes the very high fees for cashing cheques and taking out loans.”

The councillors want signage they say is needed to make the terms of borrowing clearer to customers.

PAYDAY LOANS BY THE NUMBERS

$2.5 billion: Annual estimated revenue generated by Canadian outlets

 1.8 million to 2.5 million: Estimated number of Canadian customers

1996: First outlets opened in Canada

800: Number of licensed payday lenders in Ontario

400: Number of Starbucks outlets

500: Number of McDonald’s

500 per cent-plus: Cost of using a payday loan for a year

$546.00: Fees for borrowing $100 for 26 two-week periods

7: Percentage of borrowers surveyed who said they understood the fee structure

3: Estimated percentage of Ontarians who used payday loans last year

30: Percentage who took out one loan

18: Percentage who took out 10 or more loans

3,000: Number of complaints about collection agencies to Ontario Ministry of Consumer Services 

Source: Ottawa Citizen