You can Fight those Predatory Lenders at City Hall

In 2017, new provincial legislation in Ontario gave municipalities more power to regulate predatory loan businesses.  The new rules allowed local governments to take leadership where senior levels of government have faltered.  Here is what one municipality did.

Hamilton Steps Up

The City of Hamilton had a population of 536,917 in 2016. Hamilton bills itself as “the best place to raise a child and age successfully.”  Community advocates have long been concerned about the economic violence inflicted by predatory lenders on individuals, families and the community as a whole. 

Tom Cooper, Director of the Hamilton Roundtable for Poverty Reduction, was one such advocate. 

Tom Cooper 

“Profiteering is a derogatory term applied to those in business who make profits through methods that, while not illegal, could certainly be considered unethical,” says Cooper.  “Payday lenders sure seem to fit the description of profiteers.”

  

In 2015 Cooper decided to try to shine a bright light on the industry in Hamilton.

Cooper began to work with city council and particularly Councillor Matthew Green whose downtown Ward was home to many payday loan businesses.  In fact, Green calls the targeting of inner city neighbourhoods by the payday loan industry “pernicious.” 

“We had more payday loaners in some kilometres than Tim Hortons,” Green told local media in 2015.  Estimates of the numbers operating in Hamilton were as high as 35.  

Cooper and Green worked together to bring in the province’s first municipal licensing of payday loan outlets in Hamilton. That meant these lenders were required to provide city sanctioned information on credit counselling to anybody coming in their doors.  The new licensing required lenders to display large posters that contrasted the actual interest rates of a payday loans with the interest rates of chartered bank loans. They also had to pay a licensing fee. 

But more was needed. Cooper and Green strategized. Then, early in 2018, Green brought forward a motion to restrict these businesses to 15 in total (one per ward) but grandfathered existing locations.  He received strong support from council colleagues.

The by-law was amended.

https://www.thespec.com/news-story/8044206-new-bylaw-to-cap-payday-lenders-at-15-in-hamilton/

Here is what it said. 

The Hamilton By-law in a Nutshell

Licensing

• Every payday loan business shall hold the applicable current and valid licence. Before a licence is issued, every applicant shall submit: 

(a) a current and valid licence as a lender or loan broker under the Payday Loans Act. 

(b) accurate, scale representations of the posters that will be displayed.  

(c) the credit counselling information that will be given. 

• No new payday loan business shall be issued a licence for a location where payday loan businesses were located when the by-law was passed. 

• No more than15 payday loan business licenses shall be issued and no more than one payday loan business licence shall be issued per ward.

Rates Poster

Every payday loan business shall display a poster at each office, approved in advance by the Issuer of Licences. The poster shall be in English and visible to any person immediately upon entering the office.

The poster must be a minimum size of 61 centimetres in width by 91 centimeters in length; and must lay out the amount of the payday loan business’s annual interest rate and rates of chartered banks. 

Credit Counselling Poster and Information

A Credit Counselling Poster must be displayed that lists specific contacts with their respective telephone number and email addresses.

Every business shall ensure that each person who attends at its offices is given, immediately upon him or her expressing an interest in a loan, approved credit counselling information.

Here is the bylaw in full https://d3fpllf1m7bbt3.cloudfront.net/sites/default/files/media/browser/2018-03-02/18-042-as-amended.pdf

What You Can Do?

• Consider contacting a member of your local city or town council. Ask them to initiate a similar bylaw in your town.  

• Advocate for alternatives.  For example, the Hamilton Community Legal Clinic has called for a return to postal banking where basic financial services, like credit, could be available without exorbitant fees charged by payday loan companies at the Post Office.

No Real Change to Payday Loan Lending Rates in the New Year

(This story originally appeared at www.hamiltonjustice.ca)

Maybe you missed this announcement in December from the Ontario government? 

"Our government is committed to protecting consumers and helping people in their everyday lives. This includes lowering the cost for taking out a payday loan, and further changes to ensure that financial services are fairer and more transparent for all. " — Marie-France Lalonde, Minister of Government and Consumer Services

This is how the Minister characterizes lowering the maximum total cost of borrowing for a payday loan from $21 to $18 per $100 borrowed.  That new protection will happen on of January 1, 2017.  This move, after years of dilly dallying, lowers the interest rate that predatory lenders can charge from 546% to 390% per annum.  The Criminal Code says charging anything above 60% is a crime. But Ontario and most other provinces believe an exemption is in order for this so-called industry. (We’ve written before on this.  See http://www.hamiltonjustice.ca/blog?post=Province+Getting+it+Wrong+on+Payday+Loans&id=369)

Legislating the Banks

Prior to the Ontario announcement, the Canadian Centre for Policy Alternatives put out a report developed through a survey of ACORN Canada members who have accessed payday loans.

In A Survey of High Interest Alternative Financial Services, author Joe Fantauzzi concludes that banks “through denying low and moderate income families access to credit, are driving people to access fringe high interest products like payday loans, installment loans and more.”

So, the federal government should insist that banks be more responsive to low and middle-income families.  The report suggests that access to low interest credit for emergencies and low interest overdraft protection be legislated.  Lowering NSF fees from $45 to $10 and ensuring no-holds on cheques would be positive changes.  Alternatives to predatory lenders like a postal bank and credit union products geared to moderate and low income households are also called for.  Here is the report.
https://www.policyalternatives.ca/publications/reports/predatory-lending

Together with the payday loan industry the Ontario government has become a partner in predation. 

Perhaps the federal government can change this.  The CCPA’s report shows how.

Canadians Need Access to Reasonably Priced Financial Services

(Here is a letter to the editor I sent recently to a number of newspapers .)

Dear Editor,

Good communities provide residents and businesses with easy access to reasonably priced financial services.

Such access is eroding in Canada.

The big five chartered banks have been exiting downtown cores of major Canadian cities for years.

Many small communities, have no banks or credit unions at all.

Moreover, fees are an issue. Only thirty years ago, banks did not charge fees but now these charges are amongst the highest in the world.

“Fringe” financial institutions like Money Mart and the Cash Store have stepped in to fill the void and make big bucks while charging exorbitant fees.

There is some regulation of these fringe institutions. In 2008, for example, the Ontario government, concerned about excessive charges, brought in regulations. These controls were inadequate so the government is in the process of setting new rules.

Meanwhile many Canadians don’t have bank accounts.

The solution to this problem (and others) is to bring back postal banking.

Canadians had access to Postal Banking for more than one hundred years. When the Post Office Savings Bank ceased operations in 1968, nearly 300,000 accounts closed down. At its peak in 1908, deposits in the bank totalled 47.5 million (equivalent to $1 billion in today’s money). Meanwhile postal banking is thriving in other parts of the world. Japan Post Bank, for example, has $2 trillion in assets.

The government is currently conducting a public review of Canada Post, Postal banking is an idea whose time has come again.

Bob Wood
Port Rowan

Interested readers can learn more at DeliveringCommunityPower.ca

What to do about Predatory Lending?

(Payday loans are the Lay’s Potato chips of finance.  You can’t have just one and they are terrible for you… John Oliver https://www.youtube.com/watch?v=PDylgzybWAw)


I was asked on Thursday how I felt about the Ontario’s new legislation that deals with alternative financial services.

My answer was that I'm quite disappointed.

It is hard to believe it has taken 2 years of consultation and this is all we get.

Consumer advocate Mel Fruitman put it better.

“I hate it when government does that. It says 'we're going to do something but it's going to be a year before we do something and we can't tell you anything until we do it,'" he told the CBC. http://www.cbc.ca/news/business/ontario-subprime-lenders-1.3359460

I was involved in some consultation by the Ministry of Government and Consumer Services this past July.  This was part of lengthy process that included a 2014 “panel of volunteers with expertise in matters related to payday lending.”  That panel had concluded, not surprisingly since there were lenders involved, that everything was pretty much OK.  Some tightening of regulations and a little more education for consumers was all that was needed.

To the government’s credit, they realized more had to be done.  It seemed to me that the staff leading that 2015 consultation that I had attended knew how badly people were being exploited by the payday loan predators and other private sector operations that “help” people with money problems.  I believed that they were going to do something significant about it given the political realities that they had to work with.

What happened, then?  

To be fair, there are good things in Bill 156 – An Act to amend various Acts with respect to financial services.

ACORN Canada has done a lot of advocacy in this area.  Their spokesperson, Donna Borden, had this to say:

“This announcement is a great first step.  There are still countless ways the banking system could be made fair for low-to-middle income Canadians.” 

I read the Bill yesterday.  Bill 156 amends various other pieces of legislation. Specifically:

The Collection and Debt Settlement Services Act
The Courts of justice Act
Budget Measures Act 2009
The Consumer Protection Act
and more, I think.

So, to do a thorough analysis of it one would have to look at all those acts and see how each amendment changed it.  That is a lot of work. I’ll reference Mel Fruitman again:  

“It is very difficult to comment on an announcement about an announcement about an announcement." 

Indeed.

Provincial governments have largely remained on the sidelines or brought in regulations that were as weak as the ninth batter in a National League lineup. Some municipal governments have stepped up. But it appears that no new powers will be given to municipalities to deal with the problem as Howard Elliott noted in the Hamilton Spectator. http://www.thespec.com/opinion-story/6168980-the-spectator-s-view-payday-loan-changes-don-t-go-far-enough/

This “industry” hurts communities. Peter Kucherepa, an Ottawa lawyer, has researched the payday loans and argues that  enabling cash transactions (the mainstay of how this industry functions) can contribute to the proliferation of the drug industry and other criminal activity in neighbourhoods.

There are health issue too. Kucherepa cites research from St. Michael’s Hospital in 2014. That study “clearly shows that the proliferation of cash based money lenders lowers community life expectancy and increases pre-mature deaths.” 

You can read Kucherepa’s paper at https://www.dropbox.com/s/y5tq9frrd18g6at/Pay%20day%20Loan%20Paper%20V7(CONSULTATION)%20(4).pdf?dl=0

Kucherepa also compares interest rates for the two week loans that are legally permitted in each province. For example, if you borrow $300 in Nova Scotia, the payday loan company could legally recover $2,106 from you.  In Quebec that $300 loan could result in a maximum repayment of $405.

If provinces won’t act and municipalities can’t,  perhaps the solution lies with making a change to the Criminal Code of Canada.  About ten years ago an exemption from criminal prosecution was made for Payday Loans so that they could exceed a 60% interest per annum. (Criminal code of Canada 347.1)

Recent example of advertising  used by the "Industry"

That should change. 

My Oxford English Dictionary  says “a crime is something disgraceful or very unfair.”

That ought to make these lending practices criminal.

Regulating the Predatory Lenders

Ward Three Councillor Matthew Councillor Green (pictured to the right) has a motion coming to Hamilton City Council on Wednesday September 9th.  The motion is requesting authority from the Province for the City of Hamilton to limit the number and regulate the locations of payday loan cheque cashing outlets.

Many other municipalities in Canada and the United States have implemented tighter restrictions on payday loan companies. In Winnipeg, for example, payday lenders must be a minimum of 1,000 feet apart. Another municipality, the town of Esquimalt, has increased its business license fee from $100 to $2,000. (http://calgaryherald.com/news/local-news/task-force-recommended-to-improve-citys-payday-loan-regulations). About 200 U.S municipalities are regulating these predators.

Last month, Global reported that cities in Alberta were banding together to fight against the 600% interest rates allowed by law in that province. (http://globalnews.ca/news/2185642/alberta-cities-organizations-band-together-to-fight-600-payday-loan-interest-rate/)

They'll put payday loan companies out of business, argues lobbyist Stan Keyes.

While many would like these guys put out of business altogether, alternatives are needed because the major banks have abandoned low-income communities and earners.  In Sheffield England, Council has come up with an alternative by offering municipal loans to residents. http://www.theguardian.com/money/2015/aug/08/sheffield-money-payday-loans-rates-poverty

I've argued that postal banking could be an alternative that would provide access to financial services for all Canadians.  HTTP://WWW.HAMILTONJUSTICE.CA/BLOG/?POST=PAYDAY+LENDERS+CONTINUE+TO+OUTRAGE+US&ID=303)

In the meantime, I commend Hamilton's Councillor Green for his initiative.

Here is his motion:

WHEREAS the Province of Ontario’s Ministry of Consumer Services is responsible for the Consumer Protection Act and the Payday Loans Act which regulates and licenses money lending businesses;

WHEREAS the Province of Ontario regulates the interest rates of money lending businesses while Municipalities have the authority to regulate and license businesses to protect consumers if this is not already done by the Province;

WHEREAS the use and expansion of payday loan and cheque cashing outlets in Hamilton neighbourhoods is a significant consumer protection issue identified by the Hamilton Roundtable for Poverty Reduction and neighbourhood and community groups; and

WHEREAS it is important that customers of payday loan and cheque outlets have a complete understanding of the financial services being offered.

THEREFORE BE IT RESOLVED:

(a) That the Mayor be authorized to forward correspondence to the Province of Ontario, to the attention of the Minister of Consumer Services, requesting that the protections afforded by the Payday Loans Act be strengthened and that Municipalities be authorized to limit the number and regulate the locations of payday loan and cheque cashing outlets;

(b) That Staff be directed to research the feasibility of licensing payday loan and cheque cashing outlets to assist in consumer protection by requiring the businesses to post their rates, show comparative and annualized rates and information regarding debt counselling.

(c) That staff analyze and map pay day loan and cheque cashing outlets in Hamilton and report back to Council on recommendations for alternative accessible financial services for Hamilton residents.