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Hamilton moves to control payday loan agencies
Feb. 17, 2016
By Carmela Fragomeni

Jodi Dean couldn't believe her $300 payday loan ended up costing her more than $1,500 in interest.

"It has taken me a year to pay off the loan," the Hamilton woman told city councillors as they took steps to become the first city in Ontario to crack down on what they call predatory lending.

Tuesday's planning committee moved to make payday loan businesses subject to the city's business licensing bylaw. They will have to pay a yearly $750 licensing fee, post their interest rates, show comparative bank interest rates and provide credit counselling information.

The committee also voted to push the province to make it a criminal offence to charge more than 30 per cent annual interest.

It's about all the city can do, although the move still needs to be ratified by council.

The payday businesses are licensed and regulated by the province, but Hamilton councillors and the city's anti-poverty advocates say they still prey on the poor and vulnerable, and felt compelled to act.

"This is really historic," said Coun. Matthew Green, who spearheaded the move. "We're the first municipality going in this direction."

Green called it a first step in regulating the industry.

Tom Cooper, director of the Hamilton Roundtable for Poverty Reduction, said the move will make a difference in people's lives.

Payday lenders - there are 33 in Hamilton - are usually located in low income neighbourhoods where their loans are simply unaffordable, he said.

Poverty Roundtable figures show that a $300 loan can accumulate up to $1,638 in interest in a year, equalling a 546 per cent interest rate.

"How has this been allowed to continue and flourish in our province?" asked Green rhetorically.

Cooper said, "They pull you in, initially seeming to be reasonable ... $21 (interest) on $100 may not seem like a lot, but it creates an endless cycle and drives people deeper and deeper into debt. It's profiteering on people who can least afford it.

"We call them predatory because that's what they are ... the proliferation of payday loans in our city preys on the working poor and those on fixed incomes."

Dean, a single mother of three young children, got into her predicament when her child support payment didn't come through a year ago last December. Family members paid for the rent and groceries, but she got the loan to buy Christmas gifts for her children.

"At the time, I didn't think of the $300 being $1,500 or $1,800," she said.

Coun. Maria Pearson called Dean's story an eye opener and hoped that last week's provincial move giving credit unions power to offer alternative short-term loans, will help.

The Hamilton-based Canadian Payday Loan Association (CPLA) says the city's move duplicates existing provincial regulations.

Chair Tony Irwin says, "I don't know why Hamilton has chosen to go down this road."

Payday lenders pay the province a $990 licence fee per location and are required to show clients the cost of their loan, he said. CPLA members have brochures listing credit counselling resources, he added.

He says complaints registered against payday lenders are "quite low" and only Manitoba's payday loan interest is lower than Ontario, at $17 per $100. Other provinces are higher - except in Quebec where the province's set rate of 35 per cent made it impossible for payday lenders to operate there, he said.

Green introduced a motion, adopted by the committee, calling on the mayor to formally request the province, among other things, to:

Green has also sent a personal letter to Minister of Government and Consumer Services David Orazietti calling for changes.

Cooper called Green's motion very strong and said "it needs to happen immediately. People are suffering."