The federal government made a commitment to take action on interest charges and payday loan fees in the last federal election. Today, social agencies are starting to pressure the government to keep its promises.
Calgary-based non-profit Momentum this week released a policy document calling on the government to criminalize high-interest lending. Currently, the Canadian Criminal Code defines a criminal interest rate as greater than 60% per year.
“It’s way too high, especially for the people we see living on low or precarious income to be able to get out of debt,” said Courtney Mo, head of policy and research at Momentum. Mo also noted that payday loans are in fact exempt from penal code regulations.
“So we’re seeing interest rates here going up, almost 400%. And that does not include any additional fees, insurance, or other costs associated with high cost credit. So it can be quite difficult to figure out what you are actually paying for the full cost of a loan, “Mo said.” If you were to get a $ 300 payday loan, usually a two week loan, but most of the time. a lot of times people have to renew that loan – so (actually) if you have that loan for up to a year, let’s say you would pay $ 1,170 for the cost of that $ 300 loan. “
Demonstration against payday loans, Tuesday, December 14, 2021
LOWERING THE CRIMINAL THRESHOLD
Momentum would like to see the criminal interest rate lowered to 36%, including all fees and other charges, and wants the payday loan exemption removed.
Tina Michelle Moller has used payday loans in the past. The former postwoman lost her job after a back injury.
“A disability is something you can’t always plan for. And it happens with a lot of families and people that something happens. It’s an emergency, they either incur new costs or lost income,” Moller said.
With the help of Momentum’s programs, Moller not only paid off her debt and accumulated savings, but also developed a new career: she is now a financial consultant, helping others avoid the trap of easy credit and debt. raised.
“There are people who have bad habits, it doesn’t matter,” Moller said. “Maybe they’re in debt, because they bought the last phone and their bill is $ 150 a month and they can’t afford it. Is not it ?
“There are people who do that,” she said. But there are also people who are in situations where they could not do anything to avoid the loss of income or the poverty in which they found themselves. “
“But if you pay 36% (interest), that means your debt will double every two years. And, I mean, it’s a very dangerous situation when compound interest works against you.
“But a lot, a lot of people, they just see the need now,” she added. “They don’t think about what’s going to happen in two years. And that’s the real danger that there is no obligation for payday lenders to tell you about the dangers of high interest loans.”
In his annual payday loan report the Government of Alberta notes that 73,080 people in Alberta took out 288,401 payday loans in 2020. The total value of these loans was $ 219,543,385.51
The breakdown of the amounts of these loans was as follows:
Loans available between $ 1 and $ 499
Loans available between $ 500 and $ 999
Loans available between $ 1,000 and $ 1,500
NATIONAL DAY OF ACTION
A few blocks south of Momentum’s office in southeast Calgary, a handful of protesters – all affiliated with ACORN (Association of Community Organizations for Reform Now) Canada – staged a protest outside a Money Mart on International Avenue. It was part of a national day of action organized by the organization, which is also calling on the federal government to take action against payday loan companies.
In a press release posted on its website, ACORN Canada is asking its supporters to flood the inbox of middle-class prosperity minister Mona Fortier with letters calling for several changes to lending procedures, including : lower the interest rate on installment loans from 60% to 30%; include all fees and commissions associated with a loan in the interest rate; create a federally funded fair credit benefit so all low-income people have access to low-cost credit options in emergencies and support postal banking services in all cities; and lower NSF fees from $ 45 to $ 10.
THE PROVINCE RESPONDS
With the exemption from the federal Criminal Code, the regulation of payday loans is the responsibility of the provincial government.
In an emailed statement to CTV, Tricia Velthuizen, press secretary to the Minister of Services for Alberta, said, “Alberta has some of the toughest payday loan regulations in the country, and we are committed. protect Albertans from predatory lenders. a review of the province’s strong payday loan regulatory system. “