The legislation Hamilton will consider on Tuesday is aimed at keeping payday loan companies from targeting low-income communities.Glenn Lowson
City of Hamilton councillors are set to vote Tuesday on a motion to limit the number of payday loan outlets in the city, after accusations of "predatory" behaviour from activists.
The radial separation legislation before council is aimed at keeping payday loan companies from targeting low-income communities, whose members often turn to the high-interest businesses in desperation, but fall further into debt because of the high interest rates and fees that come with the loans.
Hamilton is one of the few cities in Ontario to consider such legislation, adding to its ongoing crusade against payday loan companies. It previously cracked down by requiring them to be licensed, to educate the public on how their rates compare to traditional lenders and to share information on credit counselling with customers.
The city's latest attack on the lenders comes from Councillor Matthew Green, who said he proposed a cap of one lender per ward, or a total of 15 city-wide after discovering that loans of $300 were costing locals up to $1,600 because of fees and annualized interest rates he found to be about 546 per cent.
"This is no way for people living in poverty to try to get by," he said. "The targeting of our inner city neighbourhoods was a bit pernicious...we had more payday loans in some kilometres than Tim Hortons."
He believes payday loans companies should be abolished, but settled for fighting for the per-ward cap because the provincial and federal governments have allowed the process to continue and he lacks the power to overturn them.
The Ontario government decreased the cost of borrowing a payday loan from $21 to $18 per $100 in 2017 and dropped it down again to $15 this year.
The Canadian Consumer Finance Association, formerly the Canadian Payday Loan Association, did not respond to the Canadian Press' request for comment.
It has previously argued that it provides a bridge for consumers who are rejected by banks and would otherwise have to turn to illegal lenders.
The policy councillors will vote on won't immediately decrease the city's number of payday loan businesses to 15 to match its number of wards because it will grandfather in existing companies, but will prevent new ones from opening, said Tom Cooper, the director of the Hamilton Roundtable for Poverty Reduction.
He's noticed a "community crisis" has spawned from the 40 payday loan outlets he's counted in Hamilton, which are mostly "clustered together" in the city's downtown core.
Cooper said the proximity creates a "predatory" scenario because "we often see people who owe money go to one payday loan outlet and then go to a second to pay the first and then a few doors down again (to another) to pay the second one."
A survey commissioned by the Canadian Payday Loan Association in 2007 revealed for every new customer, 15 become repeat customers.
With few big banks offering credit alternatives for low-income customers, Cooper said it can be easy to fall into the "downward spiral" of the payday loan cycle, where high interest rates and obscure lending policies make it hard to get out of debt.
He and Green think the legislation, which they say has been backed by most councillors, is likely to pass and "sends a strong message to the industry that their days are numbered."