When Kristina Dettling, a single mother of three in Fort St. John, B.C., found herself short on cash to pay the bills in November, 2020, she did what she had done before: She took out a payday loan. Only this time, she borrowed online, through a site called speedypayloans.ca, which had popped up in her web search.
The money, $750, appeared in her bank account in just a few hours. But unlike the brick-and-mortar payday lenders Ms. Dettling had used as a financial lifeline in the past, Speedy Pay Loans, and later another similar online lender she found on social media, kept e-mailing her. Could she use more money? How about extending that loan?
Ms. Dettling, who did need the cash, took the lenders up on those offers. But a few months later, when she couldn’t keep up with her debt any more and filed a consumer proposal, the e-mails turned threatening. Then, her phone started ringing incessantly with collection calls that would come in at 30-second intervals for hours. And soon, the ceaseless calling extended to her mother and the car dealership where she worked, whose contact information Ms. Dettling had listed in her online loan applications.
Shorty after, her mother paid around $1,000 to settle the debt, according to Ms. Dettling. It was only then that the calls stopped.
Ms. Dettling had been borrowing from two unlicensed short-term lenders, part of a slew of websites that are offering Canadians payday-like loans while flouting consumer-protection laws and regulations across the country, leaving borrowers vulnerable to unlawful practices, harassment and privacy concerns.
It’s a problem that government agencies and experts say is escalating as Canadians become more comfortable borrowing online.
These online lenders usually offer amounts of $250 to $1,500, without a credit check, often promising money within minutes via e-transfer. The lenders examined by The Globe and Mail often drastically understated the interest rate they were charging, set up loan terms far longer than the maximum allowed for licensed payday lenders and prompted borrowers to roll over their high-interest loans, despite provincial rules forbidding such rollovers for payday loans.
And many borrowers who, like Ms. Dettling, fell behind on their payments say these lenders, or the collection agencies they engaged, have harassed them, their family members and their employers with constant phone calls, verbal threats and public shaming. The badgering often starts when borrowers file for insolvency, in plain violation of a legal requirement that creditors stop contacting debtors who have resorted to a consumer proposal or bankruptcy.
The lenders aren’t licensed in the provinces in which they do business and use fake physical addresses, which makes it hard to tell whether they are based within or outside Canada.
“We believe that the issue has escalated to a point that the business practices may represent a violation of the Criminal Code of Canada,” Amanda Parry, a spokesperson for Consumer Protection BC, said via e-mail relaying a statement on behalf of the provincial regulator. Dealing with businesses that have no intention of complying with provincial laws is especially difficult, the organization added.
The problem appears to be nationwide in scale. In Ontario, licensed insolvency trustee Doug Hoyes said his firm, Hoyes, Michalos and Associates Inc., has records of nearly 1,000 different websites running such payday lending schemes in the insolvency files the company has administered since the start of 2020.
The number of such lenders targeting customers in Quebec has also boomed, according to an analysis provided by Gary Schwartz, president of the Canadian Lenders Association, a group representing instalment lenders such as banks and alternative lenders.
At BDO Canada LLP, a debt solutions and accounting firm that operates across Canada, senior vice-president André P. Bolduc also said he’s increasingly seeing customers who come to him with short-term loans from companies he doesn’t recognize and that prove to be difficult to track down.
Not only does that leave consumers without protection, he said, it means Canadians are sending sensitive information to sources they can’t track.
Legitimate and illegitimate lenders both collect financial and employment information to verify a borrower’s income before giving a loan. But in many cases, unlicensed or fake loan websites deny consumers the loan after they have shared their information, the Alberta government warned on its consumer-protection website.
“As the websites now have the consumer’s personal or banking information details, there is the possibility that they may sell this information to scammers, or even sign them up for services without their consent,” the agency said.
The proliferation of unlicensed online loans is a trend Mr. Hoyes links to the COVID-19 pandemic, when more borrowers became comfortable taking out loans online.
Lenders are allowed to offer payday loans in person and on the web in British Columbia, but must be licensed to do so. Speedy Pay Loans, whose website looks otherwise similar to that of many other registered payday lenders, does not display any provincial licences online or in its loan contract, according to documents reviewed by The Globe.
When Ms. Dettling took out her first $750 from the online lender, her plan was to pay it off in full, as she had done before when borrowing in person from traditional, licensed payday lenders. But when she was one instalment away from having repaid the full amount, she received an e-mail prompt to renew the loan and went for it, she said.
Paperwork Ms. Dettling signed when she took out the loan show Speedy Pay Loans claimed it was charging a 32-per-cent annual interest rate. But the same document also says she was to repay the loan over six instalments of $212.95 every two weeks.
The payment schedule and format of the loan differed from those used by licensed payday lenders, making it difficult to calculate the exact annual interest rate. However, licensed insolvency trustees found that the annual rate could be between 305 per cent and 461 per cent for these loans, depending on how the interest was calculated. The repayment period also exceeds B.C.’s limit of 62 days for payday loans.
A few months later, Ms. Dettling was struggling with her payments to Speedy Pay Loans, outlays that had grown larger as the lender kept rolling her unpaid balances into new and bigger loans. In May, 2021, she signed up with another online short-term lender, cash2gonow.com, which had been advertising on her social-media feeds, in hopes of borrowing there to repay Speedy Pay Loans.
A document she signed with Cash2Go, which was almost identical to the one she’d received from Speedy Pay Loans, also grossly understated the loan’s annual interest rate as 32 per cent when that loan also had six biweekly instalments.
The interest rate on instalment loans is typically expressed as an annual rate, which indicates the percentage of the principal a borrower would pay in interest over the course of 12 months. However, for payday loans, which have very short terms, the cost of borrowing is usually indicated as a flat fee. In B.C., that fee is capped at $15 per $100 borrowed. Expressed as an annual interest rate, that fee would be equivalent to 390-per-cent interest assuming a biweekly repayment term.
The loan Ms. Dettling took out from Speedy Pay Loans was structured like an instalment loan but charged a payday loan-like interest. The Criminal Code makes it an offence in Canada to charge interest above 60 per cent a year, with licensed payday lenders in all provinces except Quebec the sole exception to that rule. Quebec caps annual interest rates at 35 per cent, a limit that also applies to payday lenders.
In its latest federal budget, the Trudeau government advanced a proposal to lower the current criminal rate of interest to match Quebec’s cap.
In August, 2021, unable to keep up with the payday loans and other debts, Ms. Dettling filed a consumer proposal with MNP Ltd. That was the start of the threats, the insults and the round-the-clock badgering.
According to correspondence seen by The Globe, the day after MNP notified Ms. Dettling’s creditors, she received a message from Jean-Louis Tranche-Montagne, whose e-mail signature identified him as a regional supervisor at Cash2Go. The message read: “Hey Kristina. We do not accept proposals. Please make an arrangement directly with us so we can keep renewing you.”
A few days later, Ms. Dettling received another e-mail from a man by the name of Ethan Tremblay, who claimed to be a junior collection agent at canadiandebtcollect.com. He told her that Cash2Go and Speedy Pay Loans had both handed her files to the collection agency. “We will be calling you, your work and references until you decide to pay them back,” he warned.
After that, Ms. Dettling’s phone began ringing with non-stop calls from an unknown number, sometimes with no answer and other times with verbal abuse.
“It would be a guy on the phone saying, ‘You have to pay your bills,’” Ms. Dettling recalled, and he would swear at her. “He’d make you feel like you’re just garbage.”
At work, Ms. Dettling’s superiors handled the calls, in an effort to protect her from the harassment. A few times, the caller started hurling sexual insults about her bosses, she recalled.
Roughly a week into the ordeal, her mother paid around $1,000 to settle the debt and the calls stopped, according to Ms. Dettling.
Consumer Protection BC said it has received 70 complaints so far about Canadian Debt Collect, which isn’t licensed as a collection agency in the province. It also recorded four consumer complaints against Speedy Pay Loans and two against Cash2Go. The regulator also said it has received complaints similar to Ms. Dettling’s about many other online short-term lenders.
The Globe could not find a licence for Speedy Pay Loans or Cash2Go in any online register for B.C., Alberta, Saskatchewan, Ontario or Quebec, even though the two lenders either offer loans or list addresses in those provinces. In 2022, Quebec’s consumer-protection office sent a notice of violation to Speedy Pay Loans, stating that it had broken the law by operating without a licence.
“If a lender or collector is not licensed, even when they are required to be, they are already operating outside of the law, like a scam or criminal enterprise,” Ms. Parry at Consumer Protection BC said in an e-mail statement.
B.C.’s regulator said it refers consumers who reach out with accounts such as Ms. Dettling’s to law enforcement.
But when Ms. Dettling reported the harassment to her local RCMP detachment, she says she was told there was nothing police could do, because it was a civil rather than a criminal matter.
Corporal Kim Chamberland of the RCMP’s national headquarters referred The Globe’s questions about whether the RCMP is aware of or investigating unlicensed online payday lenders at a national level to the Financial Consumer Agency of Canada, a federal regulator that does not oversee payday lenders.
The Office of the Superintendent of Bankruptcy, which oversees the insolvency profession, said it has seen an increase in allegations since last year about creditors violating stays of proceedings and attempting to claim that debts are not dischargeable in fiscal year 2023. However, the OSB said it could not say whether the increase was linked to online payday lenders, in part because there is no formal definition of what constitutes such a lender.
At MNP, senior vice-president Dean Prentice described two other recent instances of debtors experiencing the kind of illegal and aggressive pestering reported by Ms. Dettling. In one case, the borrower’s employer had to temporarily shut down its switchboard because of the constant collection calls, he said.
“I’ve never had a problem where a Canadian lender with a physical location will continue to try and collect,” Mr. Prentice said.
On its website, Cash2Go lists an address for a unit in the Southcentre Executive Tower in Calgary. The Globe visited the address, a beige building that houses law offices, a dentist, realtors and a jewellery store.
The door to the suite purported to belong to Cash2Go was locked, the windows alongside it blacked out. But inside, instead of an online loan operator, The Globe found a boutique software company that has leased the space for three years and has never heard of Cash2Go or Speedy Pay Loans.
The Globe reached out to both lenders and Canadian Debt Collect via e-mail, but none responded to a request for comment.
Most of the unlicensed lenders Mr. Prentice looked into listed fictitious addresses in Saskatchewan or Quebec, he said. However, in Ontario, Mr. Hoyes said the vast majority of the unlicensed payday lenders he’s dealt with claim to be based in the United States, often providing only a post office box as their address.
And while Mr. Hoyes also reported that online lenders pursued debtors who had filed for insolvency, he said none of them staked a formal claim to the money they were owed, as creditors would normally do in such proceedings.
That’s likely because the lenders believe they have no legal basis to collect the debt, Mr. Hoyes said. The only way to recoup the money is by applying psychological pressure to the debtor, he added.
Ms. Dettling, for her part, has changed her bank account and her telephone number. The calls, the insults and the swearing weren’t just deeply upsetting, she said, they made her feel physically unsafe.
She hopes sharing what she calls her “horror story” will help spare others from what she went through.
With a report from Emma Graney
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