You can add Thunder Bay as another Canadian jurisdiction looking to rein in the payday loan industry.
Shelby Ch’ng, a Northwood member of the Thunder Bay city council, is urging the city to pass legislation that would mandate current and future payday loan companies make it clear as to how they came up with the interest rate they charge.
Later this month, Ch’ng will introduction legislation that would target businesses who offer the best payday loans online guaranteed to hang signs that show the equivalent annual interest rate for the fees they charge for payday loans. Ch’ng makes the case that the paucity of financial literacy is one of the biggest issues for people in her ward. She stated that her constituents consistently remark how they are confused by the interest rates.
“People will frequently say that they only get a two per cent raise at their jobs, and yet taxes are going up by three per cent,” she said. “Well, three per cent on the average residential home is a lot lower than a two per cent increase on the average income.”
Ch’ng further added that by “not doing the math,” 12 percent of Thunder Bay residents living in poverty may not actually understand how much the payday loan really costs them. The city councilor alluded to a relative of hers who had became poor and actually took out a payday loan. She said it was a hellacious experience for her family member because everything was complicated, confusing and difficult.
In addition to signage and financial literacy, Ch’ng also wants to put forward legislation that regulates where payday loan stores are permitted to operate. Like other jurisdictions across North America, the Thunder Bay official wants to ensure that payday loan stores are not placed in areas “where vulnerable people are known to frequent, citing casinos, schools and shelters.
Although she notes that she is aware that the provincial government actually regulates payday lenders, Ch’ng averred that municipalities can also participate in the new regulations being put on payday loan stores.
It is expected that Ch’ng will bring forward a resolution on October 31. Afterwards, she will seek out a report on the matter from city administration.
In the province of Ontario alone, the municipalities of Toronto, Hamilton and Ottawa have all attempted to rein in the payday loan niche. Local officials have all looked at implementing the same kind of rules and regulations: financial literacy, city ordinance laws, signage and so on.
Thus far, the process has been slow, but councilors are adamant that new rules are necessary to prevent the impoverished and most vulnerable from getting sucked into the payday loan debt trap.
Payday loan critics say that these businesses prey on the impecunious in order to make more money through the means of usury rates. Proponents say that these companies actually help the poor because they do not have access to traditional forms of credit from financial institutions.