Capping how much payday loan companies can charge doesn't go far enough, Sudbury, Ont. expert says
CBC
The federal government says it wants to cap the rates payday loan companies are able to charge Canadians to borrow money from them.
The government unveiled its budget in Ottawa earlier this week, in the midst of soaring inflation rates and cost of living.
The government said, through the budget, it wants to target what it calls "predatory lending" by changing loopholes that currently allow some lenders to charge rates as high as 47 per cent per year.
The government said it's going to amend the Criminal Code to cap those rates at 35 per cent, in line with existing regulations already on the books in Quebec. It also plans to require payday lenders to charge no more than $14 dollars for every $100 borrowed.
John Cockburn, a financial empowerment co-ordinator with the Sudbury Community Service Centre, says he agrees that payday loans are predatory and that government should be proactive in helping to protect Canadians.
However, he said limiting how much the companies can charge doesn't go far enough.
"Mainstream banks have to start to offer some kind of micro loan program."
"Where they're going to accept people with less than stellar credit on loans as small as $100. But then giving them reasonable interest rates and reasonable time to pay it back," he said.
In Sudbury, there are several payday loan companies sprawled across the city.
CBC News reached out to several for comment but did not receive a response in time for publication. CBC also reached out to the Canadian Consumer Finance Association, which represents most payday loan companies and are waiting on a response.
Cockburn said he estimates that of his clients, more than 80 per cent use payday loans and it leads many of them into financial trouble — and for some financial ruin.
"I saw a person with 15 payday loans that they were rotating every two weeks," he said.
"And this person worked in major industry and they had a very good, well-paying job but their credit wasn't stellar, they were maxed out on all their liabilities."
Cockburn said juggling the payday loans left his client with only one option, to file for bankruptcy.
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