A Hamilton city councilor’s proposal to cap the number of payday loan outlets in the city broke another hurdle Tuesday when it was unanimously approved by the city’s planning committee.
Com. Matthew Green proposed the legislation, which will allow only one lender to operate in each of the city’s 15 neighborhoods, in an effort to curb “predatory” behavior by payday loan companies. He says businesses target low-income communities, whose members often turn to businesses in desperation, but take on more debt due to the high interest rates and fees that come with loans.
Green said it would become law if ratified at a meeting in two weeks, giving council time to consider an exemption from the proposed cap requested on Tuesday by a counselor at Flamboro Downs casino in his neighborhood.
Despite the exemption request, Green said he believed the cap “will pass unanimously, if not overwhelmingly.”
Hamilton is one of the few cities in Ontario to consider such legislation, adding to its ongoing crusade against payday loan companies. Previously, it required them to be licensed, educate the public about comparing their rates with traditional lenders, and share credit counseling information with clients.
Green’s attack on lenders came after he discovered that $ 300 loans cost as much as $ 1,600 due to fees and annualized interest rates he estimated at around 546%.
“This is not a way for people living in poverty to try to get out of it,” he said. “The targeting of our downtown neighborhoods was a bit pernicious… we had more payday loans in some miles than Tim Hortons.
He believes payday loan companies should be abolished, but was content to fight for the cap by neighborhood because the provincial and federal governments allowed the process to continue and he lacks the power. to cancel them.
The Ontario government reduced the cost of a payday loan from $ 21 to $ 18 per $ 100 in 2017 and lowered it again to $ 15 this year.
The Canadian Consumer Finance Association, formerly the Canadian Payday Loans Association, has argued that it provides a bridge for borrowers who are rejected by banks and would otherwise have to turn to illegal lenders.
Tony Irwin, CEO of the Canadian Consumer Finance Association, wondered why Hamilton had considered such legislation when he noticed that the payday lending industry had been shrinking for years.
“It’s a very difficult industry to operate and there is a lot of competition,” Irwin said. “As the sites have more difficulty operating, some will face a difficult decision to shut down.”
The policy that councilors will vote on will not immediately reduce the number of payday loan businesses in the city to 15 to match its number of wards, as it will be acquired in existing businesses, but will prevent new ones from opening, said Tom Cooper, director of the Hamilton Roundtable on Poverty Reduction.
He noted that a “community crisis” has arisen in the 40 payday loan outlets he counted in Hamilton, most of which are “clustered” in the inner city of the city.
Cooper said proximity creates a “predatory” scenario because “we often see people who owe money go to one payday loan outlet, then go to a second to pay off the first, then a few doors. further (in another) to pay the second one. “