Ontario Government Wants Public Feedback Over New Payday Loan Rules
The issue with loans for bad credit has seeped into Canada as many jurisdictions are debating how they should regulate and rein in the industry. All over the country, provinces and municipalities are weighing in with their ideas to combat payday advance stores and protect consumers.
According to a news release Wednesday, the government of Ontario announced that it would be seeking input from the general public regarding lower rates for payday loans. The province is looking to strengthen consumer protections for borrowers.
Although the province maintains one of the lowest borrowing costs in Canada – $21 for every $100 borrowed – it remains one of the highest in North America. To change this, the government has issued a consultation report and proposed three alternatives: $15 per $100 borrowed; $17 per $100 borrowed; and $19 per $100 borrowed.
As of Wednesday, Ontarians are asked to provide online feedback. They will have until May 20, 2016, to give their input to Queen’s Park.
Officials believe public input will help move forward on the Alternative Financial Services Statute Law Amendment Act that was proposed late last year. The bill would heighten consumer protections in not just payday loans but also rent-to-own services, installment loans, debt collections.
“Our government is committed to creating a fair, safe, and informed credit market in Ontario, and that includes exploring new ways to ensure consumers have access to alternative credit and financial services without being subjected to harmful practices,” said David Orazietti, Minister of Government and Consumer Services, in a statement.
The province of Ontario currently has more than 800 payday lenders and loan brokers. The average payday advance that an Ontario consumer takes out is $435 over a 16-day period. In all of Canada, Manitoba maintains the lowest borrowing costs for payday loans: $17 per $100 borrowed.
However, is this a superfluous move on the part of the Ontario Premier Kathleen Wynne and her Liberal government? Many jurisdictions around the province have been tackling this issue for the last 12 months, and city officials have been making progress, such as in Ottawa and Toronto.
Ottawa City Councillor Mathieu Fleury has proposed legislation that limits the number of payday loan stores in low-income areas. He will also be asking the province to amend the Municipal Act so the city can control the zoning laws to prevent payday loan stores from popping up all over Canada’s capital. Moreover, he is considering changing licensing requirements. His proposals would only apply to future payday loan stores.
Meanwhile, in Toronto, city council has ordered city staff to create a bylaw that would ban payday loan stores from opening up within 400 meters of one another. Councillor Frances Nunziata, who helped push for the new bylaw, has said payday loan establishments had hurt the image of her ward.
“You would have five or six on one block, as soon as you see a vacancy, a payday loan store would open up,” said Nunziata. “They would survive maybe a year or so, close down, and another would open up.”
At present, there are around 134 payday loan and cash-for-gold stores in Toronto. Critics say many of these stores are located in low-income areas and exploit the impoverished. Proponents, however, say payday loan stores help the poor because they do not have access to conventional forms of credit.