Province seeks to revoke licence of Hamilton Cash Stores over payday loans
Hamilton Cash Stores not offering PayDay loan as of Feb. 1
CBC News has learned that the Ontario government will try to revoke the licence of Cash Store Financial Services, one of the biggest cash advance stores in the country.
The Ontario Ministry of Consumer Services alleges that the company broke Ontario's Payday Loans Act, which limits the fees that can be charged by payday loan companies.
Cash Store Financial Services has 200 outlets in Ontario alone, branded as InstaLoans and The Cash Store.
Hamilton has six The Cash Store and five Instaloan locations listed on their respective websites.
The Ministry of Consumer Services alleges the company is guilty of "several violations" of the Act. It says Cash Store has charged customers interest rates higher than the maximum allowed, or charged prohibited fees.
The ministry is asking a provincial tribunal to revoke the company's licence.
Since CBC News reported this story Wednesday morning, Cash Store Financial released a statement saying the company no longer offers the payday loan in Ontario, despite the fact that it is still listed as a service in the province on the company's website.
"Ontario: Maximum charges permitted for a payday loan are $21 per $100 lent. We charge $21 per $100 lent. For a $300 loan for 14 days total cost of borrowing is $63. Annual percentage rate is 548%," the site reads.
Line of credit
CBC Hamilton called three local The Cash Store locations to ask for a payday loan.
All three locations did say they no longer offer PayDay loans, but that change was made only a few days ago, on Feb. 1. The stores now offer a Line of Credit instead.
"That's a decision that came from head office," said the staff person at an east Hamilton The Cash Store who answered the phone. "I guess they thought the client would overall benefit, because it helps to improve credit ratings."
"It was a company plan," another representative at a Mountain location said. "They decided to switch to the line of credit just to be more customer-friendly."
Neither mentioned government regulations as a factor in eliminating the payday loan service.
Two representatives told CBC Hamilton that a 21 per cent assessment fee for the line of credit would apply. One rep said with the assessment and interest, an annual fee of 26 per cent would apply to the line of credit.
Ontario's payday regulations state that lenders can change no more than $21 on every $100 loaned. Government officials are calling this a "major consumer protection enforcement action," and say they will release more information on Wednesday.
Executives at Cash Store's head office in Edmonton did not return calls from CBC News seeking comment.
The province brought in the Payday Loans Act in 2008 — designed to stop companies from charging exorbitant interest rates or hidden fees when lending money to the working poor.
With files from CBC's Mike Crawley and Julia Chapman