The president of the Canadian Payday Loan Association is responding to a suggestion from a city councillor in Thunder Bay, Ont., that these companies offer more education to the public about the cost of this type of borrowing.

Shelby Ch'ng has told a variety of city groups, including the Thunder Bay Police Services board, that she is in the early stages of a drafting a resolution which would require these agencies to post signs clearly illustrating the total price of these loans over a specific period. 

Tony Irwin

Tony Irwin, president of the Canadian Payday Loan Association, says Ontario regulations stipulated that member agencies pay an annual licensing fee, and that stores post signs demonstrating the cost of loans. (Canadian Payday Loan Association)

However, association president Tony Irwin questions the value of bringing in new municipal rules, when the industry already follows a "robust" set of regulations mandated by the Ontario government.

"Our members are required to post signs that show the cost of the loan, equated both in terms of cost per $100, as well as show a comparison of the cost of the payday loan versus the cost of a credit card," he said.

As well, "the province requires our members pay a $990 annual licensing fee per location, and the province has inspectors who come out to our member locations and make sure they're compliant with the regulations" from the Ministry of Government and Consumer Services. 

These loans are an "expensive product to provide but one that is very much in need" because they make money available to people who have few other borrowing options, said Irwin.

High-risk loans cost more

"In terms of the cost to run the stores, certainly the cost of capital is higher than it would be for other industries. The nature of the loans themselves end up being perhaps higher risk than some others and there are some loans that go into default. All those costs go into what's required to provide this product," he said.

A 2016 study of Ontario agencies, conducted by Deloitte, showed the cost of providing these loans is about $18 per $100, said Irwin.

Ch'ng is still gathering information for her resolution, and does not have a date for presentation.