Cleaning up the payday loan industry

Listen

Ontario's new premier may think there's a rein on payday loan companies but their level of creativity appears to be almost as high as the interest rates they charge. In some Canadian provinces and across the U.S., these so-called lenders of last resort are finding new ways to skirt the rules. Today, calls for reform in what one man calls ... the poverty industry.



Ontario NDP MPP for Parkdale-High Park, Cheri DiNovo

I feel they're just ripping off poor people that have to go there for a loan and it's just ridiculous what they charge. You're only allowed to charge $17 on the hundred. Well with them, it's a lot more. I think it's something that should be outlawed and something the company should be shut down. I mean it's outrageous.

Retired Manitoba farmer Gordon Repula did not have a good experience with his Payday lender. Last fall, he borrowed 100 dollars for 13 days. Under Manitoba law, short-term lenders are only allowed to charge up to 17% interest for a standard payday loan.

But Mr. Repula got a line-of-credit -- a relatively new service being offered by payday loan companies and he ended up paying $133.18 for his $100 loan.

Similar complaints have emerged elsewhere across the country. And the governments of Manitoba and Ontario are looking into new regulations. In Ontario, regulators are also considering the possibility of revoking the license of one short-term lender.

In the United States, Payday lenders are already banned in 15 states. And now both federal and state regulators are investigating whether some of the country's biggest banks helped Internet-based short-term lenders get around the rules.

Ontario NDP MPP Cheri DiNovo has long been advocating to put a cap on the interest rates associated with borrowing from a payday lender. She was in our Toronto studio.

We did request interviews with the Canadian Payday Loan Association -- an industry group that speaks on behalf of some payday lenders -- but they were not available.

Report on Business Insight commentator, Sean Silcoff

Complaints against Payday lenders are common. And yet Canadians are still lining up for their services. The Canadian Payday Loan Association says as many as two million Canadians take out Payday loans every year.

Sean Silcoff thinks that means Payday lenders have a place in the Canadian market. Sean Silcoff is a commentator with ROB Insight, which is a part of Globe and Mail.com. He was in Ottawa.

Author of Broke, USA, Gary Rivlin

In the United States, Payday lenders are finding creative ways to push the limits put on them. Many now offer loans online -- putting them in a legal no-man's-land that is much harder to regulate.

Gary Rivlin is the author of Broke, USA: From Pawnshops to Poverty, Inc - How the Working Poor Became Big Business. He was in New York City.

This segment was produced by The Current's Dawna Dingwall and Pacinthe Mattar.

We'd love to hear what you think about this. Tweet us @thecurrentcbc. Follow us on Facebook. Or e-mail us through our website. Call us toll-free at 1 877 287 7366. And you can always write to us at PO Box 500, Station A, Toronto, M5W 1E6.


Other segments from today's show:

The legacy of Pope Benedict XVI

The east coast lobster wars

Comments are closed.