Windsor council hopes to educate public on risks of payday loans
Regulation won't have much of an effect, councillor says
Windsor city council is looking to educate the public on the risks associated with payday loans.
Council is due to receive a report on the matter from city administration at Monday's meeting.
Ward 3 Coun. Rino Bortolin said regulation wouldn't likely have much of an effect on the city's payday loan businesses, which can charge very high interest rates.
"When we discussed it last time, we focused on a lot of the questions focused on how beneficial the licensing regime would be in actually achieving the outcomes," Bortolin told CBC News on Friday. "And the outcome is really to have people not frequent them as often and keep more, more of their own money in their pocket."
A better option, he said, might be to educate the public about the risks associated with taking high-interest loans.
"I think at the end of the day, if we license them and restrict them — we've already got about a dozen or so — those aren't going to go anywhere," Bortolin said. "You won't really see much change, except if some close later on down the line."
Putting a restriction on where payday loan businesses can be located, for example, wouldn't stop them from operating and engaging in what Bortolin called "predatory lending practices."
Bortolin said he's interested in seeing the city create a committee that will work with community partners, such as agencies that issue social service cheques, and speak with people using the payday loan businesses about other options.
"I think the key is to make sure that [you] tell them 'do you know you can go to a credit agency and get it for eight per cent instead of 20 per cent, for example, or even lower?'" he said. "I know, for example, the city has been working with social services to get more people to do direct deposit."
There are challenges, however, he said. Banks may not cash a cheque for someone who doesn't have an account with them, for example.
Credit unions have been working to expand how they provide services, Bortolin said, but access has also been limited due to the COVID-19 pandemic, as some branches have temporarily closed down.
Bortolin said an option may be to include a pamphlet with social service cheques that includes information about ways to cash or deposit the cheque that don't involve visiting a payday loan business.
Michellle Chase said she and her husband made use of payday loan businesses in the past when she was working a minimum wage job and missed time due to being ill.
"Before you knew it, we couldn't get out from from behind it," she told CBC News. "We actually ended up having to claim bankruptcy to get out of the hole."
"Not that that was the only issue," Chase said. "We were young and we lived kind of a party lifestyle. I don't party anymore, but it's so easy to [say] 'I just need $100. I just need $100.' And we had kids and bills to pay and food and all the other essentials of life. So it's not long before you got swallowed in the pit."
Chase said in the case of her and her husband, they would go to a payday loan business to get a cash advance.
"We would get $800 and then we would end up having to pay back almost double by the time you end up catching up," she said. "The compound interest doubles every day."
"And when you just have that low income job, it's almost impossible," Chase said. "The phone was constantly ringing to the point where I had to change my number and it got really bad."
Dave Booker originally took out a payday loan in 2018 to get his vehicle repaired. Booker said he suffered an injury, and the pandemic hit as he tried to find work. Booker, a single parent, is using the loans to help pay bills and expenses.
"Now, I'm paying $15 on every $100 I borrow," he said. "It makes it even a little bit tougher, but it's the situation you ended up in."
Lowering interest rates would help
"It was in between pays, I needed my van on the road, and I needed to pay the mechanic, so I had to borrow it," Booker said. "Now I'm ... still having to pay, because once you pay off everything you have to re-borrow that money back so you can try and stay afloat."
Booker said he does have a bank account and direct deposit, but he's still "trapped" by the payday loan cycle.
"I have buddies ... they just switch bank accounts and they don't pay it off at all," he said.
Both Booker and Chase said lowering interest rates on payday loans would be a big help.
Bortolin said the city has already spoken to various agencies and partners about the issue, and "it's really just about formalizing it and creating some collaboration."
"I think what I'll be looking for is what kind of metrics can we can we overlay on top of this to then check in in a year or two to see if the program is working," he said. "That's what I'm interested in, because we can move ahead with this."
"But if the number of people relying on check cashing places actually goes up after two years or three years, then obviously it's not working," Bortolin said. "We need to try something else."