New year means lower fees for payday loans in Ontario

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The Ontario government has lowered the cost of borrowing from payday lenders and given municipalities more control over where lenders can locate.

Effective January 1, the maximum cost to take out a payday loan in Ontario was lowered to $ 15 for every $ 100 borrowed.

The rate has declined in recent years. In 2017, it was reduced to $ 18, compared to $ 21 for every $ 100 borrowed.

Depending on the province, the change means a loan of $ 300 would require an additional fee of $ 45, which means that the total to be repaid would be $ 345. In 2017, it would have been $ 354.

Typically, people have to repay their loans within two weeks, but this varies depending on negotiations with payday lenders.

“Everything makes the difference”

Rideau-Vanier County. Mathieu Fleury is pushing to limit the number of payday lending establishments in Ottawa, especially in low-income neighborhoods.

He added that in addition to lowering fees, Ontario has also given municipalities more control over zoning, which could limit the opening of new payday loan stores in the future.

“I think everything makes a difference. I just think I recognize that there were challenges with the industry and that it needs to be regulated, Fleury said.

Com. Mathieu Fleury says he is encouraged by the changes made by the province to payday loan fees. (Radio-Canada)

New zoning regulations

In April 2017, the Ontario government passed Bill 59, known as Prioritize consumers.

Under this law, the government not only reduced the fees for payday loans, but also gave municipalities more power to limit the number and location of payday lenders in their jurisdictions.

The bill gives the city the same type of authority as under the Municipalities Act, which gives the city control over zoning establishments such as strip clubs, Fleury said. The city is currently undergoing a zoning review and a report is expected later in the spring.

“The problem with zoning rights is that they only look to the future,” Fleury said. This means that payday lenders that are already established are grandfathered and will not be affected by future rules. However, Fleury hopes this will prevent new ones from appearing.

Robbie McCall of Ottawa ACORN says payday loans have caused her a lot of stress and anxiety. (Ashley Burke / CBC News)

“Attacks our most vulnerable”

“He really prays over our most vulnerable [people] in many different ways. You would be surprised how many people need a loan and cannot get it through the bank, ”he said.

Someone who knows a lot about the vicious cycle of payday loans is Robbi McCall, who works with Ottawa ACORN, an organization that advocates for social and economic change.

At one point, McCall was in so much debt that he had to take out four different payday loans just to keep up with the payments. The additional fees on top of his loans made it difficult for him to repay, especially because he had a fixed income.

“Anxiety and depression at the end of the month knowing you have to pay it back … I was stressed to the point that I had to talk to my doctor about my anxiety. I didn’t want to get out of bed. was really a horrible situation to be in, ”McCall said.

The new changes are a start but it is not enough, he added. He wants a system in place to track the number of loans people take from payday lenders, which would help end the vicious cycle of borrowing from one lender to pay off another.

On top of that, he said it should be easier for people to take loans from banks and faster to cash government checks.

Finally, McCall said if people decide to turn to payday lenders, borrowing rates should be lowered even more.

More changes in July

The Ontario government will be implementing even more changes starting July 1.

By province, some of these changes include:

  • Lenders cannot lend people more than 50 percent of their net income per loan.
  • Lenders should state the cost of borrowing a payday loan as an annual percentage.
  • The maximum fee that check cashing services can charge for government-issued checks is $ 2 plus 1 percent of the value of the check, or $ 10, whichever is less.
  • Lenders will also need to offer customers the option of an extended payment plan without penalties.
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