Sandy Shaw, MPP for Hamilton West—Ancaster—Dundas, has introduced new legislation, the Payday Loans Accountability Act. If passed, the bill will protect borrowers of payday loans from predatory lenders, a more pressing issue than ever given the heightened financial stress of this year’s holiday season.
With the holidays falling in the midst of a pandemic, and with many not having worked for months, Shaw is troubled by the fact that cash-strapped families who have never needed to use these services before may have no other options to get through the holidays. With so many workers suffering from job losses, workplace closures, and reduced hours, payday lenders are poised to profit off of these newly financially-vulnerable Ontarians.
“People desperately need the joy and cheer of the holidays after a year spent in fear and isolation. Parents are just trying to give their kids a happy holiday. Payday lenders know that, and specifically target those in need of emergency financial assistance. During the holidays, they buy back gift cards at 50 cents on the dollar. They even advertise ‘CERB and EI Payday Loans’. It is shocking that payday lenders would seek to profit from these emergency government benefits.”
The interest rates charged by these lenders are extreme, with rates often as high as 390 per cent, and trap borrowers in a vicious debt cycle. Shaw’s bill caps interest rates at a maximum of 40 per cent. It also establishes a Borrower’s Bill of Right and a Payday Loans Taskforce which will recommend alternative financial products to the Ministry with the goal of eventually replacing this industry.
This legislation is a critical step to rein in the worst excesses of this industry, and prevent more families from being exploited by these lenders during the economic crisis. However, it is only a first step. The Ford government should work towards banning this industry and establish less exploitative emergency financial resources for those who need them.
Tom Cooper, Director of the Hamilton Roundtable for Poverty Reduction:
"For too long, predatory payday lenders have exploited borrowers who have nowhere else to turn in a financial emergency. MPP Sandy Shaw's Payday Loans Accountability Act would balance the scales by establishing a Borrower's Bill of Rights and a maximum cap on interest rates. Ontario needs accountability from an industry that too often operates in the dark crevices of financial indecency."