A Hamilton councillor's bid to cap the number of payday loan outlets in the city cleared another hurdle Tuesday when it was unanimously approved by the city's planning committee.
Coun. Matthew Green proposed the legislation, which will allow only one lender to operate in each of the city's 15 wards, in an effort to limit "predatory" behaviour by payday loan companies. He says the businesses target low-income communities, whose members often turn to the businesses in desperation, but fall further into debt because of the high-interest rates and fees that come with the loans.
Green said it will become a law if it's ratified at a meeting in two weeks, giving council time to mull over an exemption to the proposed cap requested Tuesday by a councillor with the Flamboro Downs casino in her ward.
Despite the exemption request, Green said he thinks the cap "will pass unanimously, if not overwhelmingly unanimously."
Hamilton is one of the few cities in Ontario to consider such legislation, adding to its ongoing crusade against payday loan companies. It previously required them to be licensed, to educate the public on how their rates compare with traditional lenders and to share information on credit counselling with customers.
Green's attack on the lenders came after he discovered that loans of $300 were costing up to $1,600 because of fees and annualized interest rates he found to be about 546 per cent.
"This is no way for people living in poverty to try to get by," he said. "The targeting of our inner city neighbourhoods was a bit pernicious...we had more payday loans in some kilometres than Tim Hortons."
He believes payday loans companies should be abolished, but settled for fighting for the per-ward cap because the provincial and federal governments have allowed the process to continue and he lacks the power to overturn them.
The Ontario government decreased the cost of a payday loan from $21 to $18 per $100 in 2017 and dropped it down again to $15 this year.
The Canadian Consumer Finance Association, formerly the Canadian Payday Loan Association, argued that it provides a bridge for borrowers who are rejected by banks and would otherwise have to turn to illegal lenders.
Tony Irwin, CEO of the Canadian Consumer Finance Association, was puzzled as to why Hamilton has considered such legislation when he's been noticing the payday loan industry shrinking for years.
"It is a very difficult industry to operate in and there is lots of competition," Irwin said. "As locations find it more difficult to operate, some will face a difficult decision to close."
The policy that councillors will vote on won't immediately decrease the city's number of payday loan businesses to 15 to match its number of wards because it will grandfather in existing companies, but will prevent new ones from opening, said Tom Cooper, the director of the Hamilton Roundtable for Poverty Reduction.
He's noticed a "community crisis" has spawned from the 40 payday loan outlets he's counted in Hamilton, which are mostly "clustered together" in the city's downtown core.
Cooper said the proximity creates a "predatory" scenario because "we often see people who owe money go to one payday loan outlet and then go to a second to pay the first and then a few doors down again (to another) to pay the second one."
Tara Deschamps, The Canadian Press