New year means lower fees for payday loans in Ontario

The Ontario government haslowered the cost of borrowing frompayday lenders and has given municipalities more control over where lenders canset up shop.

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

The ratehasbeen decreasing overthe past few years. In 2017 itwasbrought down to $18from $21for every $100 borrowed.

According to the province, thechangemeansa loan of $300would requirean additional $45fee, which means the total to pay back would be $345. In 2017 it would have been $354.

Typically people have to pay back their loans within two weeks, however it varies depending on negotiations withpayday lenders.

'Anything makes a difference'

Rideau-Vanier Coun. Mathieu Fleuryhas been pushing to limit the number of payday loan establishments in Ottawa, especially in low-income neighbourhoods.

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

"I think anything makes a difference. I think just recognizing that there were challenges with the industry and it needs to be regulated," Fleury said.

New regulations for zoning

In April 2017, the Ontario government passed Bill 59,known as the Putting Consumers First Act.

Under this law, the government not only lowered the fees for payday loans, but also gave municipalities more authority tolimit the number and location of payday lenders in their jurisdictions.

Thebill gives the city the same type of authority ithasunder the Municipal Act, which gives the city control over zoning establishmentssuch asstrip clubs,Fleury said. The city is currently undergoing a zoning review, and a report is expectedlater in the spring.

"The thing about zoning rights is that they only look forward," Fleury said. This means payday lenders that are already set up are 'grandfathered in' and won't be affected by future rules.However,Fleury hopes it will prevent new ones from popping up.

'Preys on our most vulnerable'

"It really prays on our most vulnerable [people] in many different ways. You would be surprised the amount of folks who require a loan and can't get it through the bank," he said.

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

At one point McCallwas so deep indebt that he had to take out four different payday loans just tokeep up with the payments. The additional fees on top ofhis loans made it hard to pay off, especially because he was on a fixed income.

"The anxiety and depression at the end of month, knowing that you have to pay them back ... I was stressed to the point that I had to talk to my doctor about my anxiety. I didn'twant to get out of bed. It was truly an awful situation to be in," McCall said.

The new changes are a start but it's not enough, he added. He wantsa system in place to keeptrack of how many loans people are taking out from paydaylenders, whichwould help stop the vicious cycle of borrowing from one lender to pay off another.

On top of that, he said it should be easierfor people to take out loans from banks and faster for them to cash ingovernment checks.

Finally,McCall said thatif people do decide to turn to payday lenders, the rates to borrow should be lowered even further.

More changesin July

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

According to the province,some of these changes include:

• Lenderscannot lend people more than 50 per centof their net income per loan.
• Lenders must show the cost of borrowing a payday loan as an annual percentage rate.
• The maximum fee that cheque-cashing services can charge for government-issued cheques is $2 plus 1 per centof the value of the cheque, or $10, whichever is less.
• Lenders will also have to give customers the option of an extended payment planwithout penalties.