MattersVille
I don't know about you but I really feel for folks that are forced to go to high interest lenders to make ends meet.
Especially because the stories that result when things do not go well are heartbreaking, as was noted recently by the CBC's Dianne Buckner:
Patricia Edwards of Toronto wanted to help her two adult daughters when they fell behind on bill payments at the rented townhouse they share.
She has few assets and a poor credit history, but she was employed at the time, so she went to a payday lender — not for a payday loan, but for an ongoing line of credit.
"I was like, OK, let's see if I qualify for the loan because I'm working."
Edwards, 53, was able to borrow $1,500 early in 2019 from Cash Money. But then she lost her job, and in 2020 came the pandemic. She's had to refinance the loan twice, and went to another lender, Money Mart, for an instalment loan that could be repaid over two years.
Now she's close to $5,000 in debt, all in, paying nearly 47 per cent interest on both loans...
And, believe it or not, that 47% interest rate on the fifteeen hundred dollar principle is just fine and dandy because the objectionable number, as per Canadian law, is actually 60%, which is something that Senator Pierrette Ringuette has been trying to do something about for sometime now:
...Independent Sen. Pierrette Ringuette of New Brunswick has sponsored two bills to have the Criminal Code amended to lower the maximum interest rate that lenders can legally charge from 60 to 20 per cent plus the overnight bank rate. Neither bill moved forward due to prorogations and election calls, but Ringuette said she intends to sponsor another one...
.
I don't know about you but I really feel for folks that are forced to go to high interest lenders to make ends meet.
Especially because the stories that result when things do not go well are heartbreaking, as was noted recently by the CBC's Dianne Buckner:
Patricia Edwards of Toronto wanted to help her two adult daughters when they fell behind on bill payments at the rented townhouse they share.
She has few assets and a poor credit history, but she was employed at the time, so she went to a payday lender — not for a payday loan, but for an ongoing line of credit.
"I was like, OK, let's see if I qualify for the loan because I'm working."
Edwards, 53, was able to borrow $1,500 early in 2019 from Cash Money. But then she lost her job, and in 2020 came the pandemic. She's had to refinance the loan twice, and went to another lender, Money Mart, for an instalment loan that could be repaid over two years.
Now she's close to $5,000 in debt, all in, paying nearly 47 per cent interest on both loans...
And, believe it or not, that 47% interest rate on the fifteeen hundred dollar principle is just fine and dandy because the objectionable number, as per Canadian law, is actually 60%, which is something that Senator Pierrette Ringuette has been trying to do something about for sometime now:
...Independent Sen. Pierrette Ringuette of New Brunswick has sponsored two bills to have the Criminal Code amended to lower the maximum interest rate that lenders can legally charge from 60 to 20 per cent plus the overnight bank rate. Neither bill moved forward due to prorogations and election calls, but Ringuette said she intends to sponsor another one...
****
So.
Where did that 60% maximum interest rate number come from in the first place?
Well, it was a number arrived at, as HuffPo's Samantha Beattie recently noted, way back in the 1980's:
...Under federal law, lenders are allowed to charge anywhere below 60 per cent in interest on loans over $1,500 — a rule from the 1980s when the Bank of Canada’s interest rate was at 21 per cent...
And what is the current Bank of Canada prime rate?
...Under federal law, lenders are allowed to charge anywhere below 60 per cent in interest on loans over $1,500 — a rule from the 1980s when the Bank of Canada’s interest rate was at 21 per cent...
And what is the current Bank of Canada prime rate?
Why it's 2.5%.
Which would make an equivalent recalibrated high interest loan rate maximum, if we used the three fold multiplier established back in the days when both Mr. T. and Brian Mulroney stomped on the terra, something on the order of 7.5%.
Thus, while I applaud Senator Ringuette's efforts to force a recalibration, it would seem that even her 20% maximum number might be a little high.
OK?
.
5 comments:
Yep, there outta be a law against that kind of thing. Don’t they usually call those people Loan Sharks?
I would guess 20% comes from the credit card rate. I think mine’s 19.5.
Banks have lines of credit and depending on the limit it’s in the 2 odd percent up to five ish. Why can’t folks like the women in the article get a small line of credit? Nothing beyond their capabilities but something and if all goes well after a time they could get an increase. Of course better not to live in the red but stuff happens, things come up.
I just can’t understand why we allow a business to prey on these people who often have no options. And the rich folks squeak like heck if there is any threat of their tax rate going up. Likewise for business if the minimum wage is being considered for an upward adjustment.
Thank you to the Senator who is trying to do something about it, I wish her success sooner than later.
Bankster?
Graham--
From what I've read these folks are often turned down by the bank people, some of whom point them towards the lenders of last resort...Ya, I figured that the 20% suggested by Senator P. probably has a lot to do where the high end of the credit card market is. Personally, I find the latter to be usurious also.
______
Anon-Above--
Of a different kind (with lobbyists and 'associations' and all that).
.
Banksters indeed! So I've just been offered 0.4% (that less than 1/2 of 1%) on the purchase of a GIC of over $200,000 and have to tie it up for 1 year to even get that! We're a couple in our 80's and this is leftover from selling a large home for a smaller more manageable accommodation.
I have a sneaking hunch that the private sector wants all of us to spend all of our money in order to support their vaunted GDP which the politicians have fallen into line and agree with.
We no longer process any of our natural resources and therefore achieve no "value-added" or jobs from, which was at one time a significant contributor to Canada's economy. Now, all we're left with is consumer spending on foreign made goods.
Good! That rate needs to be lowered. This rate impacts more people at the lower end of the economic scale than at the top. Yes, I do recall those rates. Try signing a mortgage at that time for $3.5 Million. Interest alone at that time could run you $50K a month.
I can remember people saying it was cheaper to go to a loan shark than a bank because the "juice" was lower than the interest rates. It was just if you fell behind in payments that is was easier to deal with a bank, sort of....the loan shark might break your leg, but the bank took you house. O.K. there is some history of bookie's back in the day shooting people when they refused to pay their gambling debts. Recall one case where a guy was shot dead in a Richmond resturant back in the day. the rumour was he owed his bookie $100K and had told him to rotate. but then people have been known to commit suicide when their debt load to banks became too much.
Banks make a huge profit in this country, and clients/customers are at the loosing end. Legislation needs to be passed which will allow for adjustments to be made based on the interest rate set by the Bank of Canada
Lobbyists and others like to keep things the way they are. However, Trudeau might want to consider with an election coming up, ensuring these high interest rates are sent to the dust bin might get him a few more votes. Many people are forced to use these pay day loan companies because banks won't deal with them.
It would be interesting to see which banks have shares/ownership in which pay day loan companies.
Post a Comment