Are payday lenders simply a necessary evil?
The Ontario Ministry of Consumer Services is going after payday lender Cash Store Financial Services which operates 200 outlets in Ontario alone: branded as InstaLoans and The Cash Store.
At issue is whether the company has violated Ontario's Payday Loans Act, which limits the fees that can be charged by payday loan companies.
Similar questions have been raised in Manitoba where certain outlets have started offering high-interest lines of credit, which also appear to fall outside the province's payday loan rules.
Payday loans are designed to tide borrowers over until their next pay cheque. The amount you can borrow is usually limited to 50% of net pay, at incredible interest rates that make credit cards look like a real bargain.
These loans then trap borrowers in a cycle of mounting debt. Charges escalate when the borrower is unable to repay the loan at the end of the month, or can repay but immediately needs to borrow the same amount again.
Proponents of payday loans claim that more strict regulation or even forcing them out of business will hurt those who need help and have no other place to turn for short-term lending solutions. Some also argue that such loans aren’t actually as onerous as their opponents charge and may be a neccessary evil.
"Like them or not, payday lenders do play an important function in society: as niche, legitimate providers of credit to people with credit challenges (loans are typically approved only to people with a source of income, and many of those earn middle-class incomes) and as a quick and convenient source of moderate amounts of cash," writes Sean Silcoff in the Globe and Mail.
Have you ever used a payday loan service? Would you describe yourself as a regular customer? What was your experience?
By Gordon Powers, MSN Money
Posted by: Really !! | Feb 27, 2022 10:18:11 PM
Payday Lenders = Loan Sharking !!! End of Story.
If the government investigated those as much as the Quebec's Construction Corruption inquiry, they'd find out that most of these "cash" outlets are run by criminal elements. They should ALL be banned.
Posted by: MAP | Feb 28, 2022 12:40:48 AM
As the owner of a non-profit society for the disabled and visually impaired, I often hear how our clients are caught in what I see as a loan shark situation with no way out if they can't afford to pay on the due date. It's shameful that they are allowed to get away with their current practices.
They should be put out of business!
Posted by: GRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRR | Feb 28, 2022 1:32:54 AM
NO. HOWEVER I INVESTED IN A PAYDAY LOAN COMPANY AND YES I THINK THE FEES ETC. WERE HIGH BUT THE BORROWERS WERE NOT ABLE TO GO ANYWHERE ELSE. SO IT IS A NECESSARY EVIL.
THE IRONY IS THAT THE ONE I INVESTED IN WENT BROKE. WHY? SOME WAS MISSMANAGEMENT ALONG WITH A VERY HIGH AMOUNT OF DEFAULTED LOANS. A CYCLE WAS CREATED AND THE POOR PERSON WAS NOT ABLE TO GET OUT OF IT BUT NOT TO PAY BACK CAUSING THE COMPANY TO LOSE ALOT OF MONEY.
OH WELL, WIN SOME... LOSE LOTS, MAYBE I SHOULD HAVE BORROWED THE MONEY INSTEAD AND I COULD HAVE SAVED TENS OF THOUSANDS. DON'T WORRY I DON'T FEEL SORRY FOR MYSELF EITHER!!
Posted by: opy | Feb 28, 2022 4:03:02 AM
5 years ago, I was caught in the pay day loan cycle. I was earning lower middle class wages and was a single mom. At times, I would ask for 150 dollars (for example) and would be encouraged to take out the max, which was about 600. You see, the interest isn't realy the big deal. It might amount to 15 or 20 dollars. Yes, still too high, but not the real culprit. Check out the administration fees, which were typically well over 100 dollars. Now, if I borrowed 150 dollars, and had to pay back close to 300 dollars, that leaves me 300 dollars short next pay cycle. So I borrow the three hundred I just payed back, find myself even, and have to pay close to 450 next pay cycle. It was very had to break the cycle. Bills had to be paid. In my case, I had help. Many don't. I don't blame the customers. I wonder why these admin fees can't be regulated, like the interest rates are.
Posted by: buzz | Feb 28, 2022 8:05:40 AM
If this was run by the mob 20years ago they'd call it lone sharking and the idea of allowing business's based on these methods to prey on others should be stopped immediately... working in the office of a small company here in southern ontario theres barely a week that goes by that im not fielding phone calls from these cash rip-off joints trying to collect from employee's caught in the loop...
The real problem tho lies with the goverment which have become so strapped for cash that they've removed so-many consumer protection laws trying to stimulate the exchange or trade of goods so they can collect tax's...
Posted by: Mr. Negative | Feb 28, 2022 8:10:19 AM
Any financial services lendinig you money to then repay it is criminal. These services were only developed because people couldn't afford to buy this and that by simply saving. So they invented loans to allow people to by now and pay later, increasing peoples debt at a faster rate. What would life be if people didn't lend out money and charge interest and administrative fees? I think it would be a life of truly living within your means......you wouldn't really have an option to venture out to keep up with the jones!