Karen Henderson, Centretown News
City councillors wants to regulate payday loan companies, such as this Cash Money store located on Bank Street that targets low-income customers.From Vanier to Bank St., payday loan businesses line the main drags of Ottawa.
The City of Ottawa, however, is working to have future locations pushed to the side streets.
An activist group, Association of Community Organizers for Reform Now, began the fight against the high concentration of payday loan businesses in the downtown area. They gained the support of councillors Mathieu Fleury and Tobi Nussbaum.
“We’ve had these discussions for a few years,” says Fleury, councillor for Rideau-Vanier. “A community group pulled the legal possibilities, and then ACORN became interested. We’re all working on this together.”
Fleury says this is a city-wide issue. While there are 16 payday loan offices in Vanier, there are also 10 in Centretown. Fleury says he is receiving support from other city councillors. Catherine McKenney’s assistant confirmed the Somerset councillor is “working closely with Fleury.”
Fleury wants to restrict payday loan businesses to the same zoning laws as strip clubs, which prohibit businesses from going on main streets and being in close proximity to one another.
His largest obstacle is legalities. Fleury is uncertain whether a municipal body has the power to carry out his plan. While Fleury has city council behind him, he may have to appeal to the province if amending the zoning law falls outside of their jurisdiction.
The provincial government is currently reviewing the Payday Loans Act from 2008. Federal legislation caps off interest fees at 60 per cent, but the costs have more wiggle room on a provincial level, allowing for even higher rates.
“[These businesses] drown residents in debt,” says Fleury. “They don’t allow them to get out of it.”
Payday loan companies provide short-term loans for people in need. Sometimes those people were turned away by banks, due to poor credit or a lack of funds. Fleury says these companies are “sharks for low income residents.”
“It all has to do with demographics,” says Allen Macleod, president of D&A Macleod Inc., a bankruptcy firm in Centretown. “These businesses try to locate in areas that will bring them the most business.”
Macleod says payday loan offices absolutely should be monitored more closely. But those who work in payday loans disagree.
“We agree they should be monitored, but we think they already are,” says Bill Baker, spokesperson for Cash Money, a payday loan business with a location in Centretown.
Baker says the costs of loans from these businesses are misunderstood. The interest rates seem large over a year, but these loans are only short term.
“I really do think the customers know what they’re doing,” he says.
“By the time they sign the loan document, they should look at all the disclosures and know what’s going on.”
Conversely, Macleod says he’s had cases where people come to his firm after payday loan companies. He says some clients go to their firm with six or seven loan companies on their list of creditors.
“What people need is a long term solution,” Macleod notes.
The existing binary of banks against payday loans puts customers in a difficult situation. Sometimes it comes down to which business will be able to get them the money the need.
If the City of Ottawa succeeds in tightening restrictions, and payday loan companies need to implement changes, Fleury has a suggestion to help people in the community.
Fleury says the city partnering with the federal government to “extend the social arm” of banks could be a good alternative for customers instead of payday loans. This way, banks would be able to help low income residents by charging smaller fees.
Among the back and forth between financial institutions, city council is working the implement a plan that could change this for all businesses, and then the City of Ottawa will see which businesses can put their money where their mouths are.