Changes coming to payday loans

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While there are some people who use their homes as banks and many others who are using payday loans in places like Mississauga and Brampton where these shops seem to have proliferated in a big way. And the reason they are thriving across the GTA is that there is a large and growing number of people forced to take on loans.

Now the province is lowering how much it costs to borrow money from payday loans. Since January 1, 2018, the cap on the cost of borrowing for payday loans will be lowered to $15 per $100 borrowed. Currently the cap is at $18 per $100 borrowed. In 2016, the cap was at $21 per $100 borrowed.

Municipalities will also be able to control the area where payday loan shops open and how many can operate in any given area starting in the new year.

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A few more changes are on the horizon, which will come into effect halfway through 2018 on July 1.

Those include that the fee for cashing a government-issued cheque will be capped at $2 plus 1 per cent of the face value of the cheque, or $10, based on whatever is left.

In addition, changes are coming to how much lenders can lend — they’ll only be able to lend up to 50 per cent of a borrower’s net pay.

If a borrower takes out three or more loans in a 63-day period, borrowers will also have the option of an extended payment plan.

This is all well and good, but there’s no doubt that these borrowers are some of our city’s most financially vulnerable.

Payday loan and cheque cashing shops maintain higher fees than mainstream banks and credit unions, and offer services outside of them.

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The cost of borrowing on a $300 payday loan is currently capped at $54 over a two-week period,” says the province. By comparison, a typical credit card with a 23 per cent annual interest rate and $3.50 service fee would cost $6.15 over the same period.

Borrowers typically must repay their payday loans two weeks after borrowing money. – CINEWS

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