Should payday lenders be kept on a tighter leash?

Hamilton could be the first city in Ontario to limit and regulate the stores at a municipal level, after Ward 3 Councillor Matthew Green put forward a notice of motion last week to have city staff assess the feasibility of such a move.

And on Monday, the Ministry of Government and Consumer Services held a community meeting at Mohawk College to talk about this business of payday loans.

The meeting was one of six being held across Ontario, with the goal of building legislation to increase provincial consumer protection around these high-cost financial services.

There are 813 licensed payday lenders in Ontario — and roughly 35 in Hamilton, according to the Ministry's online database.

Tom Cooper, director of Hamilton's Roundtable for Poverty Reduction (HRPR), calls these services "predatory lending."

"This is a business model that preys on the most vulnerable people in society … and we need to do everything we can to stop it," he said Monday.

Stan Keyes, president of the Hamilton-based Canadian Payday Loan Association (and former MP), disagrees.

"There are times when a payday loan may be the smartest option," Keyes said in an emailed statement Monday — a previously published editorial he'd written in response to a ban on payday lenders out in Maple Ridge, B.C.

"Payday loans are less expensive than a series of overdrafts or defaulting on an auto loan. They are a better deal than having the electricity or the heat or the telephone turned off, and as a consequence to later pay to have them turned on again."

But according to the Strategic Counsel Survey — a survey of 500 Ontario payday loan users — more than half of borrowers surveyed said they are using the service for recurring expenses, not crisis situations.

Of those surveyed, 27 per cent reported making less than $30,000 a year.

And 62 per cent of borrowers who defaulted on a loan took out another loan to cover the previous one — and almost one in five borrowers took out more than 10 loans in a year.

Current regulations do not limit the amount or number of loans a person can take out — one factor the Ministry is looking at changing. They're also considering establishing a form of network to allow lenders to track a borrower's current outstanding debts with other lenders.

Cooper says they began working with the Ministry in December, after local Money Marts established a pilot project to trade gift cards for 50 per cent of their cash value.

The backlash was instantaneous, with critics shaming them for preying on people with little disposable income around the holiday season.

"We went a little bit ballistic," Cooper said.

At the meeting Monday, Green said there is clearly a need for short-term loans, but that the profitability of these businesses needs to be limited. Take away the profit, he says, and the service of payday loans will be "absorbed back into the financial institutions, where it should be."

Green's motion would also have staff analyze and map pay the city's day loan and cheque cashing outlets in Hamilton and provide recommendations for alternative accessible financial services.

He also spoke of the need for explicit signage outside the storefronts (part of his proposed motion) — opposed to only inside, as is currently mandated — posting their interest rates.

"I think that would help inform people as they walk in the door," he said.

HRPR member Laura Cattari also spoke of the need for financial education.

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"Education has to start in high school. Make it part of the business class, make it part of the math class ... it has to be … part of the learning process and not done in a crisis," she said.

But more than anything, she says the booming pay day loan business speaks to a greater need.

"We need better social assistance rates and a minimum wage that people can actually live on," she said.