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In recent years, reliance on payday loans has skyrocketed. In a report last month, the Financial Consumer Agency of Canada said 4.3 per cent of Canadians reported use of a payday loan in 2014 – more than twice as many as in 2009.

There are now 800 payday lending outlets in Ontario, providing up to $1.5 billion in loans to 400,000 customers. Pawson said there are 70 known payday lenders in Ottawa alone, serving tens of thousands of customers.

Photo by Jean Levac / Postmedia

The Causeway fund will provide loans of up to $1,500 to low-income residents who now turn repeatedly to payday lenders. Those who get loans will be charged the prime rate (currently 2.7 per cent) plus two to six per cent in interest, and will have up to three years to repay.

“The approach we’re taking is, if somebody tends to borrow $500 every two weeks, then we’re going to give them $1,000,” Pawson said. “It gets them out of the debt and gets them ahead of the cycle.”

Those who receive loans primarily will be clients of Causeway or one of its partner agencies, he said. “Most of them will be low-income, mostly living in poverty, mostly who have a disability or some other barrier to employment.”

Those with unfavourable credit histories won’t necessarily be disqualified from consideration, Pawson said. “If we can vouch for their character and we’re guaranteeing the loan, our hope is that we’ll find a way to serve them.”

Though the average payday loan in Ontario is just $435, “that can put you in a spiral of debt that’s almost impossible to get out of,” he said.