Starting immediately, Toronto won't be issuing any new licences for payday loan outlets amid concerns the companies are "predatory" toward low-income residents.

The major regulatory change was approved through a unanimous 20-0 vote from council on Wednesday night, alongside a bundle of recommendations regarding the city's controversial payday loan industry.

"We heard over and over and over again stories of how people's lives were ruined, leading to depression, broken families, even suicide, because they were victims of these predatory, parasitical payday lenders," Coun. Josh Matlow said in council chambers before the vote.

"People can never escape the vicious cycle they get into because they can never get out of having to pay off these debts," he added.

Customers who borrow money from payday loan outlets can find themselves saddled with fees of 390 per cent, far higher than those on a credit card, a city report noted in 2018.

During Wednesday's debate, Coun. Kristyn Wong-Tam argued the lenders are targeting vulnerable, low-income residents while charging these "exorbitant" fees.

"You are confining people into a web of debt forever," she said.

Councillors later voted in favour of asking the province to cap annual interest rates to 30 per cent or less, while asking the federal government to cap all loan fees at $15 on every $100 loaned and to amend the Criminal Code to lower the maximum interest rate from 60 to 30 per cent.

Other recommendations given a stamp of approval include requiring all payday loan outlets to provide city-sanctioned information on credit counselling services and banning the stores from advertising on city property.

Around 200 of the outlets are currently open in Toronto.

As seen here, payday loan outlets are found throughout Toronto, with some clustering on Yonge Street. (Municipal Licensing and Standards, City of Toronto)

Payday loans can be 'only option'

This discussion around changing the city's approach to payday lenders has been going on for more than a year, after provincial regulations began granting municipalities more power to regulate payday loan store locations, prompting other cities like Hamilton and Ottawa to explore caps.

"Those powers are good," said Brian Dijkema, vice president of external affairs for the non-partisan, faith-based think tank Cardus. "Cities should be able to make decisions about businesses in their city."

But the Hamilton-based organization's research, he said, suggests capping the number of stores has a major downside: When stores close, there's just an increase in the market share for the bigger players, giving those companies less incentive to operate in a consumer-friendly way.

"The consumer's actually the one that loses ... You're going to give, effectively, a monopoly," Dijkema warned.

Cost of payday loans

A breakdown of the typical cost of a payday loan compared to other forms of credit, based on a $300 loan for a two-week period. (Financial Consumer Agency of Canada/Government of Canada)

He also stressed that there's truth to both sides in this ongoing debate: As councillors suggested, the rates are too high for many people to handle, he said. But he added the stores also provide a needed service, as industry marketing suggests.

"If you're on the poorer end of the income scale, you don't have access to the same types of credit someone in the middle or upper-class does," Dijkema said.

That means payday loan outlets are sometimes "the only option" for certain people who are struggling.

"The question of how do we expand the options of credit for people in the lower income [bracket] is a hugely important question for us to ask," Dijkema said.