Reevely: Treat payday lenders like strip clubs and gradually force them out, says anti-poverty group

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Ottawa needs a law preventing new payday loan stores from opening near existing stores, says anti-poverty group ACORN, treating them like strip clubs.

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It’s a very slow fix to financial cancer in poor neighborhoods where people use short-term loans at ridiculous interest rates to try to make ends meet, activists said at a forum that they organized Thursday at the town hall. But it’s something city council can do without help from the federal or provincial government, and Ottawa should start, according to the argument.

The city should also allow payday lenders and charge them $ 2,000 a year, ACORN says – less than what it costs for a strip club, but much more than for a restaurant or tobacco store.

The idea is that the large number of payday lenders in Ottawa is a problem, especially in Vanier. Ten are located a few blocks from Montreal Road, reports ACORN, with the help of researcher and lawyer Peter Kucherepa. He proposes that payday lenders be “strategically located” in poor and troubled neighborhoods and even encourage crime by making money available that fuels drug trafficking.

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The simplicity – we already know how to do this, we have examples – makes the tactic attractive. He’s just not likely to do much good.

ACORN organizers brought in payday borrowers to explain why they used payday loans. Amber Slegtenhorst said she used payday lenders in large part because of her medical bills: she’s a single mother with six children, two of whom have health issues, and although she works, she has no drug insurance.

“I had to survive, I had to put food on the table,” she said. “It is very unfair that these people target us the way they do. But at the end of the day, it’s hard to stay away.

Tina Ford told the group that she often borrows $ 300 or $ 400 a month, which quickly doubles the interest charges. She has a job, but also has two unemployed sons living with her, which means they are not eligible for the Ontario Works program, she said. “People like me don’t take these loans because I choose to do so,” Ford said.

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There is obviously a lot going on here.

In theory, there can be payday loans that are worth it: if they’re for, say, auto repair or short-term medication, things that help you with temporary issues that might cost you your job and destabilize your whole life. . If you really only need $ 200 until next Thursday, paying interest and fees on a small loan might be smart.

But borrowing at absurd interest rates is hardly ever smart. Most payday lenders and check tellers scoop the latest lint out of the pockets of people that regular banks don’t see as the value of time, and credit card companies don’t see as worth the risk.

It’s vampire-squid behavior. Payday lenders don’t sneak up on customers and force them to borrow money, but they help people in difficult situations turn into disasters. We would all be better off without them.

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We would also be better off without cigarettes. We would be better off without alcohol. We’d be better off without meth and heroin. However, attempts to restrict them have not been complete successes. As long as there is demand, supply finds its way.

ACORN argues that the large number of outlets on Montreal Road means a waste of space for productive businesses and that the constant face of storefronts compounds the temptation. There is something to this. But if we reduce the number of payday lenders, we probably won’t reduce the number of payday loans much. We are simply extending the timelines with the remaining lenders. Using zoning means it could take decades to achieve this.

The group recognizes that payday lenders aren’t the source of all the evil: we have regulations requiring payday lenders to post the total cost of a loan in gross dollars, but ACORN also wants lenders to post the annualized interest rates they charge. , which can be greater than 10,000%. The group wants more accessible financial education. They want Canada Post (with its many locations) to offer banking services, which is why the Canadian Union of Postal Workers had a banner at the ACORN event.

These are all much more difficult than the zoning approach, but probably much larger parts of the whole.

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twitter.com/davidreevely

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