Elli Taylor, a poverty advocate in the Downtown Eastside, has seen many desperate people struggle with payday loans.
She was that person herself.
In 2014, while working as a part-time convenience store clerk in Williams Lake, Taylor took out what she thought was a manageable $ 250 loan to purchase a bus pass and Christmas gifts for her. 14 year old twins.
His take-home pay was around $ 250 every two weeks, but monthly payments of $ 50 became an issue with the then legal rate of $ 20 in interest and fees for every $ 100 loaned.
“You are snowballing and not being able to pay for your groceries,” Taylor said. “You are ashamed. It’s dehumanizing.”
It’s stories like this that make it clear why British Columbia tightened the rules for payday lenders starting in 2016: lowering the amount that can be borrowed and the interest rates allowed.
But as the number of lenders has declined under the new rules, data shows British Columbians are borrowing more from them.
New rules, same problem
Payday loans offer quick cash flow, but charge higher interest and fees than other types of loans, especially if they are not repaid quickly – perhaps six to seven times the cost of an equivalent amount of money. ” a cash advance or line of credit.
Advocates say many low-income people can’t access these cheaper options, and regulation of payday lenders misses the point: Too many British Columbians just aren’t making enough money to make it out.
Isaiah Chan, director of the board of the Credit Counseling Society, said the fact that there are no fewer people seeking help with these debts speaks to bigger problems of affordability.
“Something started it: either some kind of disruption like a family emergency or job loss, illness, something where they have to quickly resort to borrowing money at a higher cost,” Chan said. .
“The story we hear from customers [is] they had nowhere to turn. “
Since 2016, the province has taken a series of measures to tighten payday lending rules: the maximum fee for every $ 100 borrowed is now $ 15, limits have been placed on information collection and the amount that can be borrowed. being loaned has been lowered to half a paycheck or half the earnings of a pay period.
Chan welcomes these changes but sees no impact.
The company helped more than 20,500 Canadians from British Columbia to Ontario through its debt management program in 2019. About 30 percent had payday loan problems, numbers similar to 2018.
Chan said people who depend on these loans tend to be poorer, have few credit options and are “desperate.”
In numbers :
“I was suicidal”
Taylor remembers this desperation.
Lagging behind, unable to shop for groceries and with no other options, she took out more loans to stay afloat. Lenders would send people to her house and call her employer.
Taylor also suffers from clinical depression. She blames the stress of the loan for making her illness worse until she can no longer work. She became homeless.
“I was suicidal,” she said. “I just felt, what’s wrong with me?”
Taylor says she’s better now, but it took a while.
She moved to Vancouver, where there are more supports for her mental health, and found work with organizations Raise the Rates and the Carnegie Community Action Project.
She was finally able to repay the loans, having obtained tax refunds from previous years that she had not applied for, but to this day her credit rating is down.
More regulations to come
Alan Evetts of the Canadian Consumer Finance Association, an industry association for payday lenders, said payday loans quickly deliver much-needed money to people who normally couldn’t get it.
He said it was unfair to compare the higher rates of payday loans with low-interest options like lines of credit, comparing the price per night of a hotel room to the monthly rent.
“They are meant to be used very differently.”
A provincial spokesperson said new regulations are coming that will prevent lenders from making further loans to a borrower who already has a loan with that institution and putting a waiting period after a borrower. repaid one loan before being able to take out another.
Economist Iglika Ivanova of the Canadian Center for Policy Alternatives said regulations generally show governments do not understand payday loans.
“Payday loans are touted as a kind of last resort,” Ivanova said. “A lot of people are actually taking these loans for utility bills and for groceries… which are expected but cannot pay.”
Ivanova said banks and credit unions must come up with alternatives. Vancity’s Fair and Fast Loan is a positive example, offering small, short-term loans at an interest rate of about one-twentieth that of a payday loan.
For Taylor, the answer is more affordable housing, food security and a basic income.
“No change in loan interest rates will help,” she said. “We need fairness.”
Treading Water is a CBC British Columbia series that examines the impact of the affordability crisis on residents of Metro Vancouver and across the province, including the creative solutions used to make ends meet.
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