Vancouver The first national campaign for ACORN Canada a decade ago had been to reform the payday lending industry. The federal government sidestepped the issue by pushing the primary responsibility for regulation to each individual province.
In Quebec, the provincial parliament set a cap on payday lending annual industry rates at 30%, so the industry packed up and out. In New Brunswick, the provincial parliament implemented no standard, so the cap reverted to the federal standard, which was higher than 30% per year, but not at the triple-digit level sought by the companies, so they packed out there as well. In British Columbia, the Payday Lending Act of 2007 ended up with a set of changes that were better than what had prevailed, but increasingly talking to ACORN leaders and organizers in their New Westminster office recently, it was clear that they were committed to a better fix for what continues to be badly broken. Furthermore, even with a conservative leadership in the province, ACORN’s proposals are picking up wide, multi-party support and appear to have an excellent, fighting chance of success.
The current rate in British Columbia is set at 23% per loan term. Manitoba has set the ceiling in Canada at 17% per loan term, but such a rate could still exceed 600% annually. ACORN is arguing for an interest rate that caps at no higher than 60% per year. But that’s not all.
Right now the loan repayment term is only two weeks. ACORN argues that a one-month payback term is better. Furthermore, ACORN has demanded that a real-time database has to be established with all companies required to participate to make sure that a customer only has one loan to repay at a time, rather than allowing a downward cycle where someone desperate could end up with a bunch of high interest loans weighing them down. Additionally, ACORN believes that one of the lessons of the Great Recession has been that loans have to consider affordability for the borrower, which is absent in all of the current legislation. To remedy that defect, ACORN proposes that loans should be limited to no more than 50% of the borrower’s net pay or net income during the term of the loan, which simply makes good common sense on both sides of the laon.
Predatory payday lenders are finding it more and more difficult to find a killing field for their rip offs. In Surrey, a Vancouver suburb where ACORN groups are growing rapidly, the Council reacted quickly and banned any payday lenders from being licensed within 400 meters of another location. Some ACORN groups are reporting support from councilors for banning any new licenses for payday lenders in their communities. Payday lenders are becoming the equivalent of financial porn shops without a safe haven.
ACORN’s earlier study by Professor Chris Robinson of York University had found that the average payday lending borrower was stuck in an average cycle of about 18 months of recurring loans before they were able to break out of the debt cycle. ACORN’s longtime partner the Van City credit union after years of discussion has created a safe and affordable small loans policy for its members to fill the money gap, so there are models for a better program now as well.
If support continues to increase for ACORN’s proposals now, British Columbia might end up fashioning a policy that sets the standard not only for Canada, but for North America, and finally puts an end to licensed theft from financially strapped families.