By Russell Piffer
Beleaguered payday loan corporation Cash Store Financial will be able to continue lending even if Ontario revokes its payday loans licence because certain financial products don’t fall under provincial regulations.
“You have a complicated situation where some thing that these stores do are regulated federally and some are regulated provincially,” said All Trans Credit Union CEO, Michael Alexander. “What’s upsetting people is it [Cash Store Financial] has been stopped from doing its pay day loans but it still has the ability under the federal system to do its line of credit.”
“They’re doing the lines of credit essentially on the same terms they’re doing the pay day loans,” Alexander said.
In a statement issued Tuesday, Cash Store Financial said the province’s effort to revoke its payday loans licence will not disrupt operations because it’sintroducing a line of credit to replace payday loans.
“Management has determined that the restrictive nature of Ontario’s payday loan regulatory scheme prevents it from meeting consumer demands. These new product offerings fall under relevant Federal laws,” a statement from Feb. 1 on the company’s website said.
The Ontario Payday Loans Act was introduced in 2008 to address the lack of federal regulations overseeing the payday loan industry.
The Canadian Payday Loans Association, composed of 18 Canadian payday loan companies – including Money Mart and Moneytree Canada but not Cash Store – said it couldn’t comment on the activities of nonmembers but commended the Ontario government’s commitment to consumer protection in a statement issued Wednesday.
“Payday loans are used by a broad specter of Canadian from all walks of life,” association president Stan Keyes told Humber News.
Keyes said the payday loan industry proliferated in the 1990s in response to an unfulfilled demand for short-term, small-sum loans that are “typically unavailable through conventional financial institutions.”
“The most common reason for getting a payday loan is emergency cash, say an emergency car repair, or to pay that hydro bill or that cable bill to avoid getting cut off and having to pay a reconnection fee,” Keyes said.
“Some payday loan users don’t have a bank account or a credit card and they need money quickly so they can go in and in fifteen minutes they can have a loan, something you can’t do at a typical institution,” he said.
According to Keyes, there are about 1,700 payday loans stores in Canada – not counting online services – and about two million Canadians have used a payday loan.
The CBC reported Tuesday that the Ministry of Consumer Services would go before a provincial tribunal to revoke Cash Store Financial’s licence.
The ministry alleges that Edmonton-based company – which operates about 200 payday loans stores in 19 Ontario communities as InstaLoans and The Cash Store – committed several violations of the Payday Loans Act.
Ministry official Josh Henry told Humber News that action against Cash Store Financial was launched following multiple customer complaints to the ministry.
“It is a consumer protection measure,” Henry said. “The ministry does look out for consumers. It’s one of our top priorities.”
The alleged violations include charging fees higher than the maximum $21 on every 100 borrowed as well as charging additional fees to activate prepaid debit cards, on which loans were issued, the CBC reported.
In the statement issued Tuesday, Cash Store Financial said government efforts to force its stores to deliver loans in cash instead of via prepaid debit card endanger customer and employee safety.
It will be interesting to see if they find anything more than a company providing high risk loans at a steep… fb.me/24bsNVgwg
— Gordon Gower (@GordonGower) February 6, 2013
— Cristina Howorun (@CHoworunCTV) February 6, 2013
— Sean O’Shea (@consumersos) February 7, 2013