B.C. authorities make no move to rein in usurious lenders


tay
+1
#1
When two loan companies in New York state were recently found to have charged many customers more than the maximum allowable interest, the attorney general’s office took action. The companies were fined $1.5 million and had to cough up $20 million more, which is being returned to the people who were over-charged.


This isn’t how the same kind of issue plays out in B.C.


As this column documented time and again a few years ago, payday and chattel loan companies in this province were routinely flouting the Criminal Code and charging far more than the maximum allowable interest rate. But no B.C. government — not the Socreds, nor the NDP, nor the Liberals — prosecuted such companies, not even when their names and details of several egregious cases were published in The Vancouver Sun.


And when our government finally “took action” five years ago this month, it was to sweep the mess even further under the carpet.


While New York takes steps to redress past wrongs and prevent future ones, B.C. has ignored past wrongs. And it only pretended to prevent future ones in one segment of the high-cost loan industry — payday loan shops — by raising the bar for what is legally considered a usurious rate. Whereas payday lenders used to be in technical violation if they charged more than 60 per cent a year — though this didn’t mean anything, because nobody prosecuted them no matter how many multiples of the legal limit they charged — the law now lets them charge almost 600 per cent a year to customers who take a series of back-to-back short-term loans.
Meanwhile, New York lenders can expect to find themselves in court if they charge more than a tiny fraction of that. Their limits are 16 per cent a year for unregistered companies, 25 per cent a year for registered ones. And when companies try to skirt the law by setting up shop outside the state and lending money at excessive rates over the Internet, the state goes after the affiliated companies that try to repossess from those who fall behind in their payments.


In other words, strict definitions of usury can be enforced. And the lame arguments we hear so often here — that the police are too busy to investigate, that it’s too hard to convict, that cracking down on payday or chattel loan shops would open the door to “real” loan sharks — don’t hold water.


Bruce Cran, the plain-spoken head of the Consumers’ Association of Canada, says he thinks protection against rates that other jurisdictions — even the Criminal Code — consider to be in loan-shark territory is weaker now than five years ago when he was campaigning against B.C.’s legislative seal of approval for ultra-high-cost loans.


Which is odd, because you’d think the payday loan legislation that legalized what used to be usury would free up investigative capacity to focus on other high-cost lenders not covered by the new law — pawn brokers who charge more than the allowable interest rate, or chattel loans shops that take cars for security.


But when I asked — repeatedly, and far in advance of my deadline — both the ministry and Consumer Protection B.C. how many investigations they’ve launched, what charges they’ve laid and what convictions they’ve won since 2009, I got a runaround non-answer from the former and no response at all from the latter. Which is par for the course, according to Cran, who tells me he has pretty well given up hope that B.C. authorities will do anything effective on this issue.




video




Don Cayo: B.C. authorities make no move to rein in usurious lenders (with video) (external - login to view)
 
Walter
#2
Caveat emptor.
 
taxslave
No Party Affiliation
+1
#3
So don't use them. Considering the number of people that do not repay their loans the rate for non secured and no credit rating people it is no wonder the rate is so high. But the article conveniently makes no mention of this.
 
Dixie Cup
Libertarian
+1
#4
Also, getting involved with these companies are the reason many individuals end up declaring bankruptcy because they go from one shop to another (the Peter Paul scenario) to try to keep on top of the payments. Eventually, it catches up to you, not unlike having multiple credit cards maxed to the limit and using one to pay the other.


I see this all the time.
 
tay
#5
Canadian usury laws ban more than 60% interest on loans, but in 2006 the federal Conservatives passed a law exempting payday lenders from criminal sanctions and effectively removing the interest cap. Since then, the industry has metastasized.






Scott Gilmore of Maclean's Magazine discovers (link is external) (external - login to view) the abusiveness of the payday loan industry by accident due to a lender's confusion between him and an actual borrower:

Regulations vary. Manitoba limits prices at $17 for every $100 borrowed. In Ontario it is $21. It sounds reasonable, but that is an annual percentage rate of over 540%, twice the traditional vig charged by loan sharks. Stan Keyes, the former federal cabinet minister and now the president of the Canadian Payday Loan Association, argues that it is unfair to calculate the interest rate this way, since the loans are typically for only two weeks. However, he concedes that many borrowers take out multiple loans over the course of the year.

It gets worse. A quarter of the loans initially default. Lenders actually want this. For an additional fee they happily extend the loan for another two weeks. Week after week, borrowers are slowly bled dry, often paying back several times more than they borrowed. What other business profits from keeping their customers down and out? Is there a more morally bankrupt industry?

The impact is immense. When people fall behind in their payments, the fees add up creating a painful financial drain for those who can least afford it. The stress this creates is immense. A recent study by St. Michael’s Hospital in Toronto (link is external) (external - login to view) found a relationship between the number of payday lenders in a neighbourhoods, and premature mortality.


Meanwhile, Thomas Walkom reminds us (link is external) of Stephen Harper's efforts to undermine pensions of any kind (other than his own).
 
Tecumsehsbones
+2
#6  Top Rated Post
Quote: Originally Posted by taxslaveView Post

So don't use them. Considering the number of people that do not repay their loans the rate for non secured and no credit rating people it is no wonder the rate is so high. But the article conveniently makes no mention of this.

A fool and his money. . .

It is interesting, though, that our law n' order righties are perfectly OK with this violation of the law.
 
taxslave
No Party Affiliation
#7
As I said before. No one is holding a gun to their heads and forcing them to go to payday loan sharks.
 
Tecumsehsbones
#8
Quote: Originally Posted by taxslaveView Post

As I said before. No one is holding a gun to their heads and forcing them to go to payday loan sharks.

No one is forcing a crystal meth dealer's customers either. Does that mean we should legalize dealing crystal meth? Or keep it illegal and just ignore it?
 

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