A new report by the Social Planning Council of Oxford focuses on how predatory lending hurts those in need, sometimes pushing them to bankruptcy
Making ends meet is a tough go for many.
But doing it while involved in predatory lending practices is next to impossible, says a new report from the Social Planning Council Oxford (SPCO).
“It’s getting people in need further and further into debt,” explained Bryan Smith, vice-chair of the SPCO.
The council, which after two years of examining the subject has released a report on predatory lending, also known as alternative financial institutions, says the lenders are charging up to 300 to 600 per cent for their payday loans and other lending services such as rent-to-own and tax-refund services.
The report, one of several recently released by the council, is linked to the anti-poverty initiative Zero Poverty Oxford, recently endorsed by County Council.
“One of the things that has come up in our conversations is how well numerous agencies are doing to improve the lot of the poor,” Smith said. “At the same time, a lot of people are profiting. They are the predatory lenders.”
Typically, he said, a low income person would encounter a financial emergency, such as a car breaking down, and take out a first short-term loan with the money lender.
But then, due to high interest rates, the borrower needs a second, even a third and fourth to pay the lender back.
“By the time they go for their fourth loan, they are bankrupt,” he said.
He said problem doesn’t arise from the people who work at the agencies, but with those who put up the money for the transactions.
Smith said the lenders are also undermining banks and credit unions who “could help people in financial difficulty get out of it.”
The SPCO offers several recommendations including enforcing how many money lenders can be located in one area.
Often lenders set up shop in areas with high levels of poverty, including female-led families and a large immigrant population.
Another solution could be encouraging churches, not for profits or banks to offer micro loans to those in need with “more reasonable” interest rates.
Smith said the SPCO will continue to advocate for combating the use of predatory lending practices and push for measures such as a guaranteed basic income, a living wage, affordable housing, as well as financial training and increased access to credit counselling.
SPCO also hope the municipality will follow in the Hamilton’s footsteps.
In 2016, their town council voted in favour of enforcing licensing fees for payday loan institutions, obliging them to post annualized interest rates and provide information to clients on credit counselling services.
Hamilton also urged the province to follow suit.