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ACORN calls for city controls over payday lenders
Burnaby city hall is looking at how it can control the influx of payday lenders in lower-income neighbourhoods.
The move comes after a request by social justice group ACORN at Monday's council meeting.
The companies target neighbourhoods where the most vulnerable live, said Monica McGovern, chair of ACORN's Burnaby chapter. They fill a niche no longer provided by most banks and credit unions–small loans to people on social assistance or who have bad credit.
But it's a service that comes at a major cost to its customers.
Steven McMurtrie, a Burnaby ACORN member, said he first started using payday lenders in 2006. That's when he took out a $300 loan but when he paid it back on his payday, it left him $300 short for his other bills so he had to get another payday loan to make up for it.
"This is what happens to a lot of people, it becomes a cycle you can't get out of."
McMurtrie said he receives $906 a month in disability payments. Of that, $740 goes to rent with little left over to cover groceries and bills, much less the massive interest rates and fees charged by payday lenders.
He said there are five payday lenders on Kingsway between Metrotown and Edmonds Street. He believes if there were fewer of them around fewer people would get caught in the vicious cycle of payments.
McGovern asked council to consider using its zoning powers to limit the businesses in low-income areas. She said in B.C., they typically charge the equivalent of 600 per cent in annual interest to those who can least afford it.
She said the Criminal Code limits interest rates to 60 per cent at most. But the federal government downloaded responsibility for regulating payday lenders to the provinces.
Coun. Nick Volkow said the customers of payday lenders are mostly the working poor.
"We can try to not allow them to conduct this kind of usurious business in our community," Volkow said. "Legalized loan-sharking is what it is."
It's clear the companies are setting up shop in Burnaby's poorest postal codes, he said. "So these piranhas know where the most vulnerable folks are, that's why they're setting up there."
Coun. Paul McDonell stressed that in lobbying the provincial government emphasis should be on limiting the cost of such loans. Restrictions on interest rates are easily circumvented by tacking on user fees.
A $200 loan for 15 days can cost $23 which is "a pretty high rate of interest for that short a period," said Coun. Dan Johnston.
Mayor Derek Corrigan said the city can try to restrict such businesses but it can't prohibit them. In the end, though, people that need to use such services will find them.
It would be much more effective for the province to regulate them. That would ensure the rules are the same across the country and consumers are protected, he said.
The issue was referred to the Community Development Committee. Coun. Colleen Jordan, who chairs the committee, said on Wednesday that staff are looking into what options the city has.
One idea being looked at is to create a special zone for payday lenders much like its massage parlour zone. In that case, there are restrictions on where they can be located and any application for a new one would trigger a public hearing. Existing ones would be grandfathered and allowed to continue operating.
Or, the city could possibly limit the numbers of such businesses in each part of the city, as it does for private liquor stores, she said.