Ontario Can Do More to Help Folks Trapped by Payday Loans
ONTARIO CAN DO MORE TO HELP FOLKS TRAPPED BY PAYDAY LOANS
Cardus Work & Economics Program Director Brian Dijkema offers research-backed testimony on payday loan reforms to committee at Ontario legislature
February 27, 2017
FOR IMMEDIATE RELEASE
HAMILTON – The Ontario government’s Putting Consumers First Act (Bill 59) takes some positive steps on payday loans, but also leaves out several important measures that could help consumers. While it is good to see that Bill 59 tries to reduce repeat borrowing from payday lenders and ease repayment of loans with usurious interest rates, the bill is too focused on regulation. Brian Dijkema, Work & Economics Program Director at public policy think tank Cardus, told a legislative committee that consumers attracted to payday loans need alternative options.
The Cardus report Banking on the Margins acknowledges that there will always be demand for short-term loans from consumers who cannot access credit. However, two practical measures can help:
- Governments, community foundations, and religious groups could help decrease the risk for financial institutions to make small-dollar loans available by offering funds to backstop loan losses or by providing market-based incentives for new alternatives. By empowering borrowers to achieve financial stability and avoid the potential harms of payday-loan use, enabling small-dollar loans could reduce or eliminate the harmful ripple effects of payday-loan dependency.
- Governments – especially at the provincial and municipal level – can promote payday loan alternatives that already exist. By leveraging their significant communications reach, governments can help raise consumer awareness of lending alternatives run by credit unions, banks, or other institutions.
“There is little the government can do on its own to meet demand for small-dollar, short-term loans for real needs,” Dijkema told the Standing Committee on Social Policy. “That’s why we’ve recommended that governments partner with credit unions and others to provide better, cheaper alternatives to payday loans for consumers facing a credit crunch.”
Cardus – Work & Economics Program Director
Cardus is a non-partisan think tank dedicated to clarifying and strengthening, through research and dialogue, the ways in which society's institutions can work together for the common good.