CARDUS Work & Economics

The Government of Ontario is considering establishing new protections for users of alternative financial services (AFS). AFS are high-cost financial services provided outside of traditional financial institutions like banks and credit unions. Common AFS offerings include payday loans, instalment loans, lines of credit, and auto title loans. Ontario currently regulates payday loans. The government recently invited consultation on draft proposals and options intended to strengthen protection for borrowers and improve the regulation of high-cost credit agreements, other than payday loans.

This consultation is in addition to Ontario’s comprehensive review of the Consumer Protection Act, 2002 (CPA), the law governing many personal and household transactions by consumers. The CPA’s rules support a fair and competitive marketplace where consumers make their own choices without being subject to unfair business practices.

Cardus submitted the following responses to the questions posed in the consultation.

Payday loans are short-term, high-interest-rate loans that you generally need to pay back within the typical two-week payday cycle. Are these lenders filling a need, or are they preying on Canadians who aren't able to borrow money from conventional sources? In a conversation with Alexandra Macqueen, Cardus Vice President External Affairs, Brian Dijkema notes, "There’s a certain inequality to affordable credit in Canada.” He adds, “One way to ensure that people on the economic margins have access to reasonably-costed credit is to be open to the development of unique solutions—through technology or social networks, for example—that can provide positive examples of low-dollar lending.”