SOMBA K'E/YELLOWKNIFE
Consumers are being reminded to read the small print on payday loans, now that a company operating in Yellowknife is at risk of losing its operating licences in Ontario.
Last month, the province's registrar of payday loans took legal action to enforce its Payday Loans Act, seeking to revoke the licence of Edmonton-based Cash Store Financial Services Inc., which operates The Cash Store on 50 Street in Yellowknife, alleging overcharged interest and fees.
Yellowknife residents who use the company's services in this city experience the same issues, according to Weledeh MLA Bob Bromley, who in the past led the way on NWT legislation to make payday loan companies fully disclose their interest rates.
"People who rely on payday loan companies are often the most vulnerable in our society," Bromley said. "People without bank accounts or fixed addresses. They then become trapped in a cycle of debt, paying their whole pay cheques so they can borrow on the next or borrowing to pay their loans. It's not a coincidence that loans stores are located right nearby both of our liquor stores."
Bromley decries the lack of government action to investigate, monitor and control what is happening in Yellowknife.
Unlike Ontario, there is no legislation in place to regulate the payday loan business in the NWT, said Tom Williams, deputy minister of Municipal and Community Affairs (MACA), the department responsible for consumer protection.
But the Cost of Credit Disclosure Act, which was put in place last year to protect the consumer, obligates lenders to provide full disclosure of what the interest rates will be charged on the collection of the loan, Williams said.
"The whole reason why the Cost of Credit Disclosure Act was put into force was to provide that awareness, that 'buyer beware' so they understand that they do have rights as a consumer. The agencies, the payday loan companies have to disclose and make sure that their clients understand what they're getting into financially when they do sign on for these loans," Williams said.
"I think really when it comes down to it we want to make sure that anybody getting loans through these various payday loan operations and businesses that they understand what they're getting into and they have the right to ask the questions and to understand how much they're going to be paying in terms of interest on these loans, what is the interest, what happens if they default on the loan, they have to understand all the parameters that they're getting into when they get into these loans."
Payday loan regulation is not a legislative priority because the department has not received complaints about the practices of these companies, Williams said.
"Leaving it to complaints is allowing victimization," Bromley said, adding that with no commitment to enforcement, the situation has gotten worse, according to a number of social agencies.
Lydia Bardak, executive director of the John Howard Society, said she has heard accounts of the negative effects payday loans are having on residents.
"What I know from stories told to me from others is that once you're in that system it's next to impossible to get out because of the high interest rates charged and I've heard when you owe them money, they will actually loan you money to pay them back so that you get further in," said Bardak. "It's like a drug."
Williams said the department is open to calls for items such as signage and posters to be put up in payday loan businesses, to raise consumer awareness about excessive interest rates.
Any rate that exceeds 60 per cent becomes a criminal matter and should be reported to police, he added.
Yellowknifer's calls to Cash Store Financial Services Inc. and its investor relations department were not returned.
