Alberta’s payday lending industry is contracting after the province cracked down on businesses often accused of predatory lending, although dozens remain in Calgary.
The number of licensed payday lenders in the province has fallen to around 165 in recent weeks, dropping 25% from 220 before the province forced changes on the industry in the spring of 2016, according to the group that represents lenders.
This is good news for some.
“We had what we thought was a proliferation of these types of businesses,” said Alison Karim-McSwiney, general manager of International Avenue BRZ in southeast Calgary, where a third of these businesses have closed. over the past year, dropping to six.
Karim-McSwiney said there is now more room for growth along the 17 Avenue SE commercial strip, while rental rates may drop for new tenants. She said payday lenders “artificially raised rents” because landlords often made them pay a premium.
“Their departure is a very positive thing for us,” she said.
The province has taken action against the industry over fears that too many Albertans will take out high-interest loans just to make ends meet, then take more loans to pay off elders.
The changes have reduced the costs of payday loans for borrowers and extended the payment period. Instead of having two weeks to repay loans that cost up to $ 23 per $ 100 borrowed, borrowers now have up to six weeks to repay loans that cost $ 15 per $ 100.
Reduced income for lenders
The changes reduced the income of lenders and their access to capital. According to the Canadian Consumer Finance Association, which represents payday lenders, dozens of storefronts have closed.
In Calgary, 11 businesses stopped lending payday loans last year – a drop of 22% – though 38 remain.
“There are people who come to our members because they have nowhere to go,” said Tony Irwin, general manager of the industry group.
“Whether it’s a single mom trying to get two jobs just to make ends meet to feed her kids, or a retiree who lives on a fixed income and finds her expenses increasing to a higher rate than its benefits, these are all the people who have very serious and real needs … If they cannot access credit from a safe, licensed and reliable payday lender, where will they go find it ? “
Courtney Mo, public policy manager at Momentum, which helps low-income families, said credit unions and social agencies have stepped in to help Calgarians who would otherwise have taken on high-interest loans.
“For many, a loan is not a good idea, and the more we can do to help people access alternatives, the better,” she said.
“They could be overburdened and unable to repay, which could make it even harder to pay exorbitant fees and incredibly high costs to get out of debt.”
Service Credit Union, which offers short-term loans of up to $ 2,500, has issued 185 loans with a total value of almost $ 295,000 since the fall of 2016.
First Calgary Financial also offers short-term financing to help families get through tough times when funds are low.
Shelley Vandenberg, president of the credit union, said she was “cautiously optimistic” that the province’s crackdown is actually behind the decline in the number of licensed sellers, not some other factor, like rental costs.
Despite the decline in storefronts, Vandenberg said predatory lending has increased online.
“There are people who still go to payday lenders,” she said.