I got a piece of direct mail last week for a service that purports itself to provide “affordable loan solutions.” It said I could apply easily at the branch, online, or by telephone. I could get $5,500 loan – today. I read the conditions on the back, and nowhere did it mention the interest rate for this “affordable” solution that “has helped millions of Canadians just like you for over 95 years.”
The website showed the ability to get a loan between $500 and $35,000, but it took a while to find the interest rate. For a secured personal loan the interest rate ranges between 19.99 per cent and 23.99 per cent. (I would put an exclamation mark after that … but just wait.) Unsecured loans have interest rates of 26.99 per cent to 39.99 per cent! (I should probably include a second exclamation mark, but I know my editor is not terribly fond of them – in this case I think he will agree that an exclamation mark is warranted.)
Their marketing calls themselves “Canada’s leading non-bank provider of responsible lending solutions.” How is this responsible? How can someone ever get out from under the financial situation that necessitated one of these loans with those interest rates?
How is this not usury?
The definition of usury, according to Investopedia.com, is: “the act of lending money at an interest rate that is considered unreasonably high or that is higher than the rate permitted by law.”
Reviewing a few legal websites, it appears that usury is not illegal in Canada until the business is charging over 60 per cent. This is according to Section 347 of the criminal code of Canada.
As I kept reading, I had to take pause. I thought I was outraged at the loan rates, until I read about the payday loan companies and the exemption they are afforded in Canada.
Hoyes.com (a legal firm) states that: “In 2007, Section 347.1 was added to the Criminal Code that exempted payday loans from Section 347. Instead authority to regulate payday loans was assigned to the provinces.”
The blog goes on to state that in Ontario, the Ontario Payday Loan Act allows for $15 to be charge per $100 borrowed. Be clear, however, that this is not $15 per year, this is $15 for a two-week period… which is the equivalent of an annual interest rate of 390 per cent!! (Yup – I’m doing it, two exclamation marks.) Yet, default charges are not included here. If you miss a payment, your interest rate would be even higher.
Granted, payday loans are supposed to be short term, but the annualized rate is what it is, and most people don’t simply take out $100 on a payday loan.
Whether a payday loan or an “affordable loan solution” like the one that came in the mail, I need to ask: When did it become OK to prey on people who are down on their luck? When did it become OK to actually stand on their backs to make it almost impossible to ever get back up? How can anyone ever get past being stuck on their proverbial knees at these rates? When did the loan shark business become legitimized and be given storefronts in every city?
Various religions used to call for a punishment of death for usury. I’m not saying that is the answer here, but if a society is judged on how it treats its most vulnerable, we are not even close to ethical here.