Anti-poverty activists say Ottawa should join the fight for fair banking by lowering the criminal rate of interest.
ACORN Canada, a community organization representing low and moderate-income people, recently held demonstrations against “predatory lenders” such as Easy Financial and Fairstone.
The New Brunswick chapter rallied on January 24 outside a Fairstone office in Moncton as part of a National Day of Action. ACORN also held rallies in Calgary, Toronto, and several other cities across the country.
The group is demanding the federal government lower the criminal rate of interest from 60 to 30 per cent inclusive of all charges, fees, and interest rates, said Peter Jongeneelen, co-chair of ACORN NB.
He said banks are “basically abandoning” low and moderate-income people.
Check out the full interview here:
The Criminal Code of Canada currently prohibits annual interest rates exceeding 60 per cent.
The federal Liberal Party pledged to “crack down on predatory lenders by lowering the criminal rate of interest” in its 2021 election platform and launched “consultations on fighting predatory lending” lasting from August to October 2022.
ACORN members from all over Canada sent more than 600 submissions to the federal government, highlighting their experiences with predatory lenders and the need for urgent action.
Banks are closing down in rural areas such as Grand Manan Island and people are forced to seek private lenders for emergency credit, said Jongeneelen.
But relying on private lenders comes with a considerable price, he said.
“A lot of people are one emergency away from having to use these predatory lenders… they can set pretty much whatever they want as an interest rate and get away with this. It’s basically legal loan sharking.”
For example, Easy Financial charges 9.99-46.96 per cent APR (annual percentage rate, or yearly interest) on loans with repayment terms ranging from nine to 240 months, according to its website.
Fairstone’s website offers quotes “based on a rate of no greater than 39.99 per cent APR with a term from 6-60 months” for unsecured loans from $500-$25,000, but the “actual rate will vary based on factors like credit score, homeownership status and loan amount.”
The NB Media Co-op reached out to Easy Financial and Fairstone but no comments were received.
Jongeneelen stressed the importance of postal banking to reduce people’s dependence on predatory lenders. Financial services are offered through the national postal operator in many countries, including Italy and Switzerland.
The Canadian Union of Postal Workers and the Canadian Postmasters and Assistants Association have campaigned for postal banking, calling it a “financial solution for millions of people in under-serviced Indigenous communities, towns, and villages in rural and urban areas.”
An official from the federal department of Finance told the NB Media Co-op in an emailed statement:
“Too many lower and modest-income Canadians are forced to rely on high-interest short-term loans to make ends meet, leaving them in a cycle of debt. To address this, the government is committed to cracking down on predatory lenders.
“Through a consultation process (link), the Department sought input from the general public and stakeholders to better understand the implications of lowering the criminal rate of interest, while also examining previous testimony, studies and reports on the subject. The Department also engaged with key consumer-advocacy groups to ensure a broad range of perspectives are heard.
“During the consultation, the Department of Finance received submissions from a broad range of stakeholders, that provide feedback on the rate, as well as other possible policy measures. The Department is in the process of reviewing the submissions.
“The government also continues to raise public awareness about the costs of and alternatives to high interest rate lending products by strengthening consumer education and enhancing financial literacy to empower Canadians to make informed and effective financial decisions. For example, the Financial Consumer Agency of Canada (FCAC) provides background information to Canadians on payday loans, found here:Payday loans – Canada.ca.
“Many provinces have enacted consumer protection laws pertaining to payday loans. Questions regarding their regulation should be directed to the appropriate provincial government.”
Arun Budhathoki is a video-journalist with the NB Media Co-op. This project has been made possible in part by the Government of Canada, administered by the Canadian Association of Community Television Stations and Users (CACTUS).
David Gordon Koch is a reporter and the NB Media Co-op’s part-time manager.