“Perhaps there is a need to consider the micro credit loans that have been successful in developing countries should be taken under the consideration on a national level,” Ms. Eng says.
The Payday loan industry is at its strongest in Ontario, with 700 out of 1,300 stores in Canada located in this province. On March 31, 2008, Ted McMeekin, Ontario’s Minister of Government and Consumer Services, introduced the Payday Loans Act. If passed, the Act will place a cap on total costs of borrowing, implement an inspection and enforcement regime, and launch a public education campaign funded by payday loan companies. The recommended cap on cost of borrowing is to be set at 35 per cent, which could possibly drive out the industry, as it has in Quebec.
“We want Payday lenders in Ontario to be ethical and accountable, and the new Payday Loans Act is another important step in protecting Ontario consumers who use this service,” McMeekin said.
While the public awaits the decision on The Payday Loans Act, which should be made in the upcoming months, The Royal Bank of Canada, in collaboration with St. Christopher House, has set up an innovative cheque-cashing pilot project called Cash and Save. Located in Parkdale at Queen Street West and Lansdowne Avenue in Toronto, the service provides basic banking needs such as cheque cashing, bill payments, Canadian and U.S. money orders, and wire transfers at low-cost. Customers pay a fee of 1.25 percent of the face value, with a minimum fee of $4.00, for cheques up to $1,500. Customers are not required to have an account, but need to register with two pieces of identification.
Gap between low income community and financial institutions
Over a million people or 4 per cent of the Canadian population is ‘un-banked’, and 38 per cent of Canadians aged 55 and older cited having no income as a reason for not having a bank account. Toronto – the largest city in the country, with a very dense low-income population – has only one temporary outlet providing banking services at an affordable cost.
When we take all of this into consideration, we should ask ourselves, when did basic financial services become a privilege unavailable to those who need it most?
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