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Making Payday Loans Work

Many of us balk at the interest rate of our credit cards when we open our monthly statement. If 18% or 20% a year seems excessive, imagine getting a loan at a 600% interest rate. Now imagine that the lender doesn’t even have to tell you that’s the rate.
In Alberta, 600% and even higher is what a payday lender can charge when you annualize the interest on the loan. They get around advertising this number by saying the loan is for two weeks only and that the fee they charge is only $23 for every $100 you borrow. If only it were true that these loans were only two weeks in length. Most borrowers go into the arrangement hoping loans only last that long. They rarely do.
Momentum participants have told us that the fees charged are so high it is difficult to come up with the money, the fees, and meet next month’s bills in such a short time. One participant paid $2500 in fees over a 10 month period on his original $600 loan. Talk about expensive!
Momentum has been working with the provincial and municipal government to fix this problem. This issue will go to City Hall on Wednesday, March 11th. Momentum is asking the City to prevent payday loan businesses from setting up shop in low income neighbourhoods more than they do already.
Provincially, Momentum is working to reduce the cost of loans and allow people to repay a loan in installments rather than in one lump sum. This allows people to get out of a payday loan debt cycle more easily.
Momentum has been advocating this for some time and our efforts are getting recognized. Our staff has been interview for two Herald articles this week and was on CBC radio on March 5th. Have a read and a listen. What do you think about the rules for payday lending?
Our research on payday lending is available at www.momentum.org/publications.
Related Links:
Calgary Herald – Non-profit Agency Calls for Action on Payday Loan Regulations
CBC Homestretch – March 5, 2015
Calgary Herald – City Hall to Weigh Restrictions on Payday Loan Outlets