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Ripple of Change: Big Impact through Policy Change

Momentum’s public policy program is focused on change that reduces barriers or creates more opportunities for people living on low incomes in our community.

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Wed Jan 17, 2024 by Jeff Loomis

Momentum often tells stories of individual participants who, through programs, are building assets, achieving a sustainable livelihood, and creating the breathing room they need to be able to contribute to their community. A second, important component of our work is how we participate to make change happen at a systems level. These efforts don’t always have the impact we hope for, but when they do, they can positively change the lives of thousands of people. Our Ripples of Change series shines light on these longer-term, more complex stories of impact—Both Momentum’s, and that of our partners.

Momentum knows that to achieve our mission of a local economy that works better for everyone we need to influence policy change. As a result, we launched a public policy program over 10 years ago.

Momentum’s public policy program is focused on change that reduces barriers or creates more opportunities for people living on low incomes in our community. We decide what to work on based on how big of an issue something is for participants and others living on a low income, how big of a difference a change could have, and how ‘winnable’ we think the issue is.

Our very first policy priority was to address the issue of payday loans and other forms of high-cost credit (ie: installment loans or rent-to-own products). At that time, Alberta was the most expensive province in Canada to get a payday loan. The annualized interest of payday loans and other forms of high-cost credit was regularly up to 600% or more.

We became aware of the challenges of payday lending through our programs. Many financial empowerment program participants struggled with high-cost credit debt loads and big debt payments were showing up on their budget worksheets. One participant, Timothy, had borrowed $600 to pay for his mother’s medical expenses in Nigeria and ended up paying $2400 in interest when he paid off the loan just one year later. Calgary’s Enough for All poverty reduction strategy also identified payday loans as a key barrier to reduce poverty in our community. It just felt unfair that the people who can least afford credit had to pay the most to borrow money.

In our work towards change of the payday rules in our community, Momentum took key steps along the way to policy change:

  1. Develop original research: We published reports that highlighted the challenges of payday lending and other high-cost credit products for people living on low incomes.
  2. Offer options for change: We developed reports that highlighted policy options to reduce the negative impact of high-cost credit loans.
  3. Raise the volume: Community awareness of the issue of payday loans was raised through media coverage and social media attention on Momentum’s reports.
  4. Build a coalition: Together with community partners like the International Ave Business Revitalization Zone (BRZ), Vibrant Communities Calgary and Connect First Credit Union (First Calgary at the time), we advocated to different levels of government to change payday loan policy.
  5. Continue to pay attention: We celebrate policy wins, monitor the impact of the change, and scan for future opportunities for influence.

The City of Calgary was the first to change payday loan policy in 2015 by changing the land use bylaw. The updated bylaw limited the clustering of payday loan outlets and allowed better tracking of payday loan locations.

The next year, the provincial government announced new legislation that was a significant change to payday loan policy in Alberta. The new legislation reduced the maximum lending rate from $23 to $15 per $100 borrowed, dropping Alberta from the highest borrowing rate to the lowest rate in Canada.

In 2017, the provincial government also developed new consumer protection rules that included several Momentum high-cost credit policy recommendations. The new high-cost credit rules introduced a definition for high-cost credit of 32% interest rate and above and established new disclosure and advertising requirements and new licensing requirements for high-interest lenders to better protect Alberta borrowers. 

These policy changes had a significant impact on payday lending in Alberta. After the new provincial policies were implemented:

  • The number of payday lending businesses in Alberta decreased, from about 220 stores to 165 stores between 2016 and 2018. 
  • Alberta became the most affordable province in Canada to get a payday loan resulted in borrowers annually saving over $10 million in interest payments.
  • The number of individual borrowers and total number of loans in Alberta decreased.
  • Mount Royal University research indicated that the provincial legislative changes did not drive consumers to online or more unsafe borrowing. 

Many Albertans living on lower incomes and struggling with debt are better off now due to the system level changes in our province.

Where are we now?

Momentum’s effort to influence high-cost credit policy continues with a national focus. After urging the federal government to revise its criminal rate of interest, it announced an intention to make the change in spring 2023. Draft regulations were published that propose a drop in the criminal rate of interest from 48% to 35% with an important caveat: exemptions for pawn loans and some small business loans.

Momentum opposes the exemptions: they enable too much high-cost lending to continue, which negatively impacts Canadians struggling with debt. Momentum continues to push for a fair lending framework nationwide, because these changes can support more people to achieve a sustainable livelihood and contribute meaningfully to their communities.

Read more about our impact through other posts in our Ripples of Change series.