HomeMy WebLinkAboutCOR-19-024 - Payday Loan EstablishmentsREPORT TO: Finance and Corporate Services Committee
DATE OF MEETING:June 10, 2019
SUBMITTED BY: Christine Tarling,Director, Legislated Services & City Clerk,519-741-
2200 ext. 7809
PREPARED BY:Helen Fylactou,Manager, Licensing,519-741-2200 ext. 7854
WARD (S) INVOLVED:ALL
DATE OF REPORT:May 29, 2019
REPORT NO.: COR-19-024
SUBJECT: Payday Loan Establishments
___________________________________________________________________________
RECOMMENDATION:
That the Business Licensing By-law 2017-139, be amended to add the Payday Loan
EstablishmentSchedule (Schedule 17.1), as attached as Appendix ‘A’ to and outlined in
Corporate Servicesreport COR-19-024; and
That the feesset out in report COR-19-024 related to Payday Loan Establishments be
approved; and further,
That the 2020User Fee Scheduleinclude the Payday Loan Establishment fees.
BACKGROUND:
On November 3, 2016, amendments to both the Payday Loans Act, 2008and the Municipal Act,
2001(the “Act”), were introduced allowing municipalities to regulatethe number and location of
payday loan establishments. TheAct does not, however,permit municipalities to prohibit or ban
these businessesentirely. The changes to the Actcame as a direct result of the Minister of
Government and Consumer Services announcingPutting Consumers First Act, 2016(Bill 59).
The purpose of Bill59was to strengthen consumer protectionwhen using lending
establishments.
Paydayloan establishments do not currently have a dedicated schedule within the City of
Kitchener’s BusinessLicensing By-law; rather, they are captured under a general business
licencescheduleas apermanent vendorand theironly requirement is to obtain planning
approval. A permanent vendor licence is a one-time licence thatdoes not requirean annual
renewaland is most often used for general offices and retail stores.
*** This information is available in accessible formats upon request. ***
Please call 519-741-2345 or TTY 1-866-969-9994for assistance.
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REPORT:
Staff is recommending that the Business Licensing By-law be amended to take payday loan
establishments out of the Permanent Vendor classification and put theminto theirownschedule
in order toinclude specific regulations for payday loan establishmentsin accordance with what
is now permitted under the Act.These include regulating the location and the number of payday
loan establishments but not prohibiting or banning payday loan establishments entirely since
that is not permitted. As well, the regulations in the City’s proposed schedule do not include
regulating interest rates, percentage of rates and amount of loans, advertising, and marketing
because these are already regulated by the Provincial legislation, which requires that all payday
loan establishments be registered with the Province.
Staff’s goalin adding specific regulationsforpayday loan establishments, is not to prohibit these
businesses but rather to find a balance between protecting consumers and allowing these
businesses to operate for those who need them.Although overall comments received from
public consultation supported limiting or banning payday loan establishments, staff also heard,
there is a need for thesein the community for people whodo not have access to traditional
bankingor other lending institutions.The City of Hamilton was the first municipality to adopt a
limit to the number of payday loan establishments. Staff is proposing a similar model to Hamilton
and will continue to monitor in order to ensure the proposed modelmeets the needs of the
community. With the proposed amendments, staff hopesto better align with provincial
legislation, reduce concentration, disperse locations, and see a reductionin the number of
payday loan establishments over time.
The proposed schedule includes a requirement forpayday loan establishments to submit a
police clearance check, proof of insurance, and proof of valid lender or loan broker registration
with the Province.The business licensing inspector will also annuallyinspect each establishment
to ensure continued compliancewith the requirements previously indicated.In addition, the
schedule proposes to add a minimum distance separationbetween other payday loan
establishments, gambling and addiction treatment centres, and gaming sites (such as bingo
halls).
There are currently 18 licensed payday loan establishments in Kitchener. This schedule
proposes to eventually reduce the total number of establishmentswithin the city by limiting the
number of licences via attrition to a maximum of 10 citywide and with no more than 2
establishments per ward. These18 existing andlicensed payday loan establishments will be
recognized within the new scheduleandbe permitted to remain in operation as long as each
onecontinuesto meet the following criteria:
Apply under the new schedule, pay the new fee, and obtain a licence under the
proposed Payday Loan Establishment schedule;
Continueto operateas a Payday Loan Establishment;
Annually renewtheirlicence;
Do not move locations; and
Continue to be in compliance with all municipal, provincial, and federal legislation.
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All licences under the Business Licensing By-law are non-transferable. If the ownership was to
change, the licence would not be permitted to be renewed until the number of establishments
dropsto under 10. Byrecognizing these locations,staff realizesit will take time to see a reduction
tothe number of establishments but limiting the number overall will limit an increase.
ALIGNMENT WITH CITY OF KITCHENER STRATEGIC PLAN:
The recommendation of this report supports the achievement of the city’s strategic vision through
the delivery of core service.
FINANCIAL IMPLICATIONS:
The fees below are based on a cost-recoverymodel which includes covering the cost of
administration, inspections, and enforcement, as well as,a cost for havingexclusivity of a
licence. Staff have compared the proposed fees to those of the City of Hamilton, City of Toronto,
and City of London and have alignedthe feesaccordingly.
Staff are recommendingthat Council approve the followingfees for Payday Loan
Establishments:
Old FeeNew FeeRenewal FeeLate Fee
$125$575$375$450
Staff also recommends that the fees take effective immediately. Assuming all 18 existing payday
loan establishments come into compliance with the requirements for a licence, the expected
revenues foryear one will be approximately$10,350and $6750 annually for every subsequent
renewal year.Once the number of licences has been reduced to the maximum of 10, the amount
of revenue collected from renewal fees will be reduced to approximately $3750based on the
currently proposed fees.
COMMUNITY ENGAGEMENT:
Staff usedtheEngageKitchener platform to solicit publicfeedbackon payday loan
establishments with respectto the number of locations, physical locations of establishments,
and general comments. As well, staff reached out to specific groups such asthe Downtown
Kitchener BIA, Belmont BIA, The Working Centre, KW Multicultural Centre,and the Alliance
Against Poverty to promote participation in the survey. All licensed payday loan establishments
werealsocontacted and asked to partake in the survey.
Through the EngageKitchener survey, staff asked the following questions:
What of the following options best describes your experience with payday loan
establishments?
Which statement best describes your attitude towards payday loan establishments?
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The City of Kitchener is considering implementing a limit on the number of payday loan
establishments. There are currently 18 establishments registered in Kitchener. Is the
current number of establishments too low? Appropriate? Too high? No opinion/not sure?
Do you support establishinga minimum distance for a payday loan establishment from
gambling and addiction treatment facilities, licensed gaming facilities (bingo halls), other
payday loan establishments, or no minimum distance requirements?
A summary of the results and the general comments from the surveyhavebeen provided as
Appendix “B”.
ACKNOWLEDGED BY: Victoria Raab, General Manager, Corporate Services
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Appendix “A”
Amending By-law
BY-LAW NUMBER
OF THE
CORPORATION OF THE CITY OF KITCHENER
(Being a by-law to amend Chapter 599 of The City of Kitchener
Municipal Code with respect to Licensing and Regulation of
Businesses.)
WHEREAS it is deemed expedient to amend Chapter 599 of The City of Kitchener
Municipal Code as adopted by By-law 88-100;
NOW THEREFORE the Council of the Corporation of the City of Kitchener enacts as
follows:
1.Article 1 of Chapter 599 of The City of Kitchener Municipal Code is hereby amended by
adding the following definitions and renumbering the other definitions accordingly:
“ “Gaming Site” means a gaming site as defined under the Ontario Lottery and Gaming
Corporation Act, 1999,S.O. 1999, c. 12, Sched. L.
“Payday Loan” shall have the definitionset out in the Payday Loans Act, 2008, S.O. 2008,
c. 9.
“Payday Loan Establishment” means any premises or any part of them in respect of which
a licensee within the meaning of the Payday Loans Act, 2008, S.O. 2008, c. 9 may operate
a business pursuant toa licence issued under that Act.”
2.Schedule 1 of Chapter 599 of The City of Kitchener Municipal Code is hereby amended
by adding respectively under the headings “Type of Business”, “Expiry Date”, and
“Regulations” the following in its appropriate numeric order:
“Payday Loan Establishment March 31 Schedule 17.1”.
3.Chapter 599 of The City of Kitchener Municipal Code is hereby amended by inserting the
Schedule attached to this by-law as Appendix A as Schedule 17.1 to Chapter 599 of The
City of Kitchener Municipal Code.
4.Schedule 29 of Chapter 599 of The City of Kitchener Municipal Code is hereby amended
by adding respectively under the headings “Type of Business”,
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“Requirements/Approvals”, and “Due Date” the following in its appropriate alphabetic
order:
“Payday Loan Police Record Check, Insurance, March 31”
EstablishmentProof of current and valid licence
as a lender or loan broker under
the Payday Loans Act, 2008
PASSED at the Council Chambers in the City of Kitchenerthis day
of , A.D. 2019.
_____________________________________
Mayor
_____________________________________
Clerk
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APPENDIX A
SCHEDULE 17.1
PAYDAY LOAN ESTABLISHMENTS
1.In addition to the licensing requirements set out in Article 4 of this Chapter, an Applicant
for a Payday Loan Establishment Licence shall supply the following:
a)Planning Approval;
b)Police Record Check;
c) Proof of current and valid licence as a lender or loan broker under the Payday
Loans Act, 2008; and
d)Proof of Insurance.
2.Every Payday Loan Establishment Operator shall have a separate Licence for each
Payday Loan Establishment location.
3.No more than ten (10) Payday Loan Establishment Licences shall be issued in the city
of Kitchener.
4.Nor more than two (2) Payday Loan Establishment Licences shall be issued in any one
ward of the city of Kitchener.
5.No new Licence shall be issued for Payday Loan Establishment if the proposed location
is:
a)located within 150 metres of another Licensed Payday Loan Establishment;
b)Located within 150 metres of any Gaming Establishment; or
c) Located within 150 metres of any addiction or gambling counselling service.
6.Despite sections 3, 4, and 5 of this Schedule, any Payday Loan Establishment existing
onJune 24, 2019may continue to operate in the same location provide:
a)The Operator had a current and valid Permanent Vendor Licence or Old Gold
Licence for the Payday Loan Establishment on June 24, 2019;
b)The Operator obtains a Payday Loan Establishment Licence by March 31, 2020;
c) The Business is operated continuously as a Payday Loan Establishment;
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d)The Business is, at all times, operated in compliance with this Chapter and all
applicable municipal, provincial, and federal laws; and
e)The Payday Loan Establishment Licence is renewed annually as required by this
Chapter.
7.The Payday Loan Establishments existing on June 24, 2019 are at the following
locations:
a)500 FairwayRoad South;
b)25 Frederick Street;
c) 215 Highland Road West;
d)370 Highland Road West;
e)465 Highland Road West;
f)525 Highland Road West;
g)625 King Street East;
h)1253 King Street East;
i)2880 King Street East;
j)4396 King Street East;
k) 78 King Street West;
l)648King Street West;
m)670 King Street West;
n)3101 Kingsway Drive;
o)725 Ottawa Street South;
p)12 Water Street North;
q)1087 Weber Street East; and
r)1335 Weber Street East.
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Appendix “B”
Summary of Results of Payday Loan Establishment Survey
Thesurvey ran on the Engage Kitchener platform for 2 weeks and received responses from 127
participants.The majority of the comments were in favour of the City adding stricter regulations
regarding the total number of establishments and the location of these establishments. Some of
the highlights from the survey include:
A majority of participants (77.8%) dislike having these establishments in the community.
A majority of participants (81.0%) support implementing a limit on the number of
establishments in the community.
A majority of participants (90.4%) support adding minimum distance requirements.
Summaries of the responses are included below:
Q1: What of the following options best describes your experience with payday loan
establishments:
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Q2: Which statementbest describes your attitude towards pay day loan establishments:
Q3 – Comments related to Question 2
Numberof comments to question “Which statement best describes your attitude towards
payday loan establishments?”
Total Number of Comments59
Positive5
Neutral 5
Against49
Summary of Comments:The majority of the comments surrounding payday loan
establishments were negative. The main themes that came out of the comments were that these
establishments perpetuate the cycle of poverty, take advantage of vulnerable persons, and the
fees are exorbitant.
However, there were a few comments that felt neutral towards the establishments but felt that
the City could regulate them further in terms of how many there are and the number that exist
within a radius.
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Q4: The City of Kitchener is considering implementing a limit on the number of payday
loan establishments. There are currently 18 establishments registered in Kitchener. Is
the current number of establishments…too low, appropriate, too high, not sure/no
opinion.
Q5 – Comments related to Question 2
Numberof comments to question “The City of Kitchener is considering implementing a limit
on the number of payday loan establishments. There are currently 18 establishments
registered in Kitchener. Is the current number of establishments…too low, appropriate…too
high…not sure/no opinion?”
Total Number of Comments35
Too Low0
Appropriate6
Too High26
Not sure/no opinion3
Summary of Comments:A lot of the comments mirrored the concerns raised in comments
around how people feel about payday loan establishments. The comments received spanned
from indicating that reducing the number won’t have an impact because people will go online for
the same service, to creating a prohibition. Most comments were in support of the City
implementinga limitin the number.
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Q6: Do you support establishing minimum distance for payday loan establishments from
(choose all that apply): gambling and addiction facilities, licensed gaming facilities, other
pay day loan establishments, I do not support minimum distance requirements.
Q7 – Comments related to Question 6
Number of comments to question “Do you support establishing minimum distances for a
payday loan establishment from…Gambling and addiction treatment facilities, licensed
gaming facilities, other payday loan establishments, I do not support minimum distance
requirements.”
Total Number of Comments26
Support22
Do not support4
Summary of Comments: Themajority of the comments were in support of a minimum distance
separation. Several comments suggested the inclusion of distance separations from other
locations such as schools, cannabis stores, downtown Kitchener, and other high density zones.
Although most were in support, a couple of comments were submitted stating the eliminationof
these establishments would bea hindrance to the customers that require this service.
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Q8 – General comments about Payday Loan Establishments
Included below are the general comments submitted as part of the survey:
Supportive of payday loans (3 comments)
i find them very helpful and the Ontariogovernment has already reduced how much I can
borrow from payday loan places which has already hurt me.Stop it.
I understand that once and a while people need a bit extra in the moment. For rent andwhat
not. But I'm concerned that these establishments if used routinely by the same people
promote bad financial habits.
The number of licensed payday loan establishments in Ontario is shrinking. Recent changes
to the Ontario Payday Loan Act has resulted in the business not expanding (i.e. opening new
locations), Some locations are exiting the business and some locations are restricting their
lending criteria.
They province of Ontario already has strict regulations in place. Adding additional
restriction/regulations, may lead to those seeking additional credit to seek out unlicensed
online lenders if the result of increasing restrictions are that traditional licensed store front
lenders have to close.
Supportive of total prohibition (15 comments)
Please get them outta town -they are scummy, and unnecessary. They play no positive role
in society. They play A role, but it's not positive, so why include them in our city?
They need to be gone.
They are leeches on the more desperate low income
These are horrible businesses and perpetuate a spiral of debt and compound people’s
problems as opposed to helping them.
I'd like to see them eliminated.
At a very minimum, the interest rates and amounts available for loan need to be strictly
capped and comparable to, at absolute worst, credit card rates.
I know someone who was on drugs and thanks to payday loans he couldfeed his habit. Of
course they were not paid back on time. I hate these places. I think they should all be shut
down.
Is there any way to make these organizations stop robbing people?
Payday loan establishments in my opinion should be outlawed -their rates are legal usury.
It would be preferable to regulate the banks to limit credit to those who cannot justify it, and
similarly press them to provide consolidation loans at reasonable rates. Currently, banks
actually refuse this strategy for those that do not have pledged assets (ie are not "preferred"
/ "well off" customers) - this pushes people to unethical lenders, among them payday loan
organizations. I have no qualms about pushing people into negotiated debt settlements
earlier - it might even spur better credit behaviors on the part of both the banks and
individuals!
A BAN. Or in the least, tighter loan testing matched w/ more regulations to protect the youth
and the vulnerable citizens!! Also, a cap on interest payables?
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**Is there any current protection for the vulnerable youth that have already invested their
souls in these establishments??
IF there is a Cambridge survey existing please kindly inform me. Thank you in advance.
Get rid of them and establish financial advice establishments instead. Some people are
afraid to go to the banks for advice or have a bad credit rating including bankruptcy. We
need to help not enable our community.
You either ban them outright or you allow them. Limiting them is a bit silly as that doesn't
accomplish much. They are just a bus ride away.
They are rebranding themselves I noticed (see Money Mart 'Financial Services') to appeara
bit above the cheque cashing business. I would rather see better education into why opening
a bank account is better in the long run however. That is outside of the scope of this survey
though.
Interest rates are obscene. Low income have a hard time making ends meet, and these
establishments take advantage of their situation. There’s no societal benefit to taxing the
poor in this manner.
I feel Payday loan establishments have no place in our community.
I don't know why the government allows these establishments that prey upon people with
bad credit (who shouldn't be borrowing in the first place.)
I feel the Payday loan places are like loan sharks. They lure desperate people in to borrow
money with such high interest they have no hope in being able to pay it off. I work with many
clients that are on ODSP or CPP that have used these places and got tied up with several of
them as there is no barrier to them going to 2 or 3 different places and borrowing money they
can never repay. It is heartbreaking to see this happening in our community.
These are almost "criminal" establishments that steal money from the poorest among us.
The interest rates are ridiculous!
Supportive of city-implemented controls (41 comments)
The interest rates these places charge is offensive. They are preying on the vulnerable and
in my opinion it's disturbing that our politicians haven't done anything about it.
Further regulation is needed Federally to reduce fees and interest rates to people in need.
It absolutely should be done, and the people that disagree either don't understand the nature
of these places, are being abused by them, or are working for them.
These institutions need to be much better regulated and the damage they do evaluated.
Support community co-op savings and loan model establishments instead. Support financial
literacy instead - require these establishments to carry literature and connections to
subsidized or free debt-relief and financial counselling.
Please do. They prey on those who cannot manage money, making their situation worse -
legalized loan sharking. Come to think of it, maybe this better than criminal loan sharking.
So, best to get some tight controls in place
I was caught up in the payday loan cycle and it is tough to get out of. I don't think we need
18 establishments for our city
Make a move to restrict the rates for these establishments preying on the poor!
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I think regulation of these businesses should be up to the province. But the City should put
limits on where and how many are located in a certain area.
I think there needs to be some education of the community for options on dealing with debt
and using regular bank services.
They should be required tocarry and prominently display pamphlets about proper financial
counseling and financial management toolsand advice and or posters. They should be
required to show and explain the REAL ANNUALIZED rates as well as the three month rate -
people get tricked and don't realize how bad it really is.
These establishments are expressly designed to extract the maximum amount of money
from those least able to afford it. Limiting their presence to an absolute minimum is the only
way to balance what little benefits they provide against their toll in human misery.
Encourage the government to enact regulations to enact the part of the legislation which
puts a fee on pay day lenders to fund education and research
I think the interest they can charge, or the fee for cashing a cheque is predatory.
Payday Loan establishments often use predatory tactics to attract poorer citizens of our
communities. The benefits of payday loans are quite limited, and more often provide an
innocent way for people stuck in a bad financial situation to make it worse. If someone was
short to pay bills and require a payday loan to pay them one month, how could they afford
them next month with the added interest of the loan? It didn't provide them a way out, it just
made everything worse.
They do not provide a benefit to the community and I would like to see them limited.
I'm glad that some regulation is going into place for these establishments. They can
misbehave frequently.
Limit how high interest rates can be. In financial/loan paperwork, require clear language (i.e.
Essential Skills level 2) so people are not taken advantage of due to not understanding the
terms.
Have brochures/information available on supports / social services in the area (i.e.
addictions, debt, counselling)
I believe there is a law (federal or provincial) that limits the amount of interest that can be
charged, and as best as I can figure out, these places are WAY over that on an annual
basis.
If possible reduce their costs to customers and make more reasonable offerings.
Regulating payday loan establishments is treating the symptom, not the cause. Why are
people going to payday loan establishments in the first place? Provide more free community
services and low-cost services. Support a living wage. Do more.
they need more regulation of their predatory policies and high interest rates. maybe limit
how they can advertise bonuses etc. that lure desperate people into their establishments
The more they are restricted the better, they do nothing to build our community up and only
serve to hurt and drag down those who are already in a tough spot.
Too much high rate , need to change that to be low
Regulations on their marketing practices? They can't target where vulnerable individuals
frequent, i.e. food bank, downtown/uptowns, student ghettos.
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As I said before I think some kind of payday loan ought to be available through the bank at a
reasonable rate. They take advantage of us in every possible way already. Our fees and our
high interest rates already line the pockets of people who don't need the money. They
benefit from the money to do special things that we could never afford to. I have not had a
vacation in 10 years. I am so desperate for money that I take the small amount of pay in lieu
of vacation. 69 years of age I have a right to protest this. Most especially I protest this
because the banks foreclosed on small businesses almost 30 years ago because they have
to recover their losses when canary wharf went bankrupt. We just not invest in canary wharf.
The banks invested in canary wharf. Because they lost money on that they recouped it on
the backs of the small business people. that was so that the rich business people would not
experience a temporary loss of more expensive vacations and cars. Yes I am very angry.
You can reach me at XXXX@XXXX.com. I am more than willing to talk about this. the
auditor that they sent to our company was in tears when she told us that the bank was
foreclosing. In fact the audit was just for show. She learned that the banks had already
planned to close us down. Us and many other small companies. I still feel that the banks
ought to have been investigated for that. Please please someone look into this
Regulation of such establishments should include the fees that they apply. These should be
in keeping with other loan rates.
As I mentioned in comment #1, the interest rates they charge is what needs to be regulated.
At present, their fees are just usury. Very sad.
I do think we have way to many payday loan place in Kitchener and thus cause people
hardship and they charge way to much interest.Thenumber of place should cut in half
I don't like them, pray on the ones that can least afford it. Fees are high and I know they
have to pay employees. I just feel you never can stop once you start borrowing, seen that
first hand with my mom.
There shouldbe limits on the amount of interest/service fees they can charge. These payday
loan places take advantage of vulnerable people.
Regulate the interest rate they can charge to the same as regular credit cards
They prey on low income people in the community and should be regulated as strictly as
possible, if not banned.
I'm hopeful the city with limit/eliminate these predatory establishments
Payday loans as a support system for helping with being close to poverty lines do not make
money. This should be a government offered and regulated service if we want it to be helpful
to people. High interest loans when you are not making enough money to cover your bills
when they come in rarely do much to help people in trouble. There should be a limit to the
number of loans that you can give to one person and limits on the amount of interest that
can be charged (and the amount of time they can charge interest for) because you can
easily find yourself with loans you will never be able to pay in these situations.
I would support less restrictions on the establishments in exchange for tighter regulations on
their operation.
Much more regulation is needed to protect vulnerable clients of payday loan establishments
I think regional regulation won't solve their issues. Itrequires a regulation as to how they
finance and provide money and an educational component
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Our approach shouldn't be to prevent access to these services. It should be to bring people
to a point where they themselves have tools/methods for either avoiding these services
altogether or at least limiting their use to a "healthy" amount.
Perhaps our three levels of government could begin (each in their own way) to take some
responsibility for establishing compassionate, sustainable ways of assisting low-income folks
who are in pressing financial short-term need. If we consider ourselves to be at all decent,
we really should not be enabling organizations that gouge the poor with high interest rates
and offer no alternative. Can't we do better?
I think the answers to your questions say it all.
I'm not sure that this is a problem that we can not fix with government regulation. This is a
social problem and even if we were to close all of them across the province I would not solve
the problem. The solution is education
I believe that banks are shirking the responsibilities and should be offering payday loans for
anyone who needs it. banksare wealthy enough that they can afford this. I was shocked to
find out that payday establishments can now offer lines of credit, etc.
END OF SURVEY
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