Payday loans are awful, but they are often the best of a suite of worse choices that include bank fees for bounced checks
The federal government’s actions should be seen in the same light: nice, maybe, but unlikely to make a real difference in the lives of lower-income people.
Moreover, our research shows that there is a real possibility that the rate change might constrain the choices of low-income Canadians even more. Provinces have made similar moves before. When we did research after the provincial rate reductions, we discovered significant consolidation in the industry; small providers went out of business, larger players such as Money Mart gained more market share, and the total number of providers fell.
Ontario, for instance, has lost nearly 30 per cent of its shops from 2016 to 2023, with the number of lenders declining sharply the year after the province cut maximum . This is in line with Cardus research using financial data from big payday-loan firms that showed that the break-even rate for lenders to be $14 per $100. It’s entirely likely that the federal rate mandate will expedite these closings.Sadly, neither the federal nor provincial governments have a clue. These new rules have assumed, rather than proved, that fewer lenders will benefit consumers.
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