rate of interest
Approximately eight million Canadians are “non-prime” borrowers because of their poor credit scores, with an additional 300,000 having no credit score at all. This means a sizeable chunk of Canada’s population cannot simply walk into a bank and get a loan or credit card whenever they need it. Going to an alternative lender who charges exorbitant rates can thus make perfect sense.
Asked about the implications of a new $14 national rate, the CCFA predicts “borrowers will lose access to licensed, legal lenders.” The group points to Newfoundland as proving its case. “No company to our knowledge is solely a payday lender in Newfoundland. They would not be able to survive.” In 2018 an academic analysis concluded a $15 fee was likely the minimum sustainable rate for the industry. It thus appears Ottawa’s plan is to eliminate payday lenders by stealth.
Consider Quebec, which never participated in the provincialization of payday loans and therefore does not have a legal payday loan industry. Of course, this doesn’t mean Quebeckers don’t need — or don’t have access to — short-term, high-interest loans. It just means all such transactions occur illegally in the unregulated black market.