Businesses that charge more than 60% interest on money they lends to customers are committing a criminal offence in Canada. Sounds pretty high, doesn’t it? It turns out that that’s only part of the story. Provincial governments are allowed to set rates higher than 60% for payday loan businesses. These are businesses that lend to people who are considered to be too risky by banks and other financial institutions.
A recent article in The Monitor looks at data gathered by Statistics Canada and reports the impact of these lending rules. Housing costs are intimately involved. Tenants and owners who have housing costs that are more than 50% of their income are most likely to take debt or sell assets.
It sure looks like governments in Canada can directly support the people with the highest housing costs by lowering the interest rates that payday loan companies can charge. Extending that 60% rate to all businesses, which still seems pretty high, would be a start.
Canada is not the only country with payday loan companies. Readers in other countries may wish to take note of the methods used here as well as the findings.
For more, including why Québec has the lowest rate of payday loaning in the country, check The Monitor: Predatory lending and housing insecurity, an obvious link worth stressing