Desperate people do desperate things.
That’s one of the reasons why Chilliwack council voted Tuesday to ask the federal government to ratchet down the maximum interest rate that can be charged on short-term loans.
The issue is predatory business practices of some outfits who offer cheque-cashing services and charge very high rates and fees.
Council is leaning on the federal government because it’s become a public safety, and healthier community issue for the municipality.
“These places are popping up all over town,” said Coun. Sue Attrill about payday loan outlets, the councillor who moved the resolution.
It’s hard to regulate as a municipality since the interest rate maximums are set under federal jurisdiction, she said, but it’s “outrageous” how high the interest rate can go.
Chief Administrative Officer Peter Monteith told council it couldn’t “prohibit” this type of business, but it could if it wished to “regulate” the activity, by creating a “payday loan zone,” so any new ones would be required to go before public hearing for rezoning.
“We have some social issues in Chilliwack, as does every growing city. This has become a significant social issue,” said Coun. Attrill.
These businesses are legitimate, the councillor underlined, “and they have every right to be in business,” but they tend to charge an exorbitant rate of interest in the short-term, up to 60 per cent.
“For people who are already marginalized, they end up getting themselves in trouble, living payday to payday, and giving up any disposable income just to make ends meet,” she said.
Anyone using these loan services on regular basis, “eventually finds themselves in trouble,” Coun. Attrill said. “It doesn’t leave a lot of options.”
They’re firing off the request this week.
“We hope that will meet with favour from Ottawa,” Attrill added.
Coun. Jason Lum noted that other municipalities have been proactive as well, limiting the number of them and proximity to each other, in a similar way to what Chilliwack does with pawn shops.
In the end, council voted to request in writing to the Minister of Justice and Attorney General of Canada “that Section 347 of the Criminal Code of Canada be amended to reduce the maximum amount of interest that can be charged for a loan.”
They also voted to use some municipal muscle by endorsing the resolution that the Federation of Canadian Municipalities put forth, asking the feds to reduce the maximum interest rate.