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Low-income families are in the middle of a “critical” time of year as anti-poverty advocates once again call on the federal government to lower the maximum mandatory interest rate in an effort to to curb “predatory” lenders.

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ACORN (Association of Community Organizations for Reform Now) members across the country held a national day of action earlier this month with protests at payday lenders, where people shared testimonials people from being “trapped in a cycle of indebtedness”, according to Bader Abu -Zahra, president of the Vanier ACORN chapter.

Vanier has one of the highest concentrations of payday lenders in Canada, said Abu-Zahra, and the pandemic has only increased demand.

“Right now, during the pandemic, people will have emergencies and they are forced to go to these lenders,” Abu-Zahra said. “They can’t get approved for a bank loan because they don’t make enough money, so they have to go to these payday lenders – not because they want to, but they have to. to take that money. “

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Once they signed up for a loan, Abu-Zahra said, he heard dozens of stories of “excessive” phone calls, either to offer more loans or incentives or to collect existing ones. already.

“They say they have excessive phone calls, (lenders) call to offer services, to offer loans, and they also call them and harass them to collect.”

ACORN conducted a national survey of its members and found that more than half have an annual individual income of less than $ 20,000, and 70 percent of those surveyed said they took out a loan at high interest, with rates of credit between 45 and 60 percent.

Of the 376 survey responses collected earlier this year, 30 percent said they had taken out a loan in the previous 12 months, while 13 percent said they had taken more than ten loans in the same period.

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The organization heard from people across the country, including Grace, an Ottawa mother who is still paying off a $ 5,000 loan she borrowed from a payday lender four years ago.

“Everything was fine, but then I lost my job due to COVID-19,” she wrote.

Unemployed, she first turned to Ontario Works and the federal ECP program, but faced enormous financial hardship with two daughters and one in college.

The incessant “threatening” phone calls made matters worse, Grace wrote.

“They keep calling me, harassing me, telling me they want to start all over again,” she wrote. “I can’t do it, I don’t have any money. I don’t care about my credit, I have to think about myself, about my children. I’m too stressed out, I don’t want to fall into depression.

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“The interest rate on these loans is just too high,” she wrote. “The balance I owe is way more than what I have withdrawn despite having been making regular payments for some time. “

A “large majority” of those surveyed (80%) said they took out loans to cover daily living expenses like rent, groceries and utility bills.

Others said they needed loans to cover medical expenses, illnesses and auto repair costs, and notably, ACORN said 22% of those surveyed took loans because they were told it would help. to repay other loans to improve their credit rating.

“People don’t always have knowledge of legal terms, or knowledge of reading contracts. And (with) this lack of understanding, I believe, people are being exploited, ”Abu-Zahra said.

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There are often hidden costs associated with loans, inflating the overall loan rate and increasing payments.

“So they can sign up for just one interest rate, and they don’t realize that there are additional loan costs, fees and insurance that make the real interest rate much higher,” Abu said. -Zahra.

The Canadian Consumer Finance Association, which represents companies that provide financial services to retail consumers, said in a statement that its members are already “highly regulated and licensed” under various provincial laws across Canada.

Payday loans are highly regulated and the fees charged are set by provincial governments based on their analysis of the cost of offering the product,” CCFA said in a statement.

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“Many hard-working Canadians do not have access to short- or long-term credit from banks, credit unions and trust companies. Government studies have shown that people access these loans from our members responsibly for necessary expected and unforeseen expenses.

“We would all like to pay less for products and services, but governments shouldn’t further restrict the interest rates that a lender can charge. If they did, the only result would be that more Canadians would be denied access to credit, or at least credit, from a government regulated lender.

Demand for credit would not change, the CCFA said, “and just move to illegal unlicensed online lenders.”

ACORN said that agencies offering online credit “present some of the same risks to consumers as store credit, but could potentially expose them to additional risks, as many high-cost online credit providers are not licensed or regulated “.

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ACORN calls on the federal government to lower the maximum interest rate from 60% to 30%, amend the penal code to include language specific to payday lenders, and intervene to force banks to reduce insufficient funds (NSF ) at $ 10.

More importantly, the organization calls on the government to reform banking laws to ensure that basic financial services are available to all Canadians.

“The federal government must compel banks to provide affordable loan to low and moderate income people backed by the Government of Canada,” ACORN said, “so they can avoid predatory lenders in times of personal financial crisis.

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