CBC News has learned that the Ontario government will attempt to revoke the license of Cash Store Financial Services, one of the largest cash advance stores in the country.
The Ontario Ministry of Consumer Services alleges the company violated Ontario’s Payday Loans Act, which limits the fees that can be charged by payday loan companies.
Cash Store Financial Services has 200 outlets in Ontario alone: InstaLoans and The Cash Store.
They operate in 19 different communities across the province.
The Department of Consumer Services alleges that the company is guilty of “several violations” of the law. It says Cash Store charged customers more than the maximum allowed – no more than $ 21 for every $ 100 borrowed – or charged prohibited fees.
Anyone attempting to take out a payday loan at their locations in the province was required to withdraw the money, not in cash, but on a prepaid debit card. Cash Store reportedly charged an additional fee – up to $ 18 to activate the card, $ 8 per month to keep it active, and $ 10 to reload it – on top of the $ 21 per $ 100 fee.
The ministry is asking a provincial court to revoke the company’s license.
Company requesting a hearing
Cash Store Financial Services issued a statement requesting a hearing into the case. The company also says it has changed the way it does business in Ontario and no longer offers payday loans in the province, so any decision to revoke these services will not disrupt its operations.
The company also claims that the government tried to force it to provide payday loans in cash rather than prepaid debit cards and tried to prevent it from selling products other than payday loans.
Executives at Cash Store’s head office in Edmonton did not respond to calls from CBC News for comment.
Government officials call it a “major consumer protection enforcement measure” and say they will release more information on Wednesday.
New Premier Kathleen Wynne said Wednesday the Liberals passed the Payday Loans Act to prevent businesses from deceiving consumers.
“There were vulnerabilities for people who used these services, and we want to make sure they are protected,” she said at a press conference, but declined to comment on this specific case.
More regulation needed, says NDP MP
The province passed the Payday Loans Act in 2008, designed to prevent businesses from charging exorbitant or hidden fees when lending money to the working poor.
Among the regulations of the law, there is a limit on the total cost of borrowing – a maximum of $ 21 on every $ 100 borrowed.
But NDP MP Cheri Di Novo says that rate is sky-high and that $ 21 charged for a two-week payday loan actually translates into hundreds of percent interest when calculated over a full year. , like other loans like a mortgage.
She says the provincial government needs to do more to protect consumers and that the current law does not go far enough. In 2007, Di Novo tried to pass a private member’s bill to cap the interest rate at 35 percent, but was unsuccessful.
“If you ask most Ontarians, is charging more than 35% interest at a time when interest rates are around 1% to 3%, is that reasonable? said Di Novo.
“I would say that is more than reasonable in terms of profit. Most banks would do a headstand if they could charge that kind of interest rate.”
The loan agreement has fee levels, depending on the user
Other than the fee cap, there is no maximum interest rate these companies can charge, according to the Department of Consumer Services.
A payday loan user, who only asked to be identified as Joe, said these financial transactions were a scam.
But, he said he and his partner had no choice but to use them. Last week, they borrowed $ 500 from a Cash Store – a loan he says will cost him $ 650 to repay.
He told CBC News he had to pay 17% interest, on top of all other costs. The loan agreement comes with a lot of fine print and several levels of fees, Joe says.
“They take advantage of people who have no other options,” he said.