A new report warns in a country where there are more payday loan shops than Shoppers Drug Marts, stricter government regulations are needed to rein in high-interest lenders amidst the COVID-19 pandemic.
When confronted with inaction, cash advance businesses will dsicover “windfall profits at the cost of low- and moderate-income people” who chance dropping into “debt traps” throughout the outbreak, in accordance with the study circulated Tuesday because of the Canadian Centre for Policy Alternatives.
“The sharks will always be circling, and COVID-19 is tossing lots of people in to the water each day, making them prey that is easy” the report states.
Ricardo Tranjan, a senior researcher with the CCPA’s Ontario office stated a COVID-19 reaction “should add further regulation of payday lending” including slashing maximum rates of interest.
“We can expect lending that is payday drastically increase as thousands of people, particularly low wage workers, lose their income, ” he stated.
“We want to be sure whatever income help they’ve been getting allows them to satisfy their basic needs and does not get toward having to pay interest that is exorbitantly high. ”
Payday advances are the highest priced as a type of credit available; in Ontario, the yearly rate of interest on an online payday loan ranges as much as 391 %. Some payday lenders in the province appear to be expanding their range of services amid the COVID-19 pandemic as previously reported by the Star, as banks slash interest rates.