According to the Canadian Payday Loan Association, there are approximately 44 payday loan locations in Hamilton. Research by the Bay Observer shows that the vast majority of these are within 10 km of Hamilton Centre, statistically the poorest part of the city.
A recent Ontario ruling, alleging overcharging and high interest fees, mean that all branches owned by Cash Store Financial- 11 Cash Store and Instaloan locations- can no longer provide payday loans to customers, reducing the number of Hamilton payday loan operations to 33 stores. CS Financial is appealing the province’s decision.
Stan Keyes, president of the Canadian Payday Loan Association, says that there is a lot of misinformation about payday loan stores and the people who use them.
“The average amount borrowed, as far as a small sum, short term loan is concerned, is about 300 dollars for a period of 8-14 days to coincide with the customer’s next pay day,” he said. “I think we have to remember that payday loan outlets will of course, in a convenient and quick manner, offer individuals a payday loan, but they do want that payday loan returned.”
Originally payday loan stores sprang up in part because persons receiving social assistance often did not have a bank account and needed a place to cash their cheques. Kerry Lubrick of the Hamilton Community Services Department says that most of the people using city services now have access to a bank, making them less likely to go to a payday loan location.
“Approximately 78% of our case load does have a bank account,” she said. “We have done a lot of work over the past years trying to make sure our clients have bank accounts. When you’re dealing with a traditional bank, their rates are very low compared to paying a percentage of every time you cash a check.”
According to the Social Planning and Research Council of Hamilton’s most recent data, 31.1% of the population of Hamilton Centre- 35,233 out of 117,525- is living in poverty. And even those with full-time jobs can often be classified as working poor.
“Our analysis of census data from 2006 shows that 10 000 workers were working fulltime all year long, and still living below the poverty line,” says Sara Mayo of the SPRC. “That’s about 7 percent of the workforce, which is still a ton of people.”
“Payday loans are most required by people with precarious work and low wage work, so that’s why you don’t see them in high income areas.”
Lubrick says that these stores do present a problem to those who receive government benefits.
“I think it does cause a problem if they have to pay a large fee in order to cash a check,” says Lubrick. “Because right now a single individual in Ontario Works receives just over 600 dollars a month, so if they have to pay five percent of that to a check cashing place, that doesn’t leave them with much left over.”
Keyes, however, doesn’t see it as a major problem.
“With all the regulations now in effect or in effect for three years or more across the country, there’s a huge difference,” he said. “When it comes to the payday loan product itself, it represents less than two percent of a persons overall indebtedness if they’re having overall problems.”