Windsor City Council is seeking to educate the public about the risks associated with payday loans.
Council is due to receive a report on the issue from city government at Monday’s meeting.
District 3 Com. Rino Bortolin said the regulations likely won’t have much effect on the city’s payday loan companies, which can charge sky-high interest rates.
“When we discussed this the last time, we focused on a lot of questions that focused on the usefulness of the licensing regime to achieve results,” Bortolin told CBC News on Friday. “And the result is really people don’t frequent them as often and keep more, more of their own money in their pocket.”
A better option, he said, might be to educate the public about the risks associated with taking out high-interest loans.
“I think at the end of the day if we license them and restrict them – we already have about a dozen of them – it’s not going anywhere,” Bortolin said. “You won’t really see much change unless some close later down the line.”
Putting a restriction on where payday loan companies can be located, for example, wouldn’t prevent them from operating and engaging in what Bortolin called “predatory lending practices.”
Bortolin said he’s interested in seeing the city create a committee that will work with community partners, such as agencies that issue social service checks, and talk to people using payday loan companies about other options. .
“I think the key is to make sure that [you] tell them “you know you can go to a credit bureau and get it at 8% instead of 20%, for example, or even less?” he said. “I know, for example, that the city is working with social services to get more people to make direct deposits.
There are challenges, however, he said. Banks may not cash a check for someone who does not have an account with them, for example.
Credit unions have been working to expand the way they provide service, Bortolin said, but access has also been limited due to the COVID-19 pandemic as some branches have temporarily closed.
Bortolin said one option might be to include a brochure with social services checks that includes information on ways to cash or deposit the check that don’t involve visiting a payday loan company.
Michellle Chase said she and her husband had used payday loan companies in the past when she worked minimum wage and was short on time due to illness.
“Before you knew it, we couldn’t get out from behind,” she told CBC News. “We ended up having to declare bankruptcy to get out of the hole.”
“That wasn’t the only problem,” Chase said. “We were young and we lived kind of a party lifestyle. I don’t party anymore, but it’s so easy to [say] ‘I just need 0. I just need $100. And we had kids and bills to pay, food and all the other essentials of life. So it won’t be long before you’re swallowed into the pit.”
Chase said that in her and her husband’s case, they would go to a payday loan company to get a cash advance.
“We would get $800 and end up having to pay back almost double that by the time you eventually catch up,” she said. “Compound interest doubles every day.”
“And when you just have this low-income job, it’s almost impossible,” Chase said. “The phone kept ringing to the point where I had to change the number and it got really bad.”
Dave Booker originally took out a payday loan in 2018 to get his vehicle repaired. Booker said he suffered an injury and the pandemic hit as he tried to find work. Booker, a single parent, uses the loans to help pay bills and expenses.
“Now I pay $15 on every $100 I borrow,” he said. “That makes it even a little more difficult, but that’s the situation you found yourself in.”
Lower interest rates would help
“It was between paydays, I needed my van on the road and I had to pay the mechanic, so I had to borrow it,” Booker said. “Now I have to…always have to pay, because once you’ve paid it all back, you have to borrow that money back so you can try to stay afloat.”
Booker said he had a bank account and direct deposit, but was still “trapped” by the payday loan cycle.
“I have buddies…they just switch bank accounts and they don’t pay it back at all,” he said.
Booker and Chase said lower interest rates on payday loans would help a lot.
Bortolin said the city has already spoken to various agencies and partners about the issue, and “it’s really about formalizing it and creating collaboration.”
“I think what I’m going to look at is what kind of metrics can we layer on top of that and then check in a year or two to see if the program is working,” he said. “That’s what interests me, because we can move forward.”
“But if the number of people relying on check-cashing places increases after two or three years, then obviously it’s not working,” Bortolin said. “We have to try something else.”