In 2018, Marcia Brown turned to one of the many payday lenders in her Mississauga neighbourhood to borrow money. Ms. Brown’s father had passed away, and she was chipping in to ensure that her younger sister could go to university.
The federal government is set to lower the maximum allowable interest rate on consumer loan products such as instalment and auto loans from the current 47-per-cent annual percentage rate to a 35-per-cent APR. It is alsoThe measures were approved late last year in a budget-implementation bill but the government hasn’t yet announced when they’ll take effect.
Jason Mullins, president and chief executive officer at goeasy, told The Globe and Mail that a lower maximum rate will only make certain non-prime borrowers too risky and unprofitable for lenders to work with. ACORN Canada, a national anti-poverty organization, has long advocated for the government to lower the maximum interest rate even further, to 20 per cent, saying that exorbitant interest payments are keeping non-prime borrowers trapped in a cycle of debt. ACORN’s own research found a 300-per-cent increase in the use of instalment loans between 2016 and 2020.