With inflation at a historic level and the price of living continuing to rise, families across Canada are struggling to make ends meet. In this challenging financial climate:
- Canadians should not be forced to make impossible choices.
- Canadians should not have doors closing on their financial future.
- Canadians should not be forced to ask: Now What?
By reducing access to credit, the government believes they’re helping. The exact opposite is true. They are hurting hard-working Canadians. The government needs to hear directly from you about why these changes are wrong and how they will impact you and your family.
I don’t want to choose between feeding my family or paying my bills.
I don’t want to choose between fixing my roof or heating my home.
I don’t want to choose between repairing my car or losing my job.
A study by the Ontario Association of Chiefs of Police, the voice of police leadership in Ontario, and the Canadian Lenders Association, indicates the government’s decision to decrease the maximum allowable rate of interest may lead to an upsurge in illicit financial activities, disproportionately impacting already at-risk Canadians.
Rise in illegal predatory lenders: The report shows that with legal, responsible lenders forced out of the marketplace, a void is created for illegal online lenders, operating outside the bounds of Canadian jurisdiction, to fill. Lenders who may exploit and endanger Canadians already at-risk of not making ends meet.
A clear warning: Case studies featured in the report, including examples from Quebec, California, and the UK demonstrate the many negative consequences of interest rate caps, underscoring the potentially disastrous repercussions this policy will have for the broader financial ecosystem, including illegal activity and organized crime.
A wide-ranging study conducted by the Centre for Social Justice in the United Kingdom, entitled “Swimming with the Sharks”, shows that 80% of loan shark victims faced initial rejection from legal and licensed credit sources, leading to:
Forced Entry into Illegal Markets: Limited access to legal credit sources creates a void in the financial support system for vulnerable individuals.
Vicious Cycle of Illicit Borrowing: Rejection drives individuals towards illegal money lending due to desperation for immediate funds.
This study found that the difference between prime borrowers and non-prime borrowers are striking and that the overwhelming majority of non-prime Canadian borrowers were from vulnerable/disadvantaged demographics.
Non-prime Canadians are three times more prone to anxiety-related sleep loss, with nearly half taking extra shifts to tackle debt.
Six-in-ten non-prime Canadians would worry if the government restricted the ability of lenders to offer loans to people with low credit scores.
75% of non-prime and 58% of prime Canadians worry that people who don’t have access to a loan will turn to illegal loan sharks.
Stop the Government from closing doors on Canadians’ financial future.
New research paper from the Ontario Association of Chiefs of Police and the Canadian Lenders Association
Changes to drive borrowers to payday and illegal lenders
Some Canadians who have turned to high-interest loans due to not qualifying for traditional credit could lose access to them as the government prepares to pass new laws targeting predatory lenders, according to the Canadian Lenders Association.
‘While on the surface, reducing the maximum allowable interest rate may sound helpful, this change in fact means many borrowers may no longer be able to access a loan in the future,’ letters state.