Loading articles...

Payday loans a growing part of Ontario's personal insolvencies, study finds

People walk pass a pay day loan store in Oshawa Ont. on Saturday May 13, 2017. The garish yellow storefronts promising quick and easy cash are starting to dwindle in Alberta as the payday loan industry says provincial regulations put in place last year have made its signature product unsustainable.The number of payday stores has dropped to about 195 from some 220 this time last year, according to Service Alberta. THE CANADIAN PRESS/Doug Ives

A study by a Toronto-based firm says the rate of insolvent borrowers using payday loans in Ontario has grown for the sixth consecutive year.

Insolvency trustee firm Hoyes Michalos & Associates says 31 per cent of insolvent borrowers used the loans in 2017, up from 27 per cent the year before.

The study suggests payday loans are a growing factor in personal insolvencies in Ontario, with struggling debtors are taking out fewer but larger loans despite recent changes to lower borrowing rates.

As of Jan. 1, 2017, the provincial government reduced the maximum amount lenders can charge for a payday loan to $18 for every $100 borrowed, down from $21 for each $100. Earlier this year, the rate was further reduced to $15.

Hoyes Michalos & Associates says they looked at 3,500 insolvency cases and found the average number of payday loans outstanding at the time of insolvency declined to 3.2 in 2017, but the average payday loan size was $1,095, an increase of 12.4 per cent from the year before.

In total, insolvent borrowers owed an average of $3,464 from all their payday loans, the study says, or $1.34 for every dollar of their monthly take-home pay.

Join the conversation

Please read our commenting policies

Paying $15 to borrow $100 for a month results in an interest rate of 15% for one month. To find the annual rate, one must multiply by 12. This means the actual interest rate is 180%!!!!!!!!!!!! This is legal? No, this is predation on the poor.

February 12, 2018 at 10:16 pm

Those places are a ripoff, same as those cards that get your pay to you quicker. Tools for financial dummies

February 13, 2018 at 10:10 am