Since the global economic collapse, payday loans have soared in popularity across Canada. In the last 18 months, one part of the country has seen a surge in payday loan usage: Alberta. There are around 1,400 stores nationwide, with two million Canadians taking out loans each year.
The increase in business has prompted one government watchdog agency to investigate the payday loan industry as some accuse this niche of being “predatory” in nature. The Financial Consumer Agency of Canada (FCAC) thinks it’s always been a concern, but with widespread use of the industry, it’s about time that a regulatory body intervenes and finds out what’s going on.
Would stringent regulations suffice? Not according to The Association of Community Organizations for Reform Now (ACORN) and the Canadian Union of Postal Workers (CUPW).
A news release sent out Tuesday confirmed that the two organizations are collaborating in order to urge the federal government to replace payday loans with postal banking. They say that Canada must bring back postal banking in order to ensure low- and moderate-income consumers have access to fair and equitable banking. Under today’s system, that is not the case.
Just what is postal banking? It’s where nations’ post offices open and operate postal savings systems to allow consumers without a bank account to deposit money into a safe, reliable and convenient method to save money and urge the impecunious to save for a rainy day.
The two groups say that the big banks exit low-income neighborhoods and hurt residents by not offering them products and services. This is why a growing number of Canadians are turning to payday loans and the “predatory fringe financial sector.”
“Payday lenders have moved in and filled the void left by banks in many communities, and people are being driven to payday lenders and installment loans when banks deny them basic banking services like overdraft protection, lines of credit and hold-free accounts,” said ACORN Canada spokesperson Donna Borden in a statement. “As a result, predatory lenders are the only option for many people living pay-cheque to pay-cheque when their car breaks down or hours are cut.”
On Thursday, ACORN and CUPW members will hold National Day of Action rallies to promote the return of postal banking. The demonstrations will take place in Vancouver, Toronto, Ottawa, Montreal and Halifax.
“People need an alternative to payday lenders, somewhere they can go and not be gouged,” said Mike Palecek, National President of the Canadian Union of Postal Workers, in a statement. “A postal bank could be that alternative.”
Critics of this proposal say that CUPW is just trying to keep the post office relevant. With declining use, rising costs and soaring debt levels, it’s argued that the post office would welcome this idea because it would keep their doors open. But if they can’t even balance their own budgets and remain in the black then how could they maintain deposits from Canadians?
So far, neither Canada Post or the Trudeau government have showed any interest in pursuing this initiative.