While Canada waits for the official budget to be released this afternoon, the usual leaks are springing giving some previews and insights into what the budget contains. One new item that’s come up is predatory lending which is said to be targeted within the new budget as Canadian’s struggle with record debt and inflation.
According to sources, the Government is planning to look at reducing the maximum interest rate from 60% to 35% which would be in line with what Quebec currently uses as their cap. It’s unclear if this would affect short term loans of $1,500 or less which currently can cost consumers up to 400% of the borrowed cost after fees and interest.
Predatory Lending is a Problem in Canada
Predatory lending is a term used to describe a lending practice that takes advantage of vulnerable individuals or groups by providing loans with unfavorable terms, excessive fees, and high-interest rates. Predatory lending practices are a growing problem in Canada, where many people are struggling to make ends meet and are being targeted by unscrupulous lenders. In this article, we will explore predatory lending practices in Canada and what steps you can take to protect yourself.
According to a report by the Financial Consumer Agency of Canada (FCAC), more than 1.9 million Canadians use payday loans, and the average loan amount is $450. Payday loans are a form of predatory lending that targets vulnerable people who are in urgent need of cash. These loans often come with extremely high-interest rates, with some lenders charging as much as 60% interest per year. This means that if you borrow $450 and fail to pay it back within the agreed-upon time frame, you could end up paying as much as $270 in interest.
Another form of predatory lending is the use of high-interest credit cards. Some lenders offer credit cards with interest rates as high as 30% or more, which can be devastating for people who are struggling to make ends meet. These lenders often target people with poor credit or no credit history, making it difficult for them to obtain credit from traditional lenders.
Predatory lenders often use aggressive tactics to get people to borrow money. They may offer cash incentives, make unsolicited phone calls or send unsolicited emails, and may even show up at people’s homes unannounced. They may also use confusing and misleading language in their contracts and advertising, making it difficult for borrowers to understand the terms of their loans.
How to Protect Yourself from Predatory Lending
If you’re in need of cash, there are several steps you can take to protect yourself from predatory lending practices. First and foremost, it’s important to shop around and compare the rates and fees of different lenders before taking out a loan. Be sure to read the terms and conditions carefully, and don’t be afraid to ask questions if anything is unclear.
You should also be wary of lenders who make promises that seem too good to be true. For example, if a lender offers to lend you money without checking your credit history, this is a red flag. Legitimate lenders will always perform a credit check before lending you money.
Another important step is to avoid taking out payday loans if possible. If you’re in urgent need of cash, consider other options such as borrowing from a family member or friend, or taking out a low-interest personal loan from a reputable lender.
Finally, if you suspect that you’ve been a victim of predatory lending, you should report it to the appropriate authorities. This includes contacting your provincial or territorial consumer protection agency, as well as the FCAC. They can help you to understand your rights and take steps to protect yourself from further harm.