Toronto Payday Loan Lender in Court

Money Mart Accused of “Criminal” Interest Rates

As reported throughout Canada last week, National Money Mart, one of the largest payday loan companies has been accused of charging “criminal” interest rates on 4.5 million payday loans over 10 years. Or so claims a personal injury lawyer representing over 264,000 Ontario citizens who borrowed payday loans and are now part of a class-action suit against the lending company.

According to the lawyer, Harvey Strosberg of Windsor, Ontario, was quoted in the Toronto Star while addressing Superior Court Justice Nancy Spies: “We say this action delivers access to justice for these 264,000 people who are having their day in court before you.”

However, ironically, Strosberg added: “The pivotal issue we’re dealing with is illegality.” But according to Canadian statutes, Money Mart has not broken any laws, which is why the case has landed in a personal injury court.

Money Mart at Center of Toronto Star 2003 Investigation

In a minor cause celebre in 2003, the newspaper Toronto Star launched an investigation which accused Money Mart of exploiting low-income people. However, a study of the payday loan industry performed by the Pollara company shows that the most common borrowers don’t fit the underprivileged stereotype fostered by Strosberg and the newspaper. For example, Pollara’s 2007 study* shows:

• Almost 96% of all respondent payday loan customers had a debit card.
• 93%a chequing account at a bank or credit union.
• 60% have a savings account at a bank or credit union.
• 52% have a major credit card.
• Almost 20% have a home mortgage.

The payday loan industry has also been demonized by false allegations of why people take advantage of these advances on their paycheck. While the Toronto Star and others have sought to foster stereotypes in the public’s imagination that these loans are sharked out to those in living in poverty, the real reasons given by those who actually borrow payday loans stands in stark contrast* offering a picture of informed consumers satisfied with a useful service:

• 51% of respondents said they choose payday loans because they are “quick and easy.”
• 18% said they borrow payday loans primarily because of the convenient locations.
• Only 15% of respondent payday loan customers said it was because they have no other alternative lender.
• 95% of all respondent payday loan customers said they paid all or most of their loans back on time.

As this last statistic indicates, there are always those who will be dissatisfied with a product. And as always, whenever money is involved, there will be that small percentage who cannot properly manage or meet the obligations spelled out in their freely signed and acknowledged lending agreements. Every year in North America, mortgage holders default on their loans, make late payments, and the like, yet the mortgage industry has rarely been accused of taking advantage of borrowers who cannot manage their finances.

Then again, perhaps too few of them have been enticed to lend their names to one of Mr. Strosberg’s class action lawsuits.

In their own defense, National Money Mart issued a release which is excerpted here:

“Money Mart is - and has been - a respected, valued service provider for more than one million Canadians since the early 1980s…We have been a proud member of the Better Business Bureau for over 20 years and are a founding member of the Canadian Payday Loan Association (CPLA) that has spent years working with governments to implement important regulation that balances consumer protection with a viable industry.

We believe in the merits of our business practices and in the quality of our products and services. That is why, for the past five and a half years, we have vigorously defended every allegation made in this action and why we intend to continue to do so throughout this trial.

In October 2006…when former Justice Minister Victor Toews introduced Bill C-26 in Parliament to amend the section, the Department of Justice issued a press release acknowledging that section 347 was never designed to apply to short term loans and explained that section 347, “…is NOT a consumer protection tool.” In March 2009, the Ontario Government set the maximum rate for payday loan in Ontario at $21 per $100. This is the very type of regulation that Money Mart has called for and
championed for years.

[Money Mart's] customers are educated, middle-income Canadians who borrow an average
of $300 for approximately 10 days to cover unexpected expenses. Customers know the cost of borrowing and deliberately and knowingly choose a payday loan over other options such as overdraft, credit cards or lines of credit.”

* Source: Pollara Payday Loan Customer Survey; Nov. 2007.