Payday Loan Stores Located in City’s Poorest Postal Codes

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Calgary has been vigilant over the past year in tackling the growing issue of payday loans. City Hall recently passed legislation that would rein in the payday loan industry, which would double what the provincial government has done since the beginning of the year.

Despite policies meant to combat the rise of payday loans, a new study has found that Calgary’s payday loan companies are situated in the city’s poorest postal code.

Metro newspaper looked at the city’s data from Statistics Canada and discovered that roughly one-third of payday loan businesses operate in Calgary’s low-income neighborhoods. With 50 payday loan businesses open in Calgary, 32 percent of them had stores in the T2A region, which is the city’s poorest postal code with a median family income of more than $61,000.

The growing number of payday loan stores in these kinds of areas is due to the lax in laws surrounding ordinance legislation. Moreover, financial institutions and credit unions have been gradually exiting these neighborhoods over the past couple of years.

Service Alberta Minister Stephanie McLean is not surprised by this revelation. Government officials, consumer advocacy groups, and anti-poverty activists have been warning about the cluster of payday loan companies in low-income parts of the city.

“It’s pretty easy to see. I am not surprised, but there was also an abdication of the banking and financial sector,” the provincial minister told the newspaper. She added that this is evidence of the industry’s predatory nature.

Tony Irwin, president of the Canadian Payday Loan Association (CPLA), doesn’t believe in the idea that payday loan stores are predatory. Instead, he just thinks that payday loan companies are setting up locations in high-traffic areas. Irwin added that these businesses want to be competitive and see that there is a growing need for payday loans, especially in areas where residents do not have access to conventional forms of credit.

“Maybe it is because banks and credit unions have left and now it’s under-served,” Irwin said. “We strongly disagree with that (predatory) characterization — this is a legal, licensed industry just like any others.”

Alison Karim-McSwiney, executive director of the International Avenue BRZ, told the newspaper that even with new ordinance regulations in place, the streets with these stores would have to deal with them until they move out.

“They were allowed to proliferate and go where they want,” she said. “They know who their market is: people who are desperate for that short-term loan. It is, in fact, predatory.”

Jurisdictions all over Canada have been putting forward legislation that restricts the creation of payday loan stores by prohibiting them from opening up in clusters. Right now, Calgary has a 400-meter rule in place that affects only new payday loan companies.

Critics of payday loans often make the case that these alternative financial products send the most vulnerable into perpetual debt that is hard to escape from. Proponents of payday loans retort by noting that the impecunious do not have access to conventional means of credit and often have to resort to payday loans to pay the rent, pay the light bill or pay for car repairs.