(TORONTO, ON) – Cash loans fast. Apply in just minutes. Instant approval. Hassle free. No collateral. No credit check.
Those are just some of the incentives located on the websites of payday loan companies. Their services tout themselves as an easy way for people to get cash fast – with few questions asked.
These companies are also starting to use mobile technology to their advantage. It now takes just minutes to apply for a loan, get approved, and receive the money electronically. The mobile apps that have been developed are much to the dismay of Jeffrey Schwartz, executive director of Consolidated Credit Counseling Services of Canada, Inc.
“We shouldn’t be making it easier for people to borrow money at high interest rates. People are now just a few clicks away from the debt zone. Have we not learned anything from the recent financial crisis?” says Schwartz.
Rules vary from province to province, but borrowers can expect to pay 20-25% interest when borrowing money – even if they repay the loan in a matter of days. And that’s only a fraction of the story – continue the loan cycle and watch those numbers climb. The equivalent cost over the course of a year is upwards of 500%!
When the industry ensnares its victims, it can be extremely difficult for the borrowers to escape. An example would be a day labourer who picks up his phone, visits one of these websites and, with no credit check, acquires a loan of $250. A few weeks later, he’s required to pay back the full loan amount, plus interest. He finds himself short of cash again, so he goes to a different payday lender, and does the same thing. He pays off the first loan with the second loan. This cycle repeats itself again and again.
“The payday loan industry preys on those who are desperate for cash, and who often don’t realize the amount of fees and interest they are required to pay,” says Schwartz. “These internet sites and mobile apps claim they are helping consumers, but they are really just trapping borrowers in a debt spiral.”
According to Statistics Canada, the payday loan industry is worth an estimated $2-billion annually.
Consolidated Credit is a non-profit credit counselling organization working to improve the financial situation of Canadians. We counsel our clients to make responsible and realistic decisions when it comes to their finances, and for most this does not include short-term, high interest lending.
For more information or to request an interview with Jeffrey Schwartz, please contact:
Kylie-Anne Doerner, Communications & Public Relations Manager, Consolidated Credit Counseling Services of Canada, Inc. (B) 416.915.7283 ext. 1057 (C) 289.231.7900 or [email protected].