These lenders charge a maximum interest rate, which is never lowered, even after making payments for years. The real cost of borrowing is extremely difficult to understand, as all kinds of fees, insurance, etc., are bundled into the loan.
Most often, people end up filing bankruptcy or consumer proposals because it's impossible to pay off the debt. The Canadian Lenders Association is saying that people will have to go to payday lenders and illegal loan sharks.
For one, instalment loans and payday loans are two different credit products. The average amount of payday loans borrowed is $500, and they are payable on the next payday. This is not to say that payday loans are better, but given the huge increase in instalment loans, this move is critical. Also, fringe lenders often resort to the same tactics as loan sharks.
The bottom line is that lowering the criminal interest rate will reduce the harm caused by predatory loans. It's good for people and it's good for society.
As the federal government moves forward to lower the criminal interest rate, we'd like to see a fair credit alternative so that people don't have to rely on these loans.
Thank you.