Among the cruelties left in the wake of the pandemic – it hides and could rebound again – persistent ill health and punitive debt are at the top. Imagine having to deal with both a long COVID and the payday loan you took out that charges between 30-60% interest.
This is Canada, not Appalachia. How is it legal? It is not a loan as we know it; it looks more like extortion.
Debt usually refers to mortgages, a particularly hot topic right now, or the horrendous credit card interest rates that many of us are paying because of, you know, the house. Next are those kind online offers to allow you to slice your already small purchase into smaller sectors. If you miss a payment, your credit card goes into a coma, a blessing in disguise perhaps.
But the worst are payday loans, short term and smaller but with exorbitant interest rates. And further down the pain line are installment loans, which are larger loans paid in installments over a longer period.
The Star’s Christine Dobby mapped it out via a new report from ACORN, which advocates on behalf of low-income Canadians. If you have bad credit, you can borrow up to $15,000 in installment loans at annual interest rates of up to 60%.
All installment loan stories are sad and confusing. Dobby gave the example of a dog walker whose work dried up during the pandemic. She had to bring her children back overseas with their father in Canada. It cost him $2,500 – a sum that will climb to $6,000 in the years it takes to pay it back.
This means that she will always be behind.
Stories of financial breakdown are like stories of immigration: so many unanswered questions and protagonists who tend to be judged meticulously by readers every step of the way. Why were the children absent? Why didn’t the father pay? Did she get CERB?
Immigration: Why did you file the wrong document? Didn’t you check the bona fides of the fraudulent school your parents paid huge, unaffordable tuition to? Are you studying for a degree that will get you a job?
These are all good questions. But the answer is often this: people are human. They make small mistakes. They make huge mistakes. They take crazy risks. They love their children and put a child’s well-being before their own, even when their needs are intertwined. And they end up in a debt hole so deep they can’t see the sun.
Ottawa is giving way to provincial governments regulating payday loans. But as rates rise past 60%, ACORN suggests Ottawa should set a 30% cap across Canada for all such loans, including installment loans. (Ontario did this for payday loans in 2020.)
It seems high. But my credit card charges 22.97% interest, even though I prepay the credit card debt every month, so my balance is still zero.
Yes, that’s silly. But my card issuer is not laughing. He knows my situation could easily change.
My bank carefully lured me into a home equity line of credit that I neither wanted nor needed. He knows the day will come when my life will go so badly that my line of credit will become their milking cow.
You may never need a payday loan. But you could, and you might not judge yourself as harshly as you judged others.
Financial terror is passed down from generation to generation. My Scottish mother raised us in such minimal conditions that until I was 13 I thought we were poor.
But she survived the Depression when, as Margaret Atwood points out, plastic hadn’t been invented, which is why I wonder if we should go back to saving plastic bread bags like my mother did. .
We are in a financial sea right now. Some of us retire, live on beans; some spend lavishly, live with regret; some are treading water financially. Please don’t give loan sharks legal permission to drag them under.