You don’t ask people how much they want to borrow: You tell them how much you’re lending them.
That’s one of the first things Kathy Durocher learned as a payday lending employee, she says.
“You’re trained on how to up-sell to people, how to try to get them maximum loans, to cash more cheques,” Durocher said in an interview.
During a training session, “I had said, ‘Are you going to take another loan?’ And the person said yes. And they told me how much. And my manager, in training, stopped me right after and said, ‘No. You never ask. You tell them. You say, ‘I’m giving you this amount today.’”
Durocher claims she’d be penalized for not loaning someone the maximum amount that person was eligible for.
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Canada’s Payday Loan Association says most loan approval procedures are automated, and cites a study of transactions from three payday lending companies that found 62 per cent of borrowers in 2014 didn’t borrow the maximum amount, and the average customer borrowed 68.1 per cent of the maximum.
“This indicates that borrowers are aware of their financial circumstances and seek to borrow the specific amount they need,” the association’s president Tony Irwin wrote in an email.
After five years at two payday loan companies, working at locations across Calgary, Durocher is calling it quits.
“We are loan sharks,” she said.
“I can’t go to work stressing that [if] I’m not getting somebody in a deeper hole, that I’ll get fired.”
Irwin, says his members provide an essential service, giving loans to people who need money and have no other way to get it.
“People who come to payday loan stores are there because they’ve tried to find credit elsewhere,” he said.
“They have a very real need.”
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Alberta is poised to unveil new regulations governing payday lending in the province before existing regulations expire next month. Ontario, Nova Scotia and other jurisdictions are pondering the same.
Irwin says he and his members have been in touch with suggestions of their own.
But he takes issue with the name Alberta’s already given its bill: An Act to End Predatory Lending.
“We are a licensed, regulated industry. And we abide by, of course, the regulations that the government brought in,” Irwin said.
“That name certainly would seem to be at odds with what this industry is.”
Canadian communities are hardly alone in wanting to rein in the payday loan industry.
Google announced Wednesday that, as of July 13, it will no longer host ads for loans whose payment is due within 60 days. (In the U.S. only, it’s also banning ads whose interest rate is 36 per cent or higher.)
“Research has shown that these loans can result in unaffordable payment and high default rates for users,” reads a statement attributed to Global Product Policy director David Graff.
“This change is designed to protect our users from deceptive or harmful financial products.”
“Governments, consumer advocates and credit counsellors all say payday loans are a needed service,” Irwin wrote in an email.
“To ban a whole industry sector from advertising online is not smart. They should distinguish between licensed and illegal lenders.”
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‘They’re not about helping people’
Durocher sought out a job at a payday lender because of how much she’d been helped by one before. When her dog George was hurt and she needed money for an emergency veterinary bill, a payday loan came through.
“I thought, ‘Well, this is kind of great: It’s helping people who don’t have good credit,’” she said.
She’s since changed her mind.
“They’re not about helping people out. They’re about destroying people.”
Durocher says one manager told her not to tell people out loud how much they would end up owing on the money they were taking out, but only to highlight the amount in paperwork.
“I was told not to tell them what the payback is … You’re supposed to circle the amount they owe and the date and point [it out] to them as you’re putting it through the window and say, ‘This is what you owe and it’s due December 22. for example.’”
Disclosure provisions are set out in regulations, Irwin said in an email, “including a poster in the lobby that shows the cost of a typical $300 loan.
“It is very important that the borrower know the cost.”
People have a 24-hour window if they want to change their minds, Durocher said.
“We’ve had some come back and say, ‘Wait a minute, that’s way too much … and I want to decline this loan.”
Durocher hated having to call people when they were late repaying their loans.
“We’re told not to let them off the phone. We’re told to say, ‘I understand, but I need a date for you to pay,’” she said.
“It’s heart-wrenching, sometimes. … They say, ‘What do you want me to do?’”
Durocher said she gets evaluated on whether customers come through on the payment promises they make over the phone.
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Collection practices are subject to regulations, Irwin said in an emailed statement.
“Having said that these are small loans and lenders will want to have the borrower contact them before the due date if there is a problem so the loan can be extended rather than having a payment returned [‘not sufficient funds’].
“Most borrowers want to pay and lenders are always willing to do a workout because it saves everyone time and money in the long run.”
Payday lenders feeling oilsands slump
It’s gotten worse in Calgary since Christmas, Durocher says, as families squeezed by oil’s free-fall turned to a longtime lender of last resort, only to find themselves unable to pay their debts.
She says she’s been cursed, spat at, threatened.
“We had very violent customers. I can’t blame them because they were upset. They were getting laid off,” she said.
“I’m a nice person. I just got caught up in a job that seemed OK and then it just wasn’t … We hurt the public, as far as I’m concerned.”
Contrary to popular belief, Irwin says, payday lenders haven’t cashed in on Canada’s oilsands slump.
“In order to qualify for a payday loan, you have to have a bank account and you have to have a source of income,” he said.
“People are in need more than ever. [But] if they’re unemployed, they don’t get a payday loan.”
Many payday lenders do make loans to people on social assistance, however. Irwin said each company makes that determination for themselves.
‘Where would our customers go?’
Jurisdictions across North America are experimenting with payday lender regulations.
One possibility pioneered in San Francisco is to limit the proliferation of payday loan locations through zoning regulations.
Irwin would rather not see that happen.
“Individual businesses decide, based on where their customers are, where the demand is, where they want to locate their stores,” he said.
“I don’t think that’s something where there should be limits imposed. And that’s something customer demand will dictate.”
Global News maps based on tax statistics and business location information from Red Lion Data have indicated payday loan locations are disproportionately located in areas with lower-income residents or with a higher percentage of residents receiving social assistance.
Irwin says there’s no correlation: They’re going where customers are, just like any other retailer.
“We’ve mapped where our members are located, and we find they’re in all kinds of different areas, different incomes,” he said.
“The criteria that seems to be important is areas that have a lot of foot traffic; areas people can access, transportation corridors, downtown areas — where a lot of other retail businesses locate.”
Irwin likes Alberta’s regulations as they stand. But his organization has made suggestions for whatever comes next.
One recommendation they’ve made to the Alberta, Ontario and Nova Scotia governments is for payday lenders to start offering a “voluntary extended payment plan” that gives the borrower more time to pay back the loan and fee without accruing additional interest over that grace period.
A Deloitte study the payday loan society commissioned found that the minimum their industry could charge per $100 payday loan is $20.74. Anything under that, Irwin said, and the business model doesn’t work.
“A small-sum, short-term loan is expensive to provide.”
If payday lenders were “regulated out of existence,” Irwin says, it would hurt people who don’t have alternatives.
“Where would our customers go if we weren’t here, or if regulations were such that industry was reduced significantly?”
That could make people turn to illegal lenders online, Irwin said.
“They’re going online and they’re getting a payday loan from a company that’s not licensed, not regulated, not complying with regulations … The consumer is definitely worse off.”