Running short of cash can happen to the best of us, especially when emergencies arise. But when seniors, immigrants or vulnerable people turn to instant loan companies, they risk financial abuse through predatory lending practices. Support from family or community agencies can help to get them out of this jam.
What is Predatory Lending?
Predatory lending means charging borrowers unfair, deceptive or abusive loan terms. They often charge high interest rates, carry high fees or payout balances, and sometimes strip borrowers of equity.
Critics accuse predatory lenders of using aggressive sales tactics and exploiting borrowers’ lack of understanding of finance. Through deceptive or fraudulent actions and a lack of transparency, they entice, induce, and assist a borrower in taking out a loan they cannot reasonably repay.
Effective January 1, 2025, the maximum allowable interest rate in Canada is 35% and fees are capped at $14 per $100 borrowed.
Emergencies Make People Vulnerable
Clemencia Gomez, Coordinator for the Kensington Cedar Cottage Community Response Network (CRN), sees many financially exploited clients. “They are mostly women, often immigrants and low income,” she says. “I hear so many stories in the Spanish community where they don’t know what they are signing.”
Clemencia relates the story of a woman who borrowed $10,000 from a payday loan company to help her mother in El Salvador. A hurricane had destroyed her mother’s house, and as a low-income senior herself, the woman was desperate to get secure housing for her mother.
The lender did not explain the rates to her, and limited English reading skills precluded her from reading the fine print. She was horrified when $482 was withdrawn from her bank account a month later.
Unable to afford groceries, she went to her bank only to be told they couldn’t help. While initially embarrassed to tell her son, he accompanied her to the payday lending office where staff refused them access to a manager.
A call to the Seniors 411 Seniors Society led to a referral to Clemencia for translation services. Luckily for the woman, Clemencia has a background in finance and she jumped into action. Clemencia was able to negotiate a payment plan through the woman’s bank.
Notes on Financial Abuse from a CRN Coordinator
Clemencia wants her peers to know the following:
- Educate your clients about financial abuse and that there are services to help them.
- Help clients negotiate payment plans or refer them to a reputable credit counselling agency.
- Translators can accompany seniors with English as an additional language to appointments. If your area CRN doesn’t offer this service, it may refer you or you can check immigrant services in your region.
- Climate change and emergency disasters are resulting in many financially-strapped immigrants who struggle to assist affected family members.
- Banks cannot press charges if the client refuses.
- Friends and family members may also be financially abusive.
- Many people suffer in silence because they are embarrassed. Look for sudden signs of self-neglect resulting from poverty or depression.
Explore our website to learn more about BC CRN or connect with your local CRN for more information or resources.
