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Calgary Council Cracks Down on City Payday Loan Operators

In the November 9th meeting of the Calgary City Council a report from the Calgary Planning Commission was presented on the subject of pawn shops and pay day loans in the Calgary area.

Of particular concern to the commission was the tendency for these businesses to coalesce

It reported that there were 82 payday lending businesses in Calgary and 15 pawn shops. Payday loan operations are usually very short-term loans that can be repaid by means of  a pre-authorised debit on a chequing account or post-dated cheque, that is required concurrently with the loan. Under Alberta regulations payday loan operators are prohibited from implementing rollover loans, therefore each loan must be repaid in full. However, individuals can take out concurrent loans with one payday loan business.

One particular payday loan outfit in Calgary has been seen advertising a 14 day loan for $300 with a fee of $69 giving a total repayment of $369 over the two weeks. In annualised terms this works out to result in a percentage rate changes of 599.63 per cent. This seems to be at odds with the maximum rate of 60 per cent which is the allowable rate in Canada.

Council was concerned that payday loan businesses clustering in particular areas of the city would have negative impacts on the city, including aesthetic impacts.

The main result of this was a defined 400 metre separation distance for payday loan operators. This comes with a maximum 10 percent variance of the distance given at the discretion of council.

Clustering of these short term loan institutions was found in areas such as Centre Street North, Macleod Trail, 36 Street NE and 17 Avenue SE. If clustering is left unabated it can escalate to the point where other businesses are crowded out and the payday loan segment becomes too large resulting in a suboptimal mix of businesses in an area.

The concentration of businesses in these areas can reach up to 10 times the average density for the city.

It remains to be seen what impact this new regulations will have on the payday loan industry of Calgary.


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