“Capitalizing on Poverty”

Money Mart

“The King”

I heard this statement a couple years
ago when I was walking with my team
through the downtown eastside of Vancouver- an area where the effects of exclusive policy and selective support have encouraged a mess of poverty and addiction. One of my teammates pointed to a Money Mart and said “businesses capitalize on their poverty”. That walk is something I will never forget and never should.

A little over a week ago, Paul Wilson from CBC news commented that Hamilton is a “payday loan paradise” rather than a “City of Waterfalls”. He spoke about how Hamilton has these businesses on every corner and the the fact that individuals who are customers at businesses like Money Mart, Cash Money and Cash 4 You are losing far more money than they would if they had a bank account. For example, according to the Financial Consumer Agency of Canada, a regular line of credit charges a weekly interest of about 2%, whereas places like Money Mart charge about 20%.

The reasoning behind these interest rates seems logical: there is a greater chance that the lender will lose money due to the desperate conditions that often call for the use of payday loans. However, that is where the logic ends.  The existence of a system that feeds on desperate situations has the potential to, and often does, exacerbate an individuals’ situation of poverty and debt. It does not work for anyone who does not have a stable income, which is ironic because this is typically the crowd who uses payday loans.

For individuals who do not have access to the kind of employment that actually covers daily needs (not minimum-wage), the loan that they receive may be the only income they have for weeks. This means that each week, they are accumulating more and more debt. For example: if an individual takes out money because they cannot pay for rent, the money they borrow is obviously all they have- no leftover savings as this would have been used up already. Instead of being able to focus on how they will pay for their meal that night, a birthday gift for a daughter’s 8th birthday, glasses so that they can see where they are driving during their early morning commute, etc., the individual now also has to consider how they come up with the additional $63 of interest they will accumulate over the month.

This issue is controversial because it promotes a cycle of poverty where this individuals debt load is consistently increasing at a steady rate- such that they do not have the opportunity to cut corners in a way that would still maintain a functional lifestyle. It is scary for me to think about how these businesses are promoting vulnerability in a place like Hamilton where 18% of the population already lives in poverty- that is 129, 790 people (as of 2011). Do you see why I am concerned?

Of course, closing Money Mart does not present a holistic solution to the issue of poverty. Alternatively, I think that developing an understanding as to why people would need to use these loans in the first place would allow government workers, neighbours, teachers and all those belonging to the service sector to come up with creative solutions that do not lead a vulnerable people further into debt.

So much to say and so little space! Let me know your thoughts.