New payday loan establishments would have to be a minimum of one kilometre apart under guidelines approved Thursday by the city’s planning committee.
The one-kilometre separation between stores was just one of a series of staff recommendations that full council will consider at its next meeting. Others call for a minimum distance of 500 metres between payday loan stores and casinos or racetracks and 300 metres between payday lenders and schools.
In addition, the new rules would restrict payday lenders to commercial and mixed-use zones only, meaning the stores would not be allowed to set up shop in any buildings zoned for residential use. Payday loan businesses would also be prohibited in single-use buildings.
Payday lenders often charge very high rates of interest to give customers cash advances. Critics argue they target lower-income individuals who can’t obtain loans from banks or other traditional sources of credit, leading to a vicious cycle of borrowing that drives consumers deeper and deeper into debt.
“It is recognized that many customers will use a second payday loan to pay off the initial loan, and that this may become a vicious cycle that can result in bankruptcy,” a city staff report tabled at Thursday’s meeting says.
“Although the province has established rules regarding the number of loans that may be taken over a specified period, the high visibility of these establishments is a constant reminder that additional funds will be available to those at-risk over time.”
According to the report, there were 54 payday loan businesses operating in Ottawa as of July, down from 59 in 2016. Many of them are clustered on a few main thoroughfares, including Bank Street, Hazeldean, Merivale and Montreal roads and St. Joseph Boulevard.
Under bylaw changes approved Thursday, existing payday lenders that don’t conform to the new rules would be allowed to keep operating. However, if the stores in those locations close and are replaced by another business, another payday loan shop can never reopen there.
“Over time, payday loan establishments will disperse and be reduced in number,” the staff report says.
Staff will be presenting a report to the city’s community and protective services committee next Thursday that recommends establishing a licensing system for payday lenders. Existing stores will be eligible for a licence provided they meet the new requirements, while any new lenders would have to conform to the new zoning regulations and meet the new licensing requirements.
City council will consider the new regulations at its next meeting on Sept. 25.