Loan company fights order

…is seen by some as a unique way of side-stepping usury laws. The Criminal Code sets the limit at 60 per cent per annum interest on loans, but legitimate insurance fees are not included. When combined and calculated as annual interest, the fees and interest charged on a two-week loan ranged from 390 to 890 per cent.

The Toronto Star
September 12, 2004

Loan company fights order
Charged clients 24% insurance fee. Payday firm’s hearing set for fall.
Jim Rankin and Nicole MacIntyre

A payday loan company is challenging an order by Ontario’s insurance regulator to stop conducting insurance business in the province.

The Kitchener-based chain of Stop ‘N’ Cash stores has asked for a hearing into an interim order, issued Aug. 30 by Ontario’s Superintendent of Financial Services.

That order called for the company and a related off-shore insurance firm to immediately stop carrying on insurance business without a proper license.

Stop ‘N’ Cash, which has grown to more than 50 stores from two in 1998, has been charging clients a death and disability insurance fee equal to 24 per cent of the amount borrowed, and believes its business model is sound.

Stop ‘N’ Cash lawyers appeared before the province’s Financial Services Tribunal last week seeking a stay on the order – a concession that would have allowed franchisees to continue charging the insurance fee until the tribunal holds a hearing.

“If some relief is not provided, jobs will be lost,” lawyer Stephen Sofer told the tribunal.

Sofer told the panel that the two sides have been talking almost daily since the order was issued, and that the company has made several changes suggested by the regulator, and that the regulator should be ready to hold a hearing now.

“They made the order,” Sofer argued. “They don’t need more time.”

Colin McNairn, chair of the tribunal panel, agreed with counsel for the insurance superintendent that he had no jurisdiction to stay the order – or grant other relief being sought by the company – and set tentative hearing dates in October, the earliest possible dates available. It’s unclear if franchisees have stopped charging the insurance fee.

The insurance fee is how the Stop ‘N’ Cash stores make their profits off the short-term, paycheque-to-paycheque loans, and is seen by some as a unique way of side-stepping usury laws. The Criminal Code sets the limit at 60 per cent per annum interest on loans, but legitimate insurance fees are not included.

Stop ‘N’ Cash was highlighted in a recent Star series, which found that payday-loan businesses charge a confusing mix of fees and interest.

The series included a sampling of loan terms at a dozen Toronto payday stores. When combined and calculated as annual interest, the fees and interest charged on a two-week loan ranged from 390 to 890 per cent.


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