I’m not a financial advisor but I often see people in trouble by making poor decisions as consumers. When things are bad, as they are for some right now, people are more vulnerable. The federal and provincial governments have put emergency benefits in place to help people who have lost income but for some, it’s not enough. I’m concerned about the number of people making financial decisions out of desperation.

Payday lenders are heavily regulated in every province. They operate under strict rules related to how much interest they can charge and what they must tell borrowers. If you’re considering a payday loan, think carefully. By law in Nova Scotia, these companies can charge interest rates as high as 60% if you’re not on time with your payments.

The treadmill analogy is used a lot when talking about these loans and for good reason. Far too many people resorting to this borrowing option are only pulling forward money from their next pay cheque, creating another shortfall, at which point they borrow again. They’re running in place, not getting anywhere.

All that said, these companies have their place in very specific circumstances—if they follow the rules. There’s been an uptick in advertising by online payday lenders. In many cases, these companies aren’t licensed to operate in the province in which they’re lending. This is illegal.

We’ve conducted investigations into several of these companies (including one that dubiously claimed to be located in Nova Scotia). People resorting to this option leave themselves vulnerable to fraud (as some of these companies ask for bank account information before lending), and aggressive and harassing collection tactics like calling a borrower’s place of work.

Other companies claim to be able to lend money to anyone, regardless of credit rating or even employment status. The catch in these cases is a fee (usually described as loan insurance, or an application fee), payable before the loan is granted. This is also against the law.

In Canada, no company can charge an advance fee to loan money. The calls we receive from victims of upfront-fee loan scams are heartbreaking. These are people who were already in trouble financially and scraped together what little money they could to pay the fee, only to learn that the loan isn’t coming. And on top of that, they’ve lost the money they paid.

These companies are advertising more heavily right now because people are suffering and they see a chance to capitalize on that pain. Don’t let them.

If you know someone who could be at risk of making these kinds of mistakes, talk with them about other possibilities. Banks and credit unions may have relaxed criteria for lending—contact them and ask. Some creditors may defer payments. It’s hard to ask family and friends for financial support but maybe this is the time. Make an appointment with a financial advisor, or with the non-profit Credit Counselling Services of Atlantic Canada.

We’re all in this together. Let’s look out for each other.

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