LENDING Tue, 12/21 5:49PM • 17:39 SUMMARY KEYWORDS peter, loan, postal workers, people, postal banking, credit, financial, called, folks, payday lenders, jan, bank, offer, canada, brian, working, money, product, post, interest rate SPEAKERS Afua Mfodwo, Peter Yoganellen, Brian Dijkema, Gabe Oatley, Jan Simpson Afua Mfodwo 00:05 In this episode of unraveled, Gabe Oatley talks about how the future of payday lending is connected to postal banking My name is Afua Mfodwo and this is unraveled. Peter Yoganellen 00:35 is basically what I can afford? Let's just say it's not in the greatest of neighborhoods. Gabe Oatley 00:40 That's the voice of Peter Yoganellen. He's 52 years old and he lives in Moncton, New Brunswick. Peter Yoganellen 00:46 There's like a soup kitchen and all my shelter down the road. Basically, I've seen everything in this neighborhood. Gabe Oatley 00:54 Peter lives in a part of town where many people are struggling to get by. And Peter is one of those folks too. He's also one of 1000s of Canadians who have gotten snaggled up with payday lenders. Today, we're going to hear Peter tell that story. It's complicated and it's sensitive, like many of our own stories with money are, and later we're going to hear from a group that's trying to prevent the circumstances like the one Peters facing. And curiously, it's an initiative led by postal workers. Yeah, the folks who bring you your mail, and it's called postal banking, wait for it. In 2008, Peter and his then partner lived on a small island in the Bay of Fundy. Both of them worked in the fishery business. But things got challenging for Peter when he got a diagnosis. Peter Yoganellen 01:44 Getting diagnosed with losing my sight, actually, I have peripheral dispersion glaucoma. So they're like you driving a boat, working a boat working in on the docks, running a forklift, this sort of thing. really dangerous, not just dangerous to yourself, but to everyone around you. Gabe Oatley 02:03 Work was also unstable for his partner, too. As a woman, there weren't as many job opportunities open to her. And the work was seasonal, meaning that money wasn't always stable, to try and even things out and to create a job that Peter could put more of his time into, they opened up a bed and breakfast, this was all working out, okay, until things started breaking down with their house. Peter Yoganellen 02:25 there was problems with the the heating in there, we had like a chimney. In the chimney, there was a small fire in there. Gabe Oatley 02:32 They got a $10,000 line of credit to do the renovations. Peter Yoganellen 02:36 The problem was, is that it's great to get that but if anything happens, where one person is not working, you run into you fall behind on that. Gabe Oatley 02:45 After that things started to snowball. And once they started snowballing, they didn't really stop. Peter Yoganellen 02:52 Then all the costs of just the renovations and everything kind of forces so that we had to sell the house, we had to get rid of the business altogether. At that point, you have no credit, nothing like this. Gabe Oatley 03:05 As a result of the whole situation, Peter and his partner ended up breaking up. Peter Yoganellen 03:09 Well I went to court for custody of the kids and visitation and all that when I got custody of the kids. You know, the biggest thing is they were saying, you know, when the kids visit, make sure that you have everything they need. So I mean, I had the basic so I had, you know the kitchen table and the chairs and this sort of thing. But I didn't really have anything that was like a living room set. Gabe Oatley 03:32 Peter's computer had also broken down so now he had two things he needed, the sofa set and a new laptop, but he didn't have the money. So he went to the bank and tried to get along. Peter Yoganellen 03:43 And they were just like no, no, you're you're already you know to fire out there. Gabe Oatley 03:50 One of his friends suggested that Peter look into the lease to own products offered by easy financial, a local payday lender, his friend told him that he had loans there too. Peter Yoganellen 04:02 What I didn't realize is they were doing something here which was called refer a friend. They would get $100 off the loan by doing this for them. Gabe Oatley 04:13 based in part on the recommendation from his friend Peter purchased a new computer and a sofa set with easy financial only this wasn't a typical purchase. Peter didn't have the money to pay for these things out right so use the company's lease to own program. Under this service, his laptop custom just 50 bucks a month and the sofa set just 75 at first things were going okay Peter was using the laptop to chat with his kids and he had a sofa there for when they came to visit. He was also working at a call center and work was steady at the time. All of this helped him to pay off the laptop. But then his eyes started acting up and he hurt his knee. He had to take a bunch of time off work and he ended up falling behind on his sofa payment. One day after his Miss Bill Peter noticed a block on his computer, anytime he turned it on, he saw this weird pink screen that wouldn't allow him to do anything on it. He confronted easy financial about it. But the manager said that it wasn't there doing. Peter Yoganellen 05:11 the thing users. We didn't put the block on. And as I said to him, I said, that's impossible if somebody else would have done that. What do you mean? Gabe Oatley 05:19 Oh, Peter managed to get some help from a friend who worked at a law office, the friend drafted up a letter saying that what EZ financial was doing wasn't legal. Peter took it to the office, and the next day the hold was removed. But over the following months, Peters financial challenges continued work was on and off, and he had trouble making his loan payments. And it mattered. The monthly interest rate on the loan was high, nearly 50%. And if you didn't have any funds in the account, when Ez financial tried to charge him, he'd be dinged with an insufficient funds fee, or NSF for short. Peter Yoganellen 05:53 even when I called them and I said, What's the sentences fee? Like? Where's that? Oh, it's on page 10 of your 12 page agreement? I'm like, Oh, okay. I'll have a look at it. But you know, really, and it just seems like it's kind of like a wink and a smile, and Oh, you'll be fine. Gabe Oatley 06:11 Later, Peter called Easy financial several times to try and sketch out a plan for paying back the loan. But he says he always had a tough time getting a straight answer about how much money he still owed. Eventually, his case was sent from easy financial to a collections agency. Peter Yoganellen 06:26 So right now, it's just sitting on my brain down my credit score. If I was to try and go and get a loan right now, they're saying, No, you have to pay this whole thing off. You know, when you're partially sighted, job options are really limited. Gabe Oatley 06:41 Today, despite having made many payments on the sofa set. The collections agency says that Peter still owes easy financial 2350 bucks, the sticker price on the set originally was about $500 less than that. Peter Yoganellen 06:59 In a way, it's embarrassing, you know, because I feel kind of like, people would say, you know yet, how could you be so dumb, at the time it was I was in a desperate situation, not really thinking it through maybe, as well as I should have. Like I had a friend of mine who referred me over there told me how good it was gonna be and everything like this. And I kind of took their word for it. And then later on, they're having problems themselves. You know, I got to feel like it was almost like it was duped. It's embarrassing kind of saying this. I know a lot of people don't want to even admit that their head that they were duped this badly. Gabe Oatley 07:40 Peter may feel like he was due. But Brian Dijkema believes that many people who take out these sorts of loans are just doing the best they can in really challenging circumstances. Brian is an economist with a think tank called cardus. Over the last decade, he studied the challenge of payday lending extensively. Brian Dijkema 08:02 But most people unless you're a very rare duck these days, have a need for some sort of credit, credit is real credit's been around forever. Gabe Oatley 08:12 The challenge he says is that different people have access to different sorts of credit, good credit, which is often easy to access cheap and flexible. And on the other end of the spectrum, bad credit, which can be tough to access can be expensive, and can be highly inflexible. On the best side, you have something that Brian calls natural credit. This is money that you can borrow from someone in your network. Brian Dijkema 08:36 The way I describe that in terms of like the realistic world is that's the Bank of mum and dad, or the Bank of your best friend or the Bank of your ethnic community or what have you. Gabe Oatley 08:46 This is the best type of credit because it's flexible, you can ask a friend for an extra couple of months to pay back your debt. And they probably are charging you an arm and a leg to borrow. But not everybody has a bank of mum and dad who can loan them money. Curtis's pulled Canadians on this, and they found that 33% of respondents don't know anybody who could even loan them 100 bucks. So natural capital is out for at least a quarter of the population. What are these other folks going to do? Well, there are other types of capital along the spectrum. Next is a line of credit. It's low ish interest, but typically secured against an asset like a car or a house. And most folks don't have that. Then there's credit cards, cash advances and pawn shops. Brian Dijkema 09:30 Pawn loans are the next the next sort of contestant on The Price is wrong. You know, as far as usury is concerned. Gabe Oatley 09:36 As you move down the spectrum, the terms of the credit or worse for the border. Loans are more costly, less flexible, and sometimes even less available. Nearing the end of the spectrum of credit is where we find payday lenders. They offer loans like the one Peter access for folks who are in a bind. Brian says that payday loans are bad. Brian Dijkema 09:56 The way the way I always describe it is they're really bad. Like They're just straight up, let's be honest, they're really bad. Gabe Oatley 10:03 But he also says that the folks who are using them aren't being irrational. Brian Dijkema 10:07 So a lot of people are like, well, these people are so stupid, you know, like, why would you ever do that? And I'm like, well, they're not stupid actually, compared to say, losing your car and not getting to work and getting fired, that cost might actually be better. Gabe Oatley 10:26 Losing your car, not getting to work or getting fired for say being denied access to your kids, because you don't have a space that a court deems to be suitable for them. Brian Dijkema 10:36 It's a rational choice within the within the constraint choices being offered by the person using it. Gabe Oatley 10:44 Given these limited options for working class people, many groups have been pushing for improved access to credit groups like acorn, an organization that Peter as part of are pushing for lower interest fees on payday loans, for lowering the cost of insufficient funds penalties and for making loans more flexible. In parallel to this advocacy, there's another group working to help improve things for low income people, your friendly neighborhood postal worker. Jan Simpson 11:13 My name is Jan Simpson, and I'm the national president for the Canadian union of postal workers. So I began working at Canada Post when I was in high school, I was working on Eastern Avenue at South Central and sortation plant, so I was sorting the mail. Gabe Oatley 11:28 Over the last half decade, Jan's union has been hard at work on a vision of postal banking. That is your local post office offering affordable banking services. And Jan Simpson 11:37 as we saw banks closing and financial payday loans coming up on every corner, we realized, I think, finally Canada Post realized to this was a great opportunity for us to get in to help those who are underbanked and to help the citizens as also as well as bring revenue into Canada Post. Gabe Oatley 11:53 In September, Canada Post started rolling out their first postal banking products at the post office locations in Nova Scotia and Alberta. The product is called a mind money loan, they're installment loans of up to $10,000. And provided at interest rates of between six and 16%. A significant difference from the 46% that Peter paid on his couch loan, and crucially, Jan says the terms of the loan are transparent. Jan Simpson 12:18 I think it's very transparent, because you can go to the website, and you can type in the amount of money that you want to want to borrow the interest rate and actually see what the loan payer would have to be at the end as well. Gabe Oatley 12:28 With this product candidate post is hoping to help folks like Peter. Jan Simpson 12:32 I think for us, you know, we're looking at anybody who number one is underbanked. And working people who also need smaller loans without astronomical interest rates, and who need flexible repayment schedules as well. We saw through the pandemic that many banks closed in rural areas. So those folks also we hope to target especially like indigenous communities. And also a lot of people who are here as temporary foreign workers in that Gabe Oatley 12:55 role at this first product Canada Post has partnered with TD Bank, a similar move that has been done with the rollout of postal banking in other countries like France and Switzerland. To apply for the loan customers fill out a brief application. If they're approved, they can then sign for their loan and get their check at their postal branch. That's the process today. But ultimately, Jan, and many of her fellow postal workers are keen for a much broader, much more independent role. Jan Simpson 13:22 I don't at this time right now with with Canada Post partnering with a TD Bank, its initial start. But for us as postal workers, we want to go to where we're a full fledged public postal bank. Gabe Oatley 13:33 This is just one part of the union's delivering community power campaign, a broader vision that seeks to green the Canada Post and turn it into an essential community hub 10 years into the future, Jan is keen to see a much broader role for the post office. Jan Simpson 13:49 Well, first and foremost, the postal bank would now be a public bank that's fully owned by and run by postal workers. And then secondly, you would see senior checking services where we go to the seniors homes and checking to make sure they're okay. That way it gives them a you know, some independence for quite a longer time. So if we're going to live in nursing homes, and that there are it gives us a sense of independence and some security for the families who may not live in the same neighborhood as their loved ones. And we know this is happening in Japan and other countries as well. And we're also looking at, you know, greening the post office to change in the fleet to a Green Fleet to help bring down the emissions within the country around the world as well. Gabe Oatley 14:25 It may be a surprising transformation, but Jan says it makes good sense. There are around 6000 post offices from coast to coast, many more than most banks offer. Moreover, postal workers visit many homes on a daily basis, creating an opportunity to check in on elderly residents and Canada Post delivery fleet is huge, electrifying their vehicles would make a big dent in GHG emissions reductions. And for Jan as a postal worker, it's personal. Jan Simpson 14:56 It means an opportunity for me as postal worker to see people who come into the retail counter actually have hope and access to to loans, and know that they're going to be getting a fair a fair rate of interest for them. Gabe Oatley 15:09 Both Brian and Peter are hopeful about postal banking, but they're more measured in their optimism than Jan. Brian skeptical that Canada Post will be able to get enough customers who think post office when they need a loan. And he's also unsure about how possible it will be to retrain postal workers to offer banking products. Peter says that it's a step in the right direction, but he's waiting on the details. He's curious about what kind of a stress test the product will have, ie like what your income needs to be to actually get one. If it's a higher stress test, many folks are still going to need to maybe use payday loans instead, and he's got an eagle eye on the interest rate. Peter Yoganellen 15:48 I'm happy to see that they're doing it. However, I would hope that they're, you know, the interest is low, you know, four to 5%. That sort of thing would be definitely helpful. Gabe Oatley 15:58 And while Canada Post is doing their thing, Peter isn't waiting. He's joined up with Acorn and is an active member of their New Brunswick chapter. He's advocating for improved federal regulation of payday lending, calling on the big banks to offer better credit products for low income people and pushing groups like Canada Post two Peter Yoganellen 16:19 People are looking at me and they're going oh, you have a university education. You have a degree in sociology or something like that, don't you? And I'm like, No, I'm just a regular Joe. I'm just tired of seeing this happen to everybody can see my friends going through problems. You know, speak up and you know what, you'd be amazed what you can accomplish. Afua Mfodwo 16:58 This episode was produced by Gabe Oatley. Our associate producer is Talha Hashmani and our executive producer is Elena De Luigi. Special thanks to John Powers for composing our theme music, and Ben Shelley for creating our podcast artwork. Our professor is Amanda Cupido and special thanks to Lindsay Hanna and Angela Glover. - 1 - 00Transcribed by https://otter.ai