March 29, 2012

The ‘Alternative Credit Sector’ grew out of the forest of modern personal finance like a fungus that sucks out the remaining life from weaker and dying species. The early agents of the modern credit society were labelled by many as poverty lenders who specialized in poor people who could not qualify for credit from mainstream banking or financial institutions. Harsh and often unconscionable terms for repayment accompanied these loans with the most notable condition being usurious interest rates - so high and excessive that the loan recipients were assured to remain poor while having their suffering intensified and extended well into the future.

Unscrupulous practices like seizing all household furniture in the event of a default in payment (even when the furniture had no resale or market value) and then pursuing the debtor for the inevitable deficiency balance (the difference between what was owed on the loan and the amount received from the sale of the debtor’s assets) caused unbearable fear and proved to be an excellent collection device to pressure people to do frightening things to protect their car or household furniture from seizure. Meanwhile the interest rates were so high that it was indeed difficult for the poor to get out of debt.

At the end of this unholy cycle of usury and debt repayment the debtor would see a smiling face appear in the distance with an offer from the poverty lender for more ‘easy’ money with ‘easy’ monthly payments – and the poverty debtor would know they could not get credit anywhere else – and of course their car needed to be replaced and their furniture by this time had long since worn-out beyond repair.

As the credit society expanded through greater access to the banks especially via credit cards, so too did the ‘Alternative Credit Sector’. A new face appeared alongside high risk lending finance companies, namely the modern symbol of a society up to its assets in debt - pay day loans. The principle of not borrowing from pay day to pay day was directly challenged by a lender (a lonely one at that) that challenged this cherished tenet of money management. They began to argue that people needed their loans at rates that were well beyond the criminal rate of interest. They have tirelessly defended their claim that they provide a helpful service to consumers.

A long list of litigation against their extra fees, charges and excessive rates of interest lay strewn on the evolutionary path to the present where governments recently (November 2009 in British Columbia) decided to regulate the rate of interest on small loans under $1,500 to a maximum of 23% that must be repaid in 62 days.

Aside from the pros and cons of legitimizing a lending practice shrouded in questionable benefits, the underlying problems, beneath the surface of a society of debtors who owe over $483 billion in consumer credit, is a mountain of trouble. Even governments and the banks in 2012 acknowledge that household debt is too high in Canada.

Over lending as a contributing factor to overburdened debtors has been carefully managed by the credit industry and its many allies. Most often omission from the list of the causes of bankruptcy or debt problems keeps the attention focused on the debtor and their imprudent borrowing practices – and away from any responsibility being attributed to lenders in the household debt crisis that will not go away.

The symptom of borrowing from pay day to pay day has historically been on the top of the list of warning or danger signals that people have a debt problem. Despite the repeated attempts to legitimize this lending practice and the associated charges and rates charged people who are obviously struggling to make ends meet, pay day loans appeared in the Vancouver Sun today for what the government has deemed, “charging customers in British Columbia “several millions” of dollars for cash cards when they took out loans.”

Remember, if you are experiencing financial difficulties do not wait. Call Solutions Credit Counselling at 1(877)588-9491 or fill out our Debt Consolidation Questionnaire and get your Free Credit Counselling Advice today.

For more information visit Debt Canada - your Canadian credit education centre.

If you are a woman in debt, speak with Women and Money first. We specialize in helping women with their personal and business financeMoney management advice you can count on!

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