Abstract
This chapter identifies some of the key barriers to accessing mainstream banking services and discusses various attempts to reduce, overcome, and bypass them. It reviews the federal banking regulations intended to improve access to basic banking services and introduces readers to some of the special loan products and projects designed to provide customers with an alternative to payday loans. Where barriers to using a bank account and accessing short-term loans for emergency funding needs drive some customers to the payday loan business, this chapter profiles community-based initiatives, many in partnership with local credit unions, designed to address these barriers. It concludes with an assessment of resurrecting the postal savings bank as a nationwide alternative to the payday loan.
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Notes
- 1.
Respondents were asked to rate their literacy by rating their personal financial knowledge and ability to keeping track of money, making ends meet, shopping around for the best financial product, and staying informed about financial issues (FCAC 2016b, p. 12).
- 2.
The Financial Consumer Agency of Canada (FCAC ) created in 2001 is an independent agency of the federal government “working to protect and inform consumers of financial products and services.” For a summary of the FCAC ’s mandate, see http://www.fcac-acfc.gc.ca/Eng/about/Pages/OurManda-Notreman.aspx
- 3.
Notably, the lack of a checking account will eliminate the possibility of acquiring a payday loan since a post-dated check or debit authorization is one requirement of the loan contract.
- 4.
- 5.
Historically, and for a variety of reasons, Aboriginal communities have had difficulty accessing basic banking services and business capital; see Collins (2011).
- 6.
All banks operating in Canada are chartered under federal legislation. It is these federally regulated financial institutions that are within the reach of federal legislation. Where credit unions may be chartered either federally or provincially, only the federally chartered and regulated institutions are subject to the federal legislation discussed below.
- 7.
For plain language details, see the FCAC’s summary at http://www.fcac-acfc.gc.ca/eng/forConsumers/topics/yourRights/Pages/Checkho-Retenues.aspx
- 8.
- 9.
- 10.
City of Toronto, The City Services Benefit Card. Ontario Works. Retrieved from http://www1.toronto.ca/wps/portal/contentonly?vgnextoid=95baa81204bc0410VgnVCM10000071d60f89RCRD&vgnextchannel=36b2d08099380410VgnVCM10000071d60f89RCRD
- 11.
Credit Union Central of Canada https://www.central1.com/news/providing-accessible-financial-services-core-credit-unions
- 12.
Both have been in operation for more than ten years. The literature is sprinkled with references to other shorter-lived attempts to establish a store-front operation for serving the financial needs of traditionally underserved populations. For example, RBC operated Cash & Save in the low-income neighborhood of Parkdale and Regent Park (Toronto, Ontario) from 2002 until 2005. The Provincial Alliance Credit Union (PACU) was partnering with the Centre for Addiction and Mental Health (CAMH) in 2008 to extend check-cashing services to CAMH clients but was no longer operating after the amalgamation of PACU with two other credit unions in 2014.
- 13.
Assiniboine Credit Union https://www.assiniboine.mb.ca/PigeonParkSavings and https://www.phs.ca/index.php/project/pigeon-park-savings/
- 14.
PHS Community Services Society “strives to develop, maintain and promote affordable housing for adult individuals who are poorly served elsewhere in the community due to their physical health, mental health, behavioural issues, substance dependencies, forensic history, and for those who are homeless. All of our operations aim to foster a sense of community, encouraging members to accept and support one another while empowering them to determine their own course of recovery.” https://www.phs.ca/
- 15.
- 16.
- 17.
The impetus for renewed interest in Postal Banking comes largely from a need to provide Canada Post with an alternative revenue stream to replace the lost revenue from declining letter mail services. See Anderson (2013), Canadian Union of Postal Workers (n.d.), and Le Goff (2005), all suggest that resurrecting postal banking could help “stabilize Canada Post revenue and services.” “Postal Savings Bank is not to change the banking landscape but rather to ‘breathe new life’ into Canada Post” (Le Goff 2005, p. 20).
- 18.
Canada’s postal system is now a blend of corporate (government-owned) and dealer (franchised) outlets. Dealer outlets are located primarily in urban areas (Canada Post 2015, p. 36).
- 19.
“In essence, the post office could become a community ‘hub’ since it would become a community resource center. Internet ‘bridging services’ would allow residents to connect to the rest of Canada, including businesses and various services at all levels of government. Where residents are not familiar with the use of the Internet, the local post mistress or post master would serve as a resource person, assisting residents with their connections to the wider world. The availability of Internet would also permit residents to engage in online banking as do most other Canadians. Credit unions and some banks (such as the First Nations Bank and many of the chartered banks that offer online services to rural, remote and Aboriginal communities) would undoubtedly welcome the opportunity to provide services to currently under-served rural and remote residents. Contacts could be identified at such financial institutions that would assist residents with their banking needs” (Task Force 2016, p. 76).
- 20.
The Task Force (2016, p. 81) reviewing Canada Post states, “[t]he overall finding by third-party experts was that Canada Post would be entering a well-established banking market that serves Canadians well, and in which a new player would have to earn its market share through fair competition. The basic pre-requisites are significant and include substantial investments in infrastructure, IT, security, acquiring new skill sets, and complying with increasingly complex regulatory requirements both domestic and international.”
- 21.
There is a well-established and widely supported practice of federal, provincial, and territorial governments providing a variety of financial services deemed too risky, too unprofitable, or otherwise too much in the national interest to be left to the private financial sector. Canada Mortgage and Housing Corporation, the Canadian Business Development Bank, the Bank of Canada, and the Canadian Pension Plan are but a few high-profile federal government examples.
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Spotton Visano, B. (2018). Mainstream Financial Institution Alternatives to the Payday Loans. In: Buckland, J., Robinson, C., Spotton Visano, B. (eds) Payday Lending in Canada in a Global Context. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-71213-0_6
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