04/22/2015 01:30 EDT | Updated 07/16/2015 05:59 EDT

Maple Ridge bans new payday loan centres

New payday loan centres that promise short-term loans and instant cash are now banned from opening up in Maple Ridge, B.C.

There are currently six such businesses in the city, but council recently passed a bylaw prohibiting any new ones from setting up shop.

Councillor Tyler Shymkiw, who introduced the bylaw, says payday lenders trap users in a cycle of debt and poverty because many cap interest rates at 23 per cent over a two-week loan period, or 600 per cent annually.

"Those loans just aren't payable for a lot of people," he told The Early Edition's Rick Cluff.

"And what tends to happen — this is why having a density of them around is such an issue — they take out loans from one store to pay another, to pay another."

Shymkiw, who was on the board of directors for a local food bank, says the exorbitant rates force users to end up at the food bank or other similar services.

Payday loans offer alternatives

Canadian Payday Loan Association president Stan Keyes argues there is a demand for small, short-term loans because most banks and credit unions don't offer $200 or $300-loans that are repayable in a couple of weeks.

"The payday loans, often times, is a smart option for the customers," Keyes said.

"Payday loans are less expensive than a series of overdrafts or defaulting on an auto loan, they're a better deal than having the electricity or heat or the telephone turned off only later to pay for having them turned on again."

Shymkiw points out that some financial institutions such as Vancity now offer small, short-term loans at a much lower interest rate. Plus, those in need can also turn to community initiatives like emergency rent provisions rather than resort to a payday loan store.

To hear the full story, listen to the audio labelled: No more new payday loan centres in Maple Ridge