An interesting story on the possible perils of using alternative lenders in Canada.
“While federally regulated banks dominate Canada’s residential mortgage lending market, accounting for more than 80 per cent, business appears to be growing for many “alternative” lenders, including two of the most visible B.C. companies, Capital Direct and Alpine Credits, who say they have provided more than $1 billion of loans each.
Representatives of home equity lending companies say they provide a valuable service, filling a need for Canadians unable to get loans from conventional, regulated financial institutions. Both defenders and critics of alternative mortgage lenders say more Canadians are turning to these less-regulated lenders as Ottawa has tightened lending requirements at federally regulated financial institutions. A Bank of Canada report from late last year said: “Tightening bank regulation … can lead to migration of activity from the traditional banking sector” to alternatives.
The breezy tone of their ads doesn’t sit well with a number of credit counsellors and foreclosure lawyers. They say that while these alternative lenders aren’t breaking any rules, the public needs to better understand what’s behind the catchy jingles: high costs and potential risk.”