It only launched last month, but TD Bank and Canada Post have already put a new program offering loans for customers in remote communities on pause, citing unspecified “processing issues.”
Known as the MyMoney program, the mail carrier and lender announced just last month that 6,000 Canada Post locations across the country would soon be able to offer individuals small loans of between $1,000 and $30,000.
Targeting remote communities that lack full service bank branches but do have Canada Post locations, the program was an example of what’s known as postal banking — a system that countries such as Italy, Brazil, New Zealand, Switzerland and others have, to varying degrees of success, but one that hasn’t existed in Canada in more than 50 years.
While customers would apply either in person or online via Canada Post, the loans themselves would be with TD Bank, and come with rates of up to 20 per cent per year — much higher than many other traditional lines of credit, but less than what installment and payday lenders tend to charge in communities without full-service bank facilities.
A report from the Canadian Postmasters and Assistants Association in 2015 found that almost 1,200 Canada Post locations are located in communities that don’t have a bank or credit union branch. That’s almost half of all locations, and those are the communities that the program is trying to target.
When the program was launched in October, TD said it planned to expand the program to even more banking services, but after barely a month, CBC News has learned that the lender has put the program on temporary hiatus.
“Since the launch, the product was paused both online and in physical locations, after experiencing processing issues,” the bank said, without elaborating. “We’re still working through this and will update accordingly.”
The website where Canadians can apply for the loans has an advisory that the loans are “temporarily unavailable.”
Duff Conacher, co-founder of civic advocacy group Democracy Watch, supports the concept of postal banking generally, but was underwhelmed when he heard the details of the program.
“It’s gouging on the top end,” he said in an interview. “A line of credit should be around 10 to 12 per cent right now, unless it’s tied to a mortgage and then it should be lower.”
“There’s no reason to go above that.”
Ben Dachis, the associate vice-president of public affairs at the CD Howe Institute think-tank, told CBC News in an interview Thursday that he was “not surprised that this isn’t taking off as easily as one would expect.”
He is among those who is skeptical of the idea of postal banking in the first place, noting that online banking options and credit unions already do a good job of filling the void for banking needs in areas where they lack.
“Postal banking has always been a solution looking for a problem.”
CBC News has asked Canada Post and TD Bank for more details on what sort of “processing issues” led to the decision — and what the status of existing applications is.
Canada Post directed all inquiries to TD Bank, which has so far declined to elaborate on the nature of the processing issues.