Just weeks after launch, TD is pausing the lending program in partnership with Canada Post
It only launched last month, but TD Bank and Canada Post have already put a new program for loans to customers in remote communities on hold, citing unspecified “processing issues”.
Known as the MyMoney program, the mail carrier and lender announced last month that 6,000 Canada Post locations across the country would soon be able to offer small loans to individuals between $1,000 and $30,000.
The program, which targets remote communities that do not have full-service bank branches but do have Canada Post locations, was an example of what is known as postal banking – a system that countries such as Italy, Brazil, New Zealand, Switzerland and others have success in varying degrees, but one that has not existed in Canada for over 50 years.
While customers would apply in person or online through Canada Post, the loans themselves would be with TD Bank, and come with rates of up to 20 percent per annum – much higher than many other traditional lines of credit, but less than what installment and payday lenders tend to to charge fees in communities without full-service banking facilities.
A 2015 Canadian Postmasters and Assistants Association report found that nearly 1,200 Canada Post locations are in communities that do not have a bank or credit union. That’s almost half of all locations, and those are the communities the program is trying to target.
When the program launched in October, TD said it planned to expand the program to even more banking services, but after barely a month, CBC News learned that the lender has temporarily suspended the program.
“Since launch, the product has been paused both online and in physical locations following processing issues,” the bank said without elaborating. “We are still working on this and will update accordingly.”
The website where Canadians can apply for the loans indicates that the loans are “temporarily unavailable”.
Duff Conacher, co-founder of the social advocacy group Democracy Watch, supports the concept of postal banking in general, but was impressed when he learned the details of the program.
“It’s gushing at the top,” he said in an interview. “A line of credit should be about 10 to 12 percent 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 vice president of public affairs at the CD Howe Institute think tank, told CBC News in an interview Thursday that he was “not surprised this isn’t taking off as easily as one might expect.”
He is among those primarily skeptical of the idea of postal banking, noting that online banking options and credit unions are already doing a good job of filling the void for banking needs in areas where they are lacking.
“Postal banking has always been a solution in search of a problem.”
CBC News has asked Canada Post and TD Bank for more details about what kind of “processing issues” led to the decision – and the status of existing applications.
Canada Post sent all inquiries to TD Bank, which has so far declined to comment on the nature of the processing issues.