Companies who provide cash to customers could soon need a municipal license to operate in Toronto.

City staff has recommended amending the municipal code to create a new business license category for payday loan establishments. This would require cash providers to obtain a license by both the province and the city in order to legally remain open.

The city is also considering capping the number of stores that operate in Toronto.

As of January 1, the province created a new regulation that would allow municipalities to regulate payday loan stores. They put a maximum dollar amount on how much a lender can charge a customer. That maximum amount is $15 for every $100 borrowed.

But, depending on how fast a borrower pays back their loan, they can be stuck with an annual percentage rate of over 300 per cent.

Toronto city councillor and poverty reduction advocate Joe Mihevc said the city needs more control over this industry.

“I think for those of us who look at the bigger picture here in Toronto, they are not a helpful entity,” Coun. Joe Mihevc, Toronto’s poverty reduction advocate, told CTV News Toronto. “Their exorbitantly high interest rates really hurt the very people that they say they are trying to help.”

Mihevc said that most companies will establish themselves in low-income neighbourhoods.

“Alongside limiting these payday loan places is to do a lot more education around economic literacy,” Mihevc said. “To be tempted by these pay day loans is not in their interest and that is the message we need to get out there. While they think they are getting cash money for only $20 a month, they are actually losing money very very quickly. That’s not a service. That’s a predatory activity.”

According to a report that will be presented to the Licensing and Standards Committee Tuesday, payday loan establishments would have to pay $632.87 to obtain a city license. There will also be an annual renewal fee of $308.99.

“People need access to financial services to achieve economic stability. Traditional financial services, such as credit cards, loans, and lines of credit, help individuals build credit and manage financially difficult times,” the report reads. “Payday loans fill a gap in credit for some consumers, but they are an expensive way to borrow money.”

The Canadian Consumer Finance Association, an agency that represents small-sum, short-term credit and payday loan companies, told CTV News Toronto that capping payday lenders could end up “forcing consumers to turn to licensed, unregulated lenders for credit because they are facing an emergency and have no other options.”

The Licensing and Standards Committee will review these recommendations before it goes to city council for a final decision.