The move, however, is only a partial fix to a much larger issue, experts warn.

At the end of April, Toronto City Council will vote on new zoning regulations to cap the number of payday loan stores at 207. Hamilton has already decreed that there will be no more than 15 within city limits and a maximum of one per ward, with existing businesses grandfathered in. There are 50 licensed payday lenders in Ottawa, where Mayor Jim Watson wants to impose a cap and try to keep them from concentrating in a few poor neighbourhoods.

City council action against the high-cost lenders is the result of new powers Queen’s Park granted cities last year. 

“The city does not have the power to say no, you cannot exist as a legal business,” said Toronto city councillor Joe Mihevc. “But we do have the power to regulate location.”

For years there’s been a broad consensus among social service agencies and city fathers that the payday loan industry preys upon the poor by offering small, easily acquired loans at 390-per-cent annual percentage rates (APR). But the zoning laws may be too little too late, Cardus work and economics program director Brian Dijkema told The Catholic Register.

“Quite frankly, it’s a dying industry,” said Dijkema, who has been studying the payday loan industry and its effects on communities for the Christian think tank for years. He has seen the market for small, higher risk loans is shifting from high-cost storefront operations to online offerings.

“You see (online) places like Mogo and Borrowell actually chipping away at the market share of payday loans,” he said.

The payday loan business is nowhere near as profitable as most people think, said Dijkema. Up to 75 per cent of the cost of providing the quick and expensive loans is taken up by staffing, rent, advertising and other overhead costs. The online lenders offer instalment plan loans that are less expensive than the payday loan option. “If you lose the storefront you suddenly save 75 per cent of the cost and you can charge your customer a significantly lower price for the product,” said Dijkema.

The food banks, shelters and other social service agencies that pick up the pieces for people who have gone from poor to penniless would rather see the federal government regulate big banks so that they’re required to serve the poor with a broader range of financial products and services, said Catholic Charities social justice and advocacy program manager Jack Panozzo. However, Catholic Charities has no official position on what to do about payday loans.

As the payday loan stores face the same grim competition with online technology that is crippling malls and main streets everywhere, the public policy choice may be about what kind of lending will replace them — online lenders without ties to any community, or local credit unions who were founded to act as a buffer against usury.

“The need for cash does not disappear. People need to fill that somehow and will do so,” said Dijkema.

Rather than concentrating on lenders they don’t like, churches and policy makers should keep their focus on low income people who need access to credit, said Dijkema.

“We talk about inequality. There’s massive inequality in access to good credit in this country,” he said.