NDP government to look at new rules for payday loans
As the NDP government turns its eye toward the payday loan industry in Alberta, cabinet ministers say they’re concerned about some of the lenders’ practices.
The government is expected to soon launch a new round of consultations for an industry review, which began under the previous Tory government and is needed because the current payday loan regulations expire at the end of June 2016.
Service Alberta Minister Deron Bilous, whose department oversees the file, said an announcement is coming in the next few weeks.
While reluctant to provide details, Bilous acknowledged there are issues such as the rate of interest charged by the payday loan industry.
“It is a cause for concern and we want to make sure we’re protecting Albertans,” said Bilous, who is also the municipal affairs minister, in an interview at the Alberta Urban Municipalities Association ( AUMA) convention last week. “I’m quite excited to look at different options.”
Payday loans are a short- term form of credit where people can borrow sums of money typically smaller than what traditional financial institutions would offer, with a limit of $ 1,500.
In Alberta, payday lenders are allowed to charge $ 23 per $ 100 borrowed, with the rate accrued over a short time. That amounts to a 600 per cent interest rate on a two- week $ 300 payday loan at the maximum rate of borrowing.
Before being elected in Calgary-Fort in the spring election, NDP Finance Minister Joe Ceci worked for Momentum Community Economic Development, an organization that has called for tighter rules on payday lenders.
In response to a question from an AUMA delegate, Ceci said government consultations around the industry would be a “face- to- face kind of thing, where people can tell the province how better to protect consumers so that we don’t wind up with the situations where people get stuck into the payday lenders and can’t get out.”
“There’s a lot of support in our caucus for doing something substantive,” he said, noting the government will also look at encouraging other lending options for low- income earners who are the primary clients of payday loan institutions.
Mike Brown, public policy co- ordinator with Momentum, said the organization wants to see the $ 23 charge in Alberta lowered to $ 16 or $ 17 to make it the lowest rate in the country. Momentum is also calling on the government to institute new rules that would allow clients to repay loans in instalments rather than as a lump sum.
Brown noted the review of the payday loan industry is coinciding with tough economic times battering Alberta, triggered by a precipitous drop in oil prices.
“It is the working poor that get targeted by the businesses, so in the downturn you would expect more people to access payday loans, especially if they have lost their jobs or come into some economic insecurity,” he said Friday.
“So the downturn is really a boon for these types of businesses. They certainly cluster in low- income neighbourhoods in Calgary. So for a lot of people, that might be all they see for a lender.”
Officials with payday loan companies contacted by the Herald on Friday were not available for comment. The Canadian Payday Loan Association, which represents 20 licensed payday loan companies across the country, said it had no one available to speak on the provincial review.
But Stan Keyes, who until recently was president of the association, told the Herald in March that the changes advocated by Momentum would damage an industry that provides a service that banks and credit unions don’t.
“It certainly would make it even more difficult for the industry to provide the small- sum, short- term credit that’s in demand in Alberta,” maintained Keyes, who said payday lenders operate on slim margins.
The province isn’t the only level
It would certainly be beneficial for us that if one closes down we had the ability to say, ‘ At this location, we won’t let another one ... go back in.’
of government looking at the payday loan industry.
A bylaw that would require a minimum 400- metre separation between payday loan operations to avoid “clustering” is working its way toward Calgary city council.
Ward 10 Coun. Andre Chabot, one of the bylaw’s proponents, said that while the city would be able to impose rules on new operations, it needs more autonomy from the province to be able to easily change land use rules when an existing payday lender shuts down.
“It would certainly be beneficial for us that if one closes down we had the ability to say, ‘ At this location, we won’t allow another one ... go back in,’” he said. “There are some that have shut down and been replaced by another, a different company, just overnight.”