Payday lenders feel the pinch in Alberta
CALGARY — The garish yellow storefronts promising quick and easy cash are starting to dwindle in Alberta as the payday loan industry says provincial regulations put in place last year have made its signature product unsustainable.
The number of payday stores has dropped to about 195 from some 220 this time last year, according to Service Alberta.
Cash Money says it’s reduced the number of loans it issues from around 30,000 a month a year ago to a range of 1,500 to 1,800 as it denies all but the least risky borrowers.
“The situation in Alberta is unfortunate,” said Cash Money spokesperson Melissa Soper. “Without profit we can’t risk losses, so we have to deny those with riskier credit scores.”
Alberta’s regulations require a payday loan cost no more than $15 per $100 borrowed and have a term of at least 42 days. They are part of a wider crackdown on an industry that gave nearly 4.5 million shortterm, high-interest loans totalling $2.2 billion across Canada in 2014.
At the start of this year, British Columbia and Ontario both implemented lower borrowing costs and are exploring alternative lending options. Newfoundland and Labrador has committed to having its first regulations on the industry by the end of the year.
But it’s Alberta that has seen the most dramatic change recently, with the combined effect of the lower cost and longer borrowing time dropping the annual percentage rate from 600 per cent to 202 per cent for weekly payments over the 42-day period.
“Alberta is the most extreme,” said Tony Irwin, president of the Canadian Consumer Finance Association, which represents the payday loan industry.
“The six-week term has fundamentally changed the product.”
Alberta’s Act to End Predatory Lending, passed last year, is designed to prevent vulnerable borrowers from getting trapped in cycles of debt, said Stephanie McLean, minister of Service Alberta.
“My perspective has always been that we will put regulations into place that make a fair marketplace for Albertans,” said McLean.
She said she is encouraged by a partnership between ATB Financial and Cashco Financial to get people bank accounts, as well as the payday lending alternatives that credit unions in the province started last year, even though total loans issued from the three credit unions offering them so far only total in the hundreds.
The transition will take time as people learn about the new offerings, McLean said, adding that the policies weren’t expected to revolutionize the lending market overnight.