Pay­day lenders feel the pinch in Al­berta

The Hamilton Spectator - - BUSINESS - IAN BICKIS

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.

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