New pay­day loan laws fur­ther pro­tect con­sumers

The McLeod River Post - - Family, Farm & Garden - Spe­cial to the Post

Al­berta now has the strong­est pro­tec­tions for bor­row­ers in Canada.

Pay­day lenders are now re­quired to pro­vide all loans with in­stal­ment plans, with no penalty for early pay­back. This dras­ti­cally re­duces the in­ter­est rate, and helps pre­vent Al­ber­tans from fall­ing into a cy­cle of bor­row­ing.

New rules also re­strict the num­ber of times a lender can make pre-au­tho­rized with­drawals, so bor­row­ers don’t in­cur ex­tra fees. Th­ese rules, now in ef­fect, are the next step in im­ple­ment­ing An Act to End Preda­tory Lend­ing leg­is­la­tion that was in­tro­duced and passed this spring.

“Al­ber­tans told us they want lower in­ter­est rates, longer pay­back pe­ri­ods and bet­ter al­ter­na­tives. We lis­tened and took ac­tion. I’m proud to be part of a gov­ern­ment that sup­ports fam­i­lies by im­prov­ing con­sumer pro­tec­tions.”

Stephanie McLean, Min­is­ter of Ser­vice Al­berta

The Act also re­quires gov­ern­ment to en­cour­age fi­nan­cial in­sti­tu­tions and com­mu­nity groups to of­fer al­ter­na­tive short­term loans that are fair and ac­ces­si­ble.

On Dec. 7, Servus Credit Union launched its Fast For­ward Small Loan ? a fair, con­ve­nient al­ter­na­tive to costly pay­day loans. It of­fers cash in less than an hour, with no fees and penal­ties. It has an an­nual in­ter­est rate of 19 per cent, with a pay­back pe­riod of two months to two years.

“Our new loan of­fers Al­ber­tans credit that is flex­i­ble and af­ford­able. We are proud to work with the Al­berta gov­ern­ment to help Al­ber­tans im­prove their fi­nances by of­fer­ing a low-cost al­ter­na­tive to pay­day loans that can serve as a step to­wards fi­nan­cial fit­ness.”

Garth Warner, Pres­i­dent and CEO, Servus Credit Union

“We ap­pre­ci­ate the gov­ern­ment’s lead­er­ship in en­cour­ag­ing fair lend­ing prac­tices so that use of short-term credit does not jeop­ar­dize one’s long-term fi­nan­cial sta­bil­ity.”

Joanne Cur­rie, Di­rec­tor, Fi­nan­cial Sta­bil­ity & In­de­pen­dence, United Way Cap­i­tal Re­gion

In­stal­ment pay­ments

In­stal­ment pay­ment plans are a re­quire­ment at all pay­day loan com­pa­nies. Specif­i­cally:

• Lenders must al­low bor­row­ers to re­pay the loan over a term of be­tween 42 and 62 days.

• The in­stal­ments must be spread over at least three pay pe­ri­ods.

• In­stal­ments must be sub­stan­tially the same (i.e. within $10 of each other). This will pre­vent lenders from set­ting up un­bal­anced in­stal­ment pay­ments that would de­feat the pur­pose of re­quir­ing in­stal­ment plans.

Pre-au­tho­rized debit at­tempts

• Un­der the new reg­u­la­tions, lenders can­not re­peat­edly at­tempt to with­draw preau­tho­rized debit amounts when there are in­suf­fi­cient funds, nor can they charge large fees to bor­row­ers when pre-au­tho­rized deb­its re­peat­edly fail.

• After a pre-au­tho­rized debit does not go through, a lender may make one ad­di­tional at­tempt to ob­tain re­pay­ment via pre-au­tho­rized debit.

• The amount of this ad­di­tional at­tempt must be the same as the ini­tial at­tempt, plus the al­lowed NSF fee and any in­ter­est be­cause of the de­fault.

• The ad­di­tional at­tempt must be made within 30 days after the pay­day lender was no­ti­fied that the ini­tial at­tempt was un­suc­cess­ful.

Note: This will not pre­vent a bor­rower from mak­ing ad­di­tional/al­ter­na­tive at­tempts where a lender has con­sent from the bor­rower for a spe­cific amount on a spe­cific date.

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