Government moves to regulate payday loans
The government is moving to regulate payday lenders after years of operating outside the law.
Service NL Minister Eddie Joyce said that the legislative amendments debated in the House of Assembly amount to consumer protection, but that doesn’t mean the government is encouraging people from using payday lenders.
“If there’s one point I want to make very, very clearly: We’re not promoting payday lenders,” he said.
“We know they’re here. We know that they’re going to operate. So we want to put consumer protection in that. We’re not promoting it.” The criminal code prohibits loansharking by making it illegal to charge rates higher than 60 per cent. But nearly all short-term payday loans are much, much higher than that if you work it out on an annualized basis.
Lenders haven’t been prosecuted, though, because authorities have decided it’s not in the public interest to do so, which has left the payday loans business in a legal grey area.
Under the proposed regime, the government will prevent people from being charged more than $21 per $100 borrowed — interest, fees, all-in — and the loans must be no more than $1,500 and for a maximum of 62 days.
Borrowers will have a two-day cooling off period where they can cancel the loan, and lenders will have to offer very specific warnings about the money being a high cost loan.
This will all take some time to come into force, because the provincial government will have to get approval from Ottawa to institute this regime, because it essentially involves waiving that section of the Criminal Code.
Joyce said he’d like to see these new consumer protections in place some time in 2017.
Service NL Minister Eddie Joyce said the government wants to add consumer protections to payday loans, but that doesn’t mean they’re encouraging people to use them.