Sask. pon­ders leg­is­la­tion to curb pay­day loan in­dus­try

Saskatoon StarPhoenix - - Local - ByAn­neKyle Saskatchewan News Net­work with CP Files

REGINA — Anti-poverty groups say they would wel­come fed­eral leg­isla­tive changes that pro­tect con­sumers and rein in bal­loon­ing in­ter­est rates charged by Canada’s pay­day loan in­dus­try.

“I have no prob­lem sup­port­ing the in­tro­duc­tion of leg­is­la­tion that would pre­vent the pay­day loan in­dus­try from goug­ing con­sumers. My main con­cern is the en­force­ment of those reg­u­la­tions,” said Bon­nie Mor­ton, of Regina’s An­tiPoverty Min­istry.

The fed­eral gov­ern­ment in­tro­duced Crim­i­nal Code changes Fri­day that would give prov­inces the author­ity to reg­u­late pay­day loans, which typ­i­cally in­volve lend­ing a few hun­dred dol­lars to get bor­row­ers through to their next pay­day.

Jus­tice Min­is­ter Vic Toews said Fri­day the pro­posed leg­is­la­tion gives prov­inces the tools they need to pro­tect con­sumers from what he called “ques­tion­able busi­ness prac­tices.”

It is il­le­gal un­der fed­eral law to charge an­nual in­ter­est of more than 60 per cent.

Yet the ef­fec­tive rates charged by pay­day loan out­lets on short-term bor­row­ings can amount to 1,000 per cent on an an­nu­al­ized ba­sis once ser­vice charges are in­cluded. There also are fears that bor­row­ers can be trapped in a cy­cle of re­volv­ing debts.

“The short-term loan pro­grams are tak­ing ad­van­tage of peo­ple who are al­ready dis­ad­van­taged,” said Mor­ris Ea­gles, di­rec­tor of Regina’s Wel­fare Rights Cen­tre.

Bor­row­ing money be­tween pay­cheques be­comes a per­pet­ual prob­lem and be­cause of high in­ter­est rates th­ese peo­ple dig them­selves deeper and deeper into debt, he said.

Mean­while, the in­dus­try has grown into a busi­ness es­ti­mated to lend $2 bil­lion a year to two mil­lion Cana­dian clients.

The Con­ser­va­tive gov­ern­ment’s pro­posed leg­is­la­tion would al­low prov­inces that have le­gal pro­tec­tions for pay­day loan cus­tomers to per­mit in­ter­est charges above the Crim­i­nal Code’s 60 per cent thresh­old. The ex­emp­tion will al­low prov­inces to set their own caps on in­ter­est rates, as well as other fees, and will also al­low pro­vin­cial of­fi­cials to en­force the rules.

Pay­day loan com­pa­nies have com­plained that lim­it­ing small short-term loans to 60 per cent in­ter­est would not en­able them to cover even ba­sic ad­min­is­tra­tion costs.

Ea­gles said he wouldn’t sup­port the re­moval of the ex­ist­ing cap on in­ter­est rates from the Crim­i­nal Code.

The pro­posed leg­is­la­tion ap­pears likely to get all-party con­sent and rapid pas­sage through the Com­mons.

Saskatchewan Jus­tice Min­is­ter Frank Quen­nell said there is some need to have work­able reg­u­la­tions in the in­dus­try.

“The Crim­i­nal Code has just been too clumsy an in­stru­ment for reg­u­lat­ing the in­dus­try,” Quen­nell said.

He added the prov­ince will be work­ing with the in­dus­try and con­sumers to de­velop ap­pro­pri­ate leg­is­la­tion and to set out­rules reg­u­lat­ing the max­i­mum that can be charged in terms of in­ter­est or fees, pay­ment and lend­ing terms.

The Cana­dian Pay­day Loan As­so­ci­a­tion, an in­dus­try group rep­re­sent­ing 850 of the 1,350 out­lets of­fer­ing th­ese short­term loans, wel­comed the bill, say­ing it “will en­sure con­sumer pro­tec­tion and the on­go­ing vi­a­bil­ity of this im­por­tant in­dus­try.”

As­so­ci­a­tion pres­i­dent Michael Thompson said the group, which has been call­ing for gov­ern­ment reg­u­la­tion, will work with the prov­inces as they pre­pare their rules.

The big­gest op­er­a­tor in the busi­ness, Na­tional Money Mart Co., also wel­comed the gov­ern­ment’s ac­tion.

Money Mart, a sub­sidiary of U.S.based Dol­lar Fi­nan­cial Corp., added that the pro­vin­cial reg­u­la­tions will have to “bal­ance con­sumer pro­tec­tion with the con­tin­ued im­por­tance and vi­a­bil­ity of this in­dus­try.”

(REGINALEADER-POST)

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