Lawyer says reduced payday loan fees no substitute for anti-poverty strategy
Come February, Nova Scotians will be paying slightly less for payday loans but a Halifax lawyer says the province needs to address why more people are depending on them.
“The information that we’re receiving from these lenders shows that people are taking these loans out in succession because they have a gap between their needs and their income,” said David Roberts. “What we’re seeing is incremental change in the absence of a poverty reduction strategy by the province and it’s an improvement of what we have now.”
The Nova Scotia Utility and Review Board reduced the maximum cost of payday loan borrowing to $19 per $100 loaned, from $22 per $100. The recent decision was the result of a review of the payday loan industry. Roberts, a consumer advocate, called for a steeper cut to $17 per $100 as part of his submission to the board. Roberts said he was generally pleased by the reduced rate amounting to about a 13 per cent cut. The changes will take effect in February.
But he also admits it doesn’t go far enough in providing enough relief for those subjected to interest rates that can be as high as 600 per cent.
“People have to require of their elected representatives a strategy of poverty reduction alleviating and outright eliminating the factors that cause people to have a need that can only be met by a payday lender.”
The review board did not change the maximum that can be loaned, which stands at $1,500. The current $40 default fee and 60 per cent interest on arrears also remains the same. Nova Scotia currently charges the second-highest payday loan fee in the country, next to PEI’s borrowing rate of $25 per $100. The cost per $100 in New Brunswick, Ontario and Alberta is $15. Quebec does not currently regulate the industry.
Roberts said the board acted reasonably within the limitation of the regulatory framework established by the province
“For the time being, we seem to be in a position where we have to put up with it because we don’t have any other options, generally speaking, for this type of credit — for these people that need shortterm credit and maybe don’t have access to other forms of credit.”
“Until our governments provide other opportunities these payday lenders are going to be there and they’re going to be a better option than online credit sources that are unregulated and exist who knows where.”
Repeat borrowers remain an issue in the province, accounting for 56 per cent of loans issued in 2017. That amounts to 18,795 borrowers, up from 15,545 in 2013. In 2017, the total number of payday loans issued in Nova Scotia was 209,000, up from 148,348 in 2011.
Payday lenders had pushed for the $22 rate to be maintained and argued that a reduction would drive outlets out of the market. In New Brunswick, several outlets have disappeared since the rate was set at $15 per $100. The board also rejected a proposal by Face of Poverty Consultation that would spell the end of payday loans in the province by drastically reducing the borrowing fee to $2.25 per $100.
“I don’t think it’s irrelevant for the board to consider what would happen if there was a large-scale reduction of the payday lenders,” said Roberts. “That would probably mean people resorting to less regulated and less reliable forms of credit, which of course are all over the internet.”
The board said it will recommend to the province that borrowers carrying multiple loans be given more time to repay the debt.
Roberts says it’s a recommendation he hopes the province will adopt but he’s not convinced it will happen.
“The board has made many recommendations to the government over the years and it has been very slow to take them up, put it that way. The province has been noncommittal in dealing with extended repayment terms.”