Canadian Payday Loan Association — Media & Policy Makers

N.B. to push feds over payday loan law: minister; Bruce Fitch says it’s unwise to outline N.B. plans before Ottawa amends Criminal Code

Times & Transcript (Moncton)

Wed 07 Jun 2006

Page: A5

Section: NEWS

Byline: By Daniel McHardie Times & Transcript Staff

Justice and Consumer Affairs Minister Bruce Fitch promises to outline how the province will crackdown on payday loan companies before the end of the year.

Provinces have been pressuring the federal government to change a provision in the Criminal Code of Canada that handcuffs their ability to tackle these high- interest loan companies. Fitch said he understands there is a demand for these stores, but he's interested in finding a compromise that protects those vulnerable to falling into a debt spiral.

"We are anxious to make sure consumers are protected here in the province of New Brunswick and, if there is a niche market for payday loan institutions, that they can operate. But we want to make sure they operate not at the expense of the consumers," Fitch said.

The payday loan industry is unregulated with the sole stipulation found in the Criminal Code of Canada stating a lender cannot charge more than 60 per cent interest on an annualized basis. But there are no limits on other practices such as service fees or how often the same person can take out high-interest loans.

The basic payday loan company will offer to loan a person 50 per cent of their net pay, but the short-term loan comes at a price.

A price calculator on the Money Mart website, a national chain with more than 350 outlets across the country, indicates a person expecting a $1,000 cheque can get $400 on the spot but will have to pay the institution back $465 in two weeks.

Manitoba has taken steps to tighten up the industry but before its proposed legislation can be adopted, the federal government must amend the Criminal Code provision. Fitch said his department is keeping an eye on Manitoba's moves, but he doesn't feel it is wise to outline his own plan until Ottawa acts.

"That's why we want to push the feds, until that happens our legislation really wouldn't be as effective as it would be once you get the authority from the feds in setting those interest rates," Fitch said.

Fitch said it is unlikely he will have legislation introduced by the end of 2006, but he'd like to announce the steps that will be taken to safeguard New Brunswickers from the high-interest loan industry.

An internal committee has been struck by Canada's consumer affairs' ministers to find out what is the minimal cost that can be charged to a customer but will also maintain a viable business environment for the payday loan institutions.

Moncton North Liberal MLA Michael Murphy, the opposition's finance critic, questioned Fitch yesterday on the government's action on reforming payday loan legislation. Murphy said his debate with Fitch was not acrimonious, instead he was trying to nail down some clear timelines.

"I don't think either side has developed any refined positions other than we know something has to be done," Murphy said.

"And we know that the interest rates that are charged by these companies are beyond scandalous and we have to make sure that the consumer of New Brunswick is properly protected."

Michael Thompson, president of the Canadian Payday Loan Association, said in a recent interview that more than two million Canadians take advantage of payday loans each year, so the industry is large enough to benefit from regulation. He said the criminal code provision has led to controversy and misconceptions in the past, so he believes both the industry and its clients could take advantage of stricter regulations.

"Frankly the issue is the industry has come under a lot of criticism for its lending rates, so we think the law needs to be changed to recognize the nature of the product," he said in May.