Cap sought on amount charged by payday lenders
- PUBLICATION: The Chronicle-Herald
- DATE: 2006.11.08
- SECTION: NovaScotia
- PAGE: B5
The MacDonald government wants to cap the amount payday loan companies can charge for short-term loans and ensure borrowers know exactly how much the fees are.
Under the Criminal Code, those companies can only charge up to 60 per cent interest annually. But Service Nova Scotia Minister Jamie Muir said Tuesday that between interest rates and fees, the total is often more than that.
Mr. Muir proposed changes to the Consumer Protection Act that would put tighter restrictions on payday lenders and have the Nova Scotia Utility and Review Board set the maximum interest rates and fees they can charge.
The minister said the changes would help borrowers.
"There will be no hidden charges, no guesses," Mr. Muir said at Province House. "There will be full disclosure. They'll know what it's going to cost them."
The minister said some payday loan companies didn't intend to break the law with high interest rates.
"It just happened," he said.
He said, for example, that a two-week loan of $200 at a cost of $20 doesn't amount to a 10 per cent annual interest rate.
Among other things, the changes would ensure lenders disclose all fees, force borrowers to pay off existing loans before getting new ones and give borrowers a day to change their minds about a loan and cancel it at no cost.
Stan Keyes, president of the Canadian Payday Loan Association, said he's glad to see Nova Scotia is taking action on the issue.
He didn't have a suggestion on what the maximum rate should be. But he said the industry needs a better gauge than an annual rate, considering that the average loan is $280 for 10 days.
Mr. Keyes, a former federal Liberal cabinet minister, said industry interest rates should be a set amount of money rather than an annual percentage.
He said the utility and review board must find a balance in setting the rate. He suggested that an interest rate of $30 per $100 loaned would be too high and $16 per $100 loaned would be too low.
He noted that a proposed provision to allow a free loan if the lender charges fees more than the amounts in the disclosure agreement isn't tough enough.
"I'd be tougher on them than giving one person a one-off. We've got to clean this industry up," Mr. Keyes said in an interview from Ottawa.
The province's registrar of credit attempted this year to suspend the licence of The Cash Store for charging fees it didn't disclose to customers and make repaying those fees - which could total more than $1 million - a condition of getting the licence back.
The company appealed to the Nova Scotia Supreme Court and can keep its 13 locations open while awaiting the court's decision.
The Cash Store isn't a member of the Canadian Payday Loan Association, whose members include about 850 of 1,350 payday loans stores in Canada.
Before the province's proposed legislation could take effect, the federal government must pass changes that will allow provinces to regulate payday lenders. The federal legislation is now working its way through Parliament.