Web extra: New rules for short-term lenders

  • PUBLICATION: WINNIPEG FREE PRESS
  • DATE: 2006.11.29
  • PAGE: 999
  • SECTION: City

Martin Cash Martin Cash Manitoba's payday lenders will soon start living under a new set of regulations.

Amendments to the Consumer Protection Act have been passed. Before the provincial regulations come into effect, the province needs federal legislation to be passed that will allow the province to set interest rates.

The new provincial law will prohibit the popular short-term lenders from gouging consumers by preventing lenders from charging extra fees if loans are rolled over. Operators will have to be bonded and they will no longer be able to have customers sign over future wages to them to pay loans off.

The key to the provincial legislation, however, lies in the federal legislation. The federal Tories have already introduced a bill that would shift authority for setting interest rates from the federal to provincial governments. That legislation could pass next year.

When that happens it will allow the Manitoba Public Utilities Board to hold hearings and set the rates that payday lenders will be able to charge in this province.

It is illegal in Canada to charge more than 60 per cent interest per year. But with fees and surcharges, payday lenders sometimes effectively charge more that 1,000 per cent.

Stan Keyes, president of the Canadian Payday Loan Association, is supportive of the legislation but is also hoping the rates that are eventually set will be fair.

"The viability of the industry is at stake," he said.

Close to two million people use payday-loan operations for short-term loans. Keyes' association has 20 members with close to 500 outlets across the country. While the association maintains that its members operate with a strictly enforced code of conduct, there are close to 1,000 other outlets in the country that are not members and are not regulated.

The new legislation gives the province's Consumers' Bureau the right to inspect payday-loan operations and it will allow customers 48 hours to back out of a loan without penalty.