Regulate payday-loan companies
- The Vancouver Province
- Page: A8
- Section: News
- Byline: Michael Smyth
- Column: In the House
- Source: The Province
According to the Criminal Code of Canada, it's illegal in this country to charge more than 60-per-cent interest on a loan -- but you wouldn't know it by the booming payday-loan racket.
Payday-loan stores are springing up everywhere and now seem as common as the gas stations and quickie marts that litter the urban landscape.
And it's not surprising why. When you factor in the shark-sized interest bite and all the fees charged by such lenders, customers can end up paying 1,000 per cent or more on their money.
No wonder it's one of the fastest growing financial industries in Canada, estimated at $2 billion a year and heading nowhere but up.
Payday lenders like industry-leading Money Mart specialize in small, short-term unsecured loans that average under 300 bucks. Customers generally need to produce a paycheque stub and write a post-dated cheque to pay back their loan on their next payday.
The industry says that it needs to charge fees and interest greater than 60 per cent to cover its own costs and risks.
Bob Whitelaw of the Canadian Payday Loan Association has argued that if a lender loaned a customer $100 for five days and charged just one dollar for the service, that still works out to a 107-per-cent annual interest rate.
It makes sense that anyone looking for an unsecured, short-term loan is going to pay through the nose for the privilege.
But what about fairness? What about making sure consumers are not completely gouged? What about ensuring they know exactly how much they're paying?
This industry needs to be regulated. In fact, this industry is asking to be regulated.
What a shame the B.C. government doesn't want to play a leading role in this hot consumer-protection issue.
NDP MLA Rob Fleming has tabled a common-sense private member's bill that would impose some basic fairness rules on payday lenders.
They would include a "plain-language" requirement so the true cost of the loan isn't hidden in fine print. It would also limit the size of the loans and -- gasp! -- require payday lenders to be licensed.
"We license pawnshops in this province, but not payday lenders," Fleming said yesterday. "It's bizarre."
The B.C. government, though, says the federal government must take the lead on this issue by amending the Criminal Code.
"The Opposition has the cart before the horse," said Solicitor-General John Les.
The problem is the horse is lame, if not downright crippled. Ottawa has been sitting on this file for years with no action.
The Manitoba government is already moving to regulate payday lenders with the industry's support. Several class-action suits are under way. Even the police are sitting up and taking notice with talk of criminal charges.
No one is saying the industry should be shut down. There's obviously a demand for payday lending services.
But it should be brought onside with the law and fundamental fairness.
The B.C. government is missing an opportunity to stand with consumers on the right side of the issue.