Manitoba sets limits on interest rates payday loan companies charge customers
- PUBLICATION: The Canadian Press
- DATE: Friday, April 4, 2008
WINNIPEG - Manitoba has set strict limits on the interest rates that payday loan companies can charge customers.
The Manitoba Public Utilities Board announced Friday that the new maximum rates will be significantly lower than the average amounts now being charged.
The maximum cost of credit will be 17 per cent for loans up to $500. The rates are lower for people on employment insurance or social assistance.
The utilities board said it recognizes that the changes could mean that some payday loan companies will close.
Quebec, Ontario, Saskatchewan, New Brunswick, Nova Scotia, British Columbia and Alberta have either passed payday loan legislation or are considering regulating the industry.
Manitoba has been near the front of the pack, however, in its efforts to set rules for payday loan companies, which are frequently accused of gouging poverty-stricken customers, who don't qualify for loans from a bank or credit union.
The Canadian Payday Loan Association predicted the interest cap will hurt payday lenders and consumers alike.
"The PUB issued an order that will directly drive many small- and medium-sized companies out of business," association president Stan Keyes said in a release.
He said the move will drive payday lenders out of the province and result in consumers having to "do without."
But Gloria DeSorcy, executive director of the Consumers Association of Canada's Manitoba branch, said the caps will help users.
"While payday loans are still very expensive, Manitoba consumers can expect to save between 20 per cent and 50 per cent on what they currently pay," she said in a release.
The board held public hearings last year during which one lender admitted his interest rates worked out to more than 700 per cent a year. But he said while that sounded like a lot of money, it only worked out to a few dozen dollars for a small, short-term loan _ barely enough, he said, to cover costs.
The federal government granted provinces the right to set maximum interest rates early in 2007. Manitoba's NDP government jumped at the chance and asked the utilities board to set maximum interest rates that would be fair to consumers and also allow businesses to make a profit.
Keyes said the numbers the board has come up with do neither.