Province enacts curbs on payday loan lending rates
- PUBLICATION: Winnipeg Sun
- DATE: Saturday, April 5, 2008
Manitoba has become the first province in Canada to regulate the rates payday loan lenders can charge customers, and the industry is not happy about it.
Stan Keyes, president of the Canadian Payday Loan Association, said Manitoba's small and medium-sized lenders will have trouble staying in business charging the new rates.
The CPLA was suggesting a maximum charge between 20% and 23% of the loan, but the provincial Public Utilities Board -- which referred to the lenders as "loan sharks" in its decision -- announced yesterday the maximum will be 17% on the first $500, 15% on the next $500 and 6% on loans over $1,000.
All interest, fees and other charges must be included in that limit, and anyone on employment insurance or welfare, or taking a loan for more than 30% of their cheque, cannot be charged more than 6%.
The rates are still well above bank and credit union rates.
"The PUB got it very wrong," Keyes said. "We presented them evidence on the cost of providing the product and they completely ignored it. Then they refer to us all as loan sharks. How irresponsible is that?"
Although the PUB acknowledged its rates may drive some lenders out of business, provincial Finance Minister Greg Selinger said similar rates have been regulated in some U.S. states, and the industry has survived just fine.
Ken Strausser, a payday loan customer, said the new rates are a relief.
"They rip poor people off, and these are the banks of the poor," said Strausser, 54.
Winnipeg police Sgt. Larry Levasseur, whose commercial crime unit became the first in Canada to charge a lender with usury for charging more than the 60% criminal interest rate when it charged Paymax in 2006, said he hoped the rates would come in even lower than they did.
"(The industry) is totally established just to take advantage of people who don't qualify for regular banks."
Winnipeg Harvest executive director David Northcott called the rates "a good first step," but added the real answer is to get mainstream banks and credit unions to cater to low-income people.
Northcott said many Harvest users are payday loan customers, and he's noticed not all payday loan outlets are bad.
"Some of them have been very respectful and run really good programs," he said. "But there's enough problems that if they can't regulate themselves, the province has to step in."