Payday loan rate, fee caps come into effect August 1; Province says new rules will help protect consumers

New rules for payday lenders in Nova Scotia announced a year ago come into effect next month.

Maximum rates and fees on payday loans that were set by the Nova Scotia Utility and Review Board last July will be enforced starting Aug. 1, the province said Tuesday.

Regulations mean payday lenders cannot charge more than $31 per $100 borrowed, including all non-optional fees tied to the loan. Default fees on loans cannot exceed $40 per loan, and the interest rate on loans in default cannot exceed 60 per cent annually.

Payday loan rates in Nova Scotia range from about $15 to $35 per $100, according to evidence submitted last year to the regulatory board.

Practices such as automatic loan rollovers and setting the loan due date before the customer’s next payday are also banned under the regulations.

Federal legislation passed in 2007 means that payday lenders are exempt from a federal Criminal Code provision that bans lenders from charging an interest rate over 60 per cent annually. However, the exemption only applies in provinces that regulate payday loans.

Ontario recently said it will set payday maximum rates at $21 per $100 borrowed, while British Columbia has set its rate at $23.

After the board held public hearings and rendered a decision on payday loans, the province had to draft the regulations and submit them to Ottawa for approval, said Lori Errington, a spokeswoman for Service Nova Scotia and Municipal Relations.

"We got that final approval June 16."

The new regulations mean payday lenders will have to disclose all costs and fees before customers provide their personal information.

"Protecting consumers and helping them understand their rights and obligations as borrowers is a priority for government," Ramona Jennex, the minister of Service Nova Scotia and municipal relations, said Tuesday in a news release.

Under the new regulations, all payday lenders will have to be licensed and submit an annual report to government on their loan activities, Ms. Errington said.

"Once we got the go-ahead in June, we started working with the industry to help them through the (licensing) application process, and almost all of them are now licensed," she said.

There are 13 payday loan companies with about 40 outlets in Nova Scotia.

While most other provinces are also in the midst of implementing payday loan regulations, Nova Scotia will be the first to officially regulate the industry, said the Canadian Payday Loan Association.

"Nova Scotia has showed great leadership in protecting consumers while still recognizing the important service the payday loan industry provides for many people seeking short-term, small-sum loans," Stan Keyes, president of the Hamilton association, said in a news release.

"Our members look forward to operating fully within the new laws and regulations and continuing to work with government to ensure the regulations achieve the desired outcomes."

Nova Scotia’s payday loan regulations must be reviewed in 2010, the board said in its decision.

( cmellor@herald.ca )

"Nova Scotia has showed great leadership in protecting consumers while still recognizing the important service the payday loan industry provides for many people seeking short-term, small-sum loans."

STAN KEYES
Canadian Payday Loan Association president