Payday Loan Industry Association unveils stronger Code of Best Business Practices to protect consumers

Stronger Code widens gap between CACFS members and non-members

Ottawa, June 22, 2005 – Tougher new rules designed to increase protection for payday loan customers were unveiled today by the Canadian Association of Community Financial Service Providers (CACFS). All members of the industry association –large, medium and small “payday loan” companies and their retail stores across Canada have agreed to abide by a revised Code of Best Business Practices, which sets stricter consumer protection standards that members must observe.

“The CACFS wants government to regulate the payday lending industry,” says CACFS President and CEO Bob Whitelaw. “Until regulation is introduced, we are voluntarily improving our members’ business practices by adopting a stronger Code of Best Business Practices to protect payday loan customers. It’s a significant step that further widens the gap between CACFS members and non-members.”

The code will prevent such practices as granting loans to welfare recipients, using a borrower’s assets as collateral, garnering a customer’s wages, or providing multiple loans in excess of the initial amount for which a client is approved. To promote the use of credit counselling for borrowers who have defaulted more than once, a payday lender will offer to forgo the accrual of interest on a loan if the customer demonstrates that he or she has completed a credit counselling course. The code also limits the fee members can charge customers for cheques returned NSF to the fee levels the top five Canadian banks charge when cheques are returned.

“Adherence to Code standards, which take effect September 1, 2005, will be a condition of membership in the CACFS, says Whitelaw. “However, only CACFS members are bound by this code. We are calling for government regulation because the CACFS has no tools to force payday lenders who are not members to join the association and follow our consumer protection practices.”

Association members will be required to prominently display and make available a Guide to Responsible Borrowing and other credit counselling brochures in their stores. Members must also prominently display in their storefronts the revised Code of Best Business Practices and the CACFS logo, showing membership in the Association and compliance with the new Code.

An Environics survey on Canadians’ attitudes about the payday loan industry, released June 13, 2005, reveals that more than two-thirds (67%) of Canadians believe people who need or want payday loans should have access to them. Customers also indicated in the survey that the industry provides legitimate services that are not available elsewhere. Customers stated that they are more aware of the exact amounts of their administrative fees and interest paid for their transactions with payday loan providers than they are with their credit cards or bank accounts. The vast majority (95%) of payday loan customers believe payday loans are a better option than alternatives such as pawnbrokers.

“The survey confirms we are providing a service Canadians want and need,” says Whitelaw. “But consumers and payday lenders are operating without government mandated consumer protection. In the absence of government regulation, we are acting voluntarily to fill the regulatory gap and adopting this stronger Code of Best Business Practices.”

For additional information, please contact:

  • Sophie Lambert
  • Trillium Corporate Communications
  • Toronto
  • (416) 322-3030 ext. 227
  • (416) 505-3350 (cell)
  • sophie@trilliumpr.com