Alberta backs effort to control payday loans

  • The Calgary Herald
  • Tue 26 Sep 2006
  • Page: B7
  • Section: City & Region
  • Byline: Kelly Cryderman
  • Source: Calgary Herald

The Alberta government has quietly joined in the chorus of those calling for the regulation of payday loan outlets -- the Money Marts or the Cash Stores that dot Calgary -- and for Ottawa to hand control of the interest rates charged by the industry over to the provinces.

"I am becoming increasingly concerned about the lack of regulation of payday loans," wrote Alberta Government Services Minister George VanderBurg in a recent letter to federal justice and finance ministers.

The Harper Conservatives appear keen on the push to amend the Criminal Code, and the move is supported by the main industry body as well as other provinces.

The Canadian Payday Loan Association believes potential provincial regulations -- which would allow the industry to charge higher interest rates than the Criminal Code allows -- will lend its members more legitimacy and mitigate the force of the various class-action suits launched against its members.

"We would like it to be more transparent," said association president Michael Thompson. "There are issues that are specific to the payday loan industry that are controversial and are damaging to the general reputation of the industry, and we would like to address those head-on."

The association, which represents about 850 of the 1,350 payday loan outlets in Canada, has what it calls a "strict" code of business practices.

This week, the association will lobby MPs -- including a special meeting with the Alberta caucus -- to try to keep the matter on the federal radar even as Justice Minister Vic Toews grapples with such issues as same-sex marriage and a law-and-order agenda.

According to Canada’s Criminal Code, it is illegal for any lender to charge an interest rate above 60 per cent per year. However, the payday lenders -- who provide short-term, unsecured loans routinely -- can be charged much more.

A customer borrowing $100 to make it a week or two until payday will usually be charged about $20 in fees and interest. The industry argues the Criminal Code is out of date and the only way short-term loans can be profitable is to charge higher rates.

Since the birth of the industry in Canada in the early 1990s, there have been few repercussions. But now class-action suits are going ahead.

Last month, a B.C. Supreme Court judge ruled that the processing fees and late fees charged by A OK Payday Loans Inc. were actually interest, and the company was charging "criminal" rates.

The movement on regulating payday loans is led by Manitoba, which is in the midst of passing regulations that disallow some payday loan practices and force other transparency rules.