B.C. moves to cap payday loan rates
- PUBLICATION: Vancouver Sun
- BYLINE: Jonathan Fowlie
- DATE: Tuesday, March 3, 2009
Businesses that offer payday loan services in B.C. will be required to be licensed by November, and will not be able to charge more than 23-per-cent interest on a short-term loan, Solicitor-General John van Dongen announced Monday.
Van Dongen said he believes the new cap is still a "high interest rate," but said it represents a balance between a variety of competing interests.
"We had to look at balancing the interests of consumers [and] balancing the need to have credit available on an emergency basis," he said.
"It's certainly not a form of credit that we would encourage consumers to use," he added, acknowledging the new maximum interest rate, annualized, still amounts to 600 per cent per year.
Currently, Nova Scotia has a maximum charge for two-week payday loans of $31 per $100.
In Manitoba, the maximum is $17 per $100 for loans up to $500.
At a news conference in Victoria, Skip Triplett, vice-chairman of the Credit Counselling Society of B.C., said he supports the new rules, but still feels people should seek out other options before going to payday lenders.
"Go to a bank first, or a credit union -- one of our financial institutions. I think a lot of people would find that they are eligible for a loan at a much more reasonable rate," he said.
Under the rules -- which would take effect Nov. 1 -- the maximum charges for short-term loans are capped at 23 per cent of the principal on a 14-day loan, including all fees. Payday lenders will need to be licensed by the Business Practices and Consumer Protection Authority, pass a criminal record check, and pay an annual licensing fee of between $750 and $1,500. There are about 250 to 300 payday outlets in the province.
Under the new rules, payday lenders will also not be able to collect from a customer's employer, or get unrestricted access to his or her bank account.
Extra charges will not be permitted for so-called "roll-over loans," where an expiring loan is simply replaced by a new loan.
Van Dongen added the regulations will be reviewed in two years.
New Democratic Party MLA Rob Fleming said the new rules do not go far enough to protect consumers. "What should have been consumer protection legislation has turned into a boon for the payday lending industry," he said.
"This government has landed on a figure that is totally in the interests of the big corporations," he added.
In a written statement, the president of the Canadian Payday Loan Association supported the move.
"The government has taken a balanced approach to the payday loan industry, ensuring consumers are protected from the minority of those companies with bad business practices charging exorbitant rates," said Stan Keyes.