Payday loans capped at 23 per cent

  • PUBLICATION: MetroValley Newspaper Group
  • BYLINE: Tom Fletcher
  • DATE: Monday, March 2, 2009

Starting in November, payday loan companies in B.C. will have to be licensed and limit their charges on a short-term loan to 23 per cent.

Payday lenders will also be required to post signs that tell customers what they're really paying - an annualized interest rate of up to 600 per cent.

Solicitor General John van Dongen announced the regulations Monday for payday loan legislation passed in 2007. He said the 23 per cent maximum on a two-week loan is in the middle range among provinces that have regulated the business. Manitoba has a limit of 17 per cent but Nova Scotia allows lenders to charge up to 31 per cent.

"We have a lot of smaller players in British Columbia in small communities where there may be only one payday lender, and so I had to balance all those interests," van Dongen said. "I can assure you that all of the payday lenders will not be happy with the 23 per cent rate."

Skip Triplett, a volunteer director with B.C.'s Credit Counselling Society, described two examples of payday loan customers. One is a woman who needs emergency car repairs to get to work, and the other is a man who piles one payday loan on top of another so he can play in his weekly poker game.

In tougher times, more people get into credit trouble and call the society.

"In 2008 we served 15,000 clients, and unfortunately that was up about 40 per cent from the previous year," Triplett said.

The regulations will also prevent payday lenders from lending more than 50 per cent of the customer's next paycheque, giving more than one loan to the same person at the same time, or rolling over one loan into another with extra charges.

Payday loan companies will have to pay $1,500 for an operating licence, plus $750 to licence each office they operate. The licence fees include the cost of a mandatory criminal record check.

Van Dongen said the regulations don't come into effect until November because they have to be approved by the federal government.