Proposed Manitoba payday loan rules slammed

Proposed regulations for payday loans in Manitoba are unduly restrictive and not in the best interests of consumers, a lead association for the industry says.

“Manitoba is out of step with the rest of the country,” Stan Keyes, president of the Canadian Payday Loan Association, told CBC News in an interview Saturday from Ontario.

Keyes was reacting to a Friday news release from the government of Manitoba outlining new regulations for short-term loans.

Payday loans are typically used by consumers looking for quick access to funds, to tide them over between paycheques. According to the industry, the average loan is for $280 and is paid back in 10 days.

Manitoba's proposed regulations will place limits on the product, including a maximum charge of $17 per $100 loaned.

As well, customers would not be allowed to borrow more than 30 per cent of their next pay.

“We're going to ensure consumers are protected from exorbitant rates and questionable business practices,” Gord Mackintosh, Manitoba's minister of family services and consumer affairs, is quoted as saying in the news release. “At the same time, we recognize there is a demand for this service and we want to give lenders clear rules to operate their business.”

According to the province, Manitoba's maximum charge is the lowest amount among six provinces. In Ontario the maximum charge is $21 per $100. In B.C. and Alberta it is $23 per $100.

“They have totally ignored, in fact turned a blind eye to, what the other provinces have set as their total cost-of-borrowing rate,” Keyes said in reviewing Manitoba's rules.

Keyes said the providers of payday loans face very high costs and the Manitoba regulations will make it difficult for some to continue.

“It does cost a premium for lenders to provide this product,” he explained. “It's a high-cost loan to the lender and that in turn becomes a high-cost loan to the consumer.”

“At a rate of $17 [in Manitoba], stores will close,” Keyes predicted, noting that will reduce borrowing options for consumers.

Keyes said Manitoba's rules are out of step with what other provinces are doing.

“There's an understanding of this product from B.C. to Nova Scotia, but for some unknown reason, Manitoba gets it wrong,” he said. “It makes no sense at all.

“Clearly we're going to have to go through the regulations with a scalpel,” he said, when asked about his association's next steps.

“We're going to have to sit down and examine those regulations in detail,” he said. “Then appeal to the common sense of the government … and say, 'Where you think you are protecting the consumer, you are making it more difficult for them.'”

Keyes's organization represents 24 companies in the payday loan business.

“A viable industry is needed in order to serve those who need access to short-term loans,” said Keyes. “We are disappointed and find it ironic that the [Manitoba] government's decision will, in the end, reduce access to credit for consumers by reducing the number of outlets that provide this needed service.”