Opening Remarks for the Appearance by the Honourable Stan Keyes, P.C., President, Canadian Payday Loan Industry (CPLA) Regarding the Standing Committee on Law Amendments Review of BILL NO. 87, Consumer Protection Act (amended)
Thank you very much for this opportunity, today, to discuss Bill No. 87 which amends the Consumer Protection Act to create a means to regulate the activities of payday lenders operating in Nova Scotia.
My name is Stan Keyes and I am the President of the Canadian Payday Loan Association or CPLA as it is commonly called.
The CPLA represents 24 companies offering payday loans across Canada.
First let me say CPLA welcomes the Province of Nova Scotia’s decision to take a leadership role in Canada by introducing Bill No. 87. Nova Scotia is only the second province to come forward with legislation to better protect payday loan customers and to create a consistent set of standards for all payday loan providers. There are close to two million payday loan transactions annually.
The federal government recognizes that this industry needs to be properly regulated. It is essential that the federal government continues to advance Bill C-26 through the parliamentary process in Ottawa so that Nova Scotia and other provinces can establish real protection for payday loan consumers. We continue to work closely with the federal government on this initiative.
You may find it somewhat unusual that we, as an industry, are seeking regulation. I suppose people are usually looking for less regulation. The CPLA, however, supports increased regulation. So let me take a moment to outline for you the mandate of our Association:
The Canadian Payday Loan Association’s first order of business is to work with governments to achieve a regulatory framework that protects consumers and allows for a viable industry. We are continuing that work here today and we are working closely with other provincial and territorial governments right across the country, as well as the federal government as I previously noted.
Secondly, we are committed to enforcing a Code of Best Business Practices designed to protect consumers in the absence of appropriate government regulation.
Our Association was created in 2004 with a clear recognition among responsible payday lenders that, in the longer-term, the viability of the industry would rest on the creation of a legislative and regulatory framework governing all payday lenders.
In an effort to establish common standards of consumer protection among its members, the CPLA created a Code of Best Business Practices in 2004 and, following extensive consultations with the federal, provincial and territorial governments, updated this Code in 2005.
As a condition of membership, our members are required to comply with this Code. To ensure compliance, the Association has also created an independent Ethics and Integrity Commissioner to enforce compliance. The current Commissioner is Sid Peckford who was formerly the Director General of Ports Canada Police.
Because our members already adhere to the Code, we believe they would have few problems complying with the consumer protection measures included in Bill 87. For example, our members do not roll over payday loans.
This measure is essential to limit the potential for customers to accumulate large amounts of high cost debt in a short time. It also emphasizes that payday loans can assist customers in filling temporary cash shortfalls, as opposed to being used to meet longer term financing requirements.
Additionally, our members give their customers the right to rescind their loans at no cost on or before the close of the following business day; they use plain language and disclose all the fees, costs and interest in a clear manner in all their loan documentation. Bill 87 would require all payday lenders in the province to do the same.
Some provisions, however, do raise issues that I would like to take a moment to summarize for you. Our formal submission provides further details.
CPLA’s members believe that it is essential that the Nova Scotia Utility and Review Board recognize that customers will be best served by a viable and competitive payday loan industry operating in Nova Scotia. To that end, the Association believes this should be an explicit objective of the NSURB in setting limits on what payday loan lenders can provide.
The Registrar of Credit is given broad discretionary powers to regulate payday loan providers in the Province. Furthermore, the legislation lays out many of the circumstances that would allow the Registrar to refuse to renew or to cancel a payday lender’s licence. For example, the Registrar could refuse or cancel a licence because a payday lender provides bad information, fails to meet the conditions of the licence, or has previously been convicted of breaking the law.
Because of this, the Association believes including provisions that would allow the Registrar to exercise these powers, based on an assessment of what would be “in the public interest”, are unnecessary. These provisions could open the way for subjective decisions and unnecessary uncertainty in the licencing process.
We also recommend that payday lenders should disclose and give prominence to one additional piece of information when they provide the cost of borrowing to their customers. Specifically, payday lenders should indicate the cost of borrowing per $100 being advanced. In the experience of our members, this information provides customers with an easy way to compare costs among competing payday lenders. Indicating the charge per $100 is a cost borrowers easily understand.
I would argue that the federal government, in “carving out” the payday lending industry from s. 347 of the criminal code, is recognizing that an interest rate approach for short term loans that average about $280 for 10 days, is not appropriate. A reasonable charge, taking into account costs associated with delivering the loan, is more appropriate and better understood by borrowers.
Our final concern is that that the proposed legislation would allow for regulations that would limit the amount of the loan to a maximum portion of a borrower’s net pay. To our knowledge, there is no other federal or provincial legislation that limits the amount a willing lender can lend to a willing and informed borrower. It is important to note that the average payday loan is only $280 and, by definition, no payday loan can exceed $1500. There is no evidence to suggest that loan limits are necessary. In any event, it is the payday lender who assumes the risk if he/she lends a borrower more than they can repay.
In closing, let me again express our strong support for Bill No. 87 and its objective of providing a regulatory framework for payday lending in Nova Scotia. We commend the Nova Scotia government for taking a leadership role to put in place measures that will protect consumers in this province, and will provide clear direction to payday lenders on how they must operate.
We believe this legislation, combined with C-26 currently before the House of Commons, will provide for a responsible, viable and competitive payday loan industry to operate in Nova Scotia.