James Wood and Jordan Jackle, at The StarPhoenix
(Saskatoon) 2007 found at canada.com
Published: Tuesday, March 13, 2007
Payday loans are short-term advances that usually have to be paid back before
the customer's next paycheque and are usually accompanied by high interest rates
and service fees.
Besides those costs, consumer and anti-poverty groups have raised particular
concerns about actions such as wage garnishees, new fees charged when loans are
renewed and rollovers, where a borrower takes out a second loan to pay off the
first.
"The industry needs to be regulated. It's very popular amongst people
who need, or feel that they need, emergency loans," Justice Minister Frank
Quennell told reporters at the legislature Monday.
"There are a number of practices we want to prohibit." The Payday
Loans Act will include provisions that require licensing of payday
lenders, set
maximum limits on the cost of payday loans and the type of fees that can be
charged, prohibit lenders from taking security on loans, prevent lenders from
requiring a borrower to sign over future wages or purchase another product or
service and set limits on the amount of a loan based on the borrower's income.
"I think people (are) getting into long-term debt when they only meant
to get a short-term loan," said Quennell.
Borrowers, who will be limited to one loan per company at a time, will also
be able to cancel loans without penalty on the same day they are made.
Lenders will also be required to comply with collection practices set out in
The Collection Agents Act.
Fee limits on the cost of loans will only be set in regulations to be drawn
up after the legislation is passed, said Quennell.
The Canadian Payday Loans Association, which represents 23 companies that
account for about 40 per cent of the payday loan operations in the country, has
called for regulations of the industry, including a maximum fee of $20 for every
$100 borrowed.
CPLA president Stan Keyes applauded the government for introducing
legislation, which he said mirrored much of his association's code of best
business practices.
Keyes said there are companies that "gouge" the consumer.
"I call them the bad apples of the industry," said the former
federal Liberal cabinet minister.
Quennell has said in the past that, even if regulated, payday loans are not a
good option for consumers.
But Keyes said the companies serve a valuable role for many Canadians.
"There are two million Canadians who use this financial instrument for
their short-term, small-sum, unexpected circumstances," he said.
Saskatchewan joins Manitoba and Nova Scotia in introducing such legislation.
Quennell said the government brought forward the bill now because federal
enabling legislation that allows the province to regulate the industry has made
it past third reading in the House of Commons and is now in the Senate.
Public hearings on the bill by a committee of the legislature may be
worthwhile, said Quennell.
The government wants to pass the bill during the legislature's spring
sitting.
jwood@sp.canwest.com
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