Feds poised to off-load regulation of payday loan industry to provinces
OTTAWA (CP) - After watching payday loan outlets reproduce like rabbits across Canada with no regulation, the federal government appears poised to hand over control of the controversial industry to the provinces.
Banks, insurance companies, utilities, credit unions - they're all bound by an article in the Criminal Code that prevents them from charging annual interest rates of more than 60 per cent.
But the payday loan industry has floated under the enforcement radar, at times charging rates that hover in the 20,000 per cent range for short-term loans when various fees and charges are factored in.
Before the last election was called, the Liberal government was about to table legislation that would exempt the industry from the 60 per cent interest-rate limit, as long as the provinces came up with their own regulations and rates.
Now Justice Minister Vic Toews says he's also favorable to the plan.
"That is a mechanism that I think has some merit and I will very seriously consider that," Justice Minister Vic Toews said Monday.
Manitoba has been a pioneer on the issue. Last January, it took payday lender Paymax to court for allegedly levying a criminal level of interest charges, the first such action in Canada. There are also a handful of class-action lawsuits in the courts.
Manitoba Finance Minister Greg Selinger is trying to push the envelope by bringing forward a package of consumer protection measures to regulate the industry, such as making it a requirement to disclose from the outset all the fees a consumer must pay.
The only thing Manitoba needs now is for the federal government to do its part and let the province license the industry and set its own interest rates.
"What I'm trying to do is set up a regime that in effect legalizes this activity under proper controls and protections for the consumer, and drives the worst practitioners of payday loans out of business," Selinger said in an interview.
Ontario, meanwhile, has been pushing in the opposite direction. It's been lobbying the federal government to rework the Criminal Code to specifically address the payday loan industry, rather than delve into the issue itself.
The province of Quebec bans payday loan practices outright.
The previous Liberal government had drafted legislation to hand over control to the provinces, and was about to table it when the election was called last November.
There are about 1,350 payday loan outlets across Canada, 850 of which are members of the Canadian Payday Loan Association, which wants regulation.
The association has its own code of conduct, and has banned such practices as loan "rollovers," where fees and interest are rolled into unpaid loans, expanding the debt exponentially. The association says it cannot, however, control those bad apples that aren't members.
"Those 550 non-member stores still use . . . unfair collection practices, and those stories, and the customer dissatisfaction, relates to the industry as a whole," said Bob Whitelaw, president of the Canadian Payday Loan Association.
Whitelaw also said 60 per cent annual interest-rate limit is unrealistic for an industry that offers short-term loans.
For example, a 60 per cent annual interest rate on a $100 loan would give the payday loan company only about 90 cents a week, he said.
Source: http://www.cbc.ca/cp/business/060424/b042496.html
Banks, insurance companies, utilities, credit unions - they're all bound by an article in the Criminal Code that prevents them from charging annual interest rates of more than 60 per cent.
But the payday loan industry has floated under the enforcement radar, at times charging rates that hover in the 20,000 per cent range for short-term loans when various fees and charges are factored in.
Before the last election was called, the Liberal government was about to table legislation that would exempt the industry from the 60 per cent interest-rate limit, as long as the provinces came up with their own regulations and rates.
Now Justice Minister Vic Toews says he's also favorable to the plan.
"That is a mechanism that I think has some merit and I will very seriously consider that," Justice Minister Vic Toews said Monday.
Manitoba has been a pioneer on the issue. Last January, it took payday lender Paymax to court for allegedly levying a criminal level of interest charges, the first such action in Canada. There are also a handful of class-action lawsuits in the courts.
Manitoba Finance Minister Greg Selinger is trying to push the envelope by bringing forward a package of consumer protection measures to regulate the industry, such as making it a requirement to disclose from the outset all the fees a consumer must pay.
The only thing Manitoba needs now is for the federal government to do its part and let the province license the industry and set its own interest rates.
"What I'm trying to do is set up a regime that in effect legalizes this activity under proper controls and protections for the consumer, and drives the worst practitioners of payday loans out of business," Selinger said in an interview.
Ontario, meanwhile, has been pushing in the opposite direction. It's been lobbying the federal government to rework the Criminal Code to specifically address the payday loan industry, rather than delve into the issue itself.
The province of Quebec bans payday loan practices outright.
The previous Liberal government had drafted legislation to hand over control to the provinces, and was about to table it when the election was called last November.
There are about 1,350 payday loan outlets across Canada, 850 of which are members of the Canadian Payday Loan Association, which wants regulation.
The association has its own code of conduct, and has banned such practices as loan "rollovers," where fees and interest are rolled into unpaid loans, expanding the debt exponentially. The association says it cannot, however, control those bad apples that aren't members.
"Those 550 non-member stores still use . . . unfair collection practices, and those stories, and the customer dissatisfaction, relates to the industry as a whole," said Bob Whitelaw, president of the Canadian Payday Loan Association.
Whitelaw also said 60 per cent annual interest-rate limit is unrealistic for an industry that offers short-term loans.
For example, a 60 per cent annual interest rate on a $100 loan would give the payday loan company only about 90 cents a week, he said.
Source: http://www.cbc.ca/cp/business/060424/b042496.html
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