Canada Consumer Association Head Concerned Over Payday Loans
By J.J. CameronPayday Loan Writer
Michael Thompson is president of the Canadian Payday Loan Association. He recently wrote an article for The Hamilton Spectator expressing his view on his country's responses to these resources. Let's take a look at what he has to say …
Canada is one of the few countries in the world that doesn't regulate payday loans. As a result, the industry operates in a legal vacuum - and consumers are unprotected from its bad apples.
The Canadian Payday Loan Association has worked with federal and provincial governments to implement regulations for all payday advance lenders. We now see signs that governments are moving in the right direction. Federal Minister of Justice Vic Toews said last month that he would "seriously consider" a proposal by the government of Manitoba to quickly regulate the growing payday loan industry.
Manitoba has figured out faster than other governments that faxless payday loans are moving into the financial services mainstream. About two million Canadians now use a cash loan every year and more than 80%, according to a poll by Environics Research, are satisfied with the service. More Canadians have access to payday loans than ever before.
Somehow, the industry - a financial service that now generates over half a billion dollars in business every year - is still not regulated. It operates under an outdated section of the federal Criminal Code, one never designed to regulate payday loans. Neither the federal nor provincial governments have a regulatory tool specific to payday loans. To make matters worse, the Criminal Code actually prohibits Canada's provinces - who actually have the responsibility for consumer protection - from regulating the price of a cash advance.
That's the logic behind Manitoba's proposal: that provinces should have the authority to set consumer protection standards and regulate the price of a payday loan. Although the CPLA takes issue with some aspects of the Manitoba proposal, we support this initiative. Unfortunately, Ontario appears reluctant to embrace Manitoba's approach.
Ontario's reluctance could allow for ongoing abuses of payday loan consumers by unscrupulous lenders. For example, The Spectator article profiled a payday loan customer named Cathy, who recently found herself in a terrible cycle of "rollover loans" - saddled with an ever-increasing mound of interest, fees and debt - after taking out a payday loan.
Honest players in the industry know "rollovers" are bad. Founding members of the CPLA banned the practice two years ago. That said, the association can only monitor the behaviour of its 800 members. In the absence of government regulation, 500 more payday loan lending stores can go on, happily ignoring the strict consumer protection measures promoted by the Association.
That is why the industry, its customers, and all Canadians need the leadership of the federal government and provinces such as Manitoba - and Ontario - to put the bad apples out of the instant payday loan business.
