Manitoba Payday Loan Controversy Goes Public; Legislature Discusses Cash Advance Regulations
By J.J. CameronPayday Loan Writer
The debate over payday loans is not only remaining strong in Canada - it's being taken to the Manitoba legislature. On Thursday,the public weighed in on the government's proposal to regulate companies offering cash loans and cash advances.
Members of the public were free to share their opinions on the proposed Consumer Protection Amendment Act with the government's standing committee on social and economic development. The proposed law, introduced in the legislature in March, would require payday loan companies to be licensed and bonded.
Potential customers would then be warned about the high cost of the payday loan have the right to cancel a loan without penalty after 48 hours.
The legislation proposes the provincial Public Utilities Board control the fees these faxless payday loan companies are allowed to charge. Additional fees would not be allowed when payday loans are renewed, extended or replaced by a new payday advance unless these additional fees are authorized by the PUB.
David Love, a former police officer who is now an addictions counsellor, told the committee that many of the people he works with are customers of a payday loan company that has charged extreme interest rates. He said addicts turn to the payday loan companies which, in turn, help keep their addictions going.
"They look for any means that they can to fuel that, and does the payday loan give them that fuel? Yes, it does. It gives them money," he said. "They need help. They don't need someone to push them deeper into the hole."
Love told the committee he thinks personal loan services should be banned.
Michael Thompson, president of the Canadian Payday Loan Association, said research shows people who use payday loan companies are not more vulnerable than other people.
"People who use our product know what they're using and they know why they're using it," he said. "Just as a basic business fundamental, we lend money to people that are going to pay it back to us, otherwise we wouldn't be in business," he said.
Thompson added that the cash advance companies play an important role in the modern economy, lending between $1.5 billion and $2 billion per year in Canada.
"They create good jobs for young people, provide lots of opportunity," he said. "They attract talent. They are a growing cog in the economic machine, absolutely."
The federal government's usury threshold is 60 percent per year, but consumer advocacy groups have complained that when service fees and payday loan extension fees are tallied up, the interest rate can top 1,000 percent on some loans.
Therefore, the province's cash loan legislation requires the Criminal Code be amended to allow the province to regulate the interest rate companies can charge on short-term payday loans, defined in the legislation as loans for $1,500 or less and for a term of 62 days or less.
