Follow-Up to Canadian Payday Loan Lawsuit; Cash Advance Company Lawyer Speaks
By J.J. CameronPayday Loan Writer
The interest rates charged on payday loans in Canada are criminal. So decreed a judge last week in a class action lawsuit against A-OK Payday Loans
Not everyone agrees with this decision, however. Most notable among those that object? The lawyer representing the instant payday loan firm.
"I think the reason this is in the news is there's a class-action lawsuit going on," said Bruce Hallsor." They're a small company. That's why they went after them first. They're not going to get much money out of A-OK."
B.C. Supreme Court Justice Brenda Brown ruled last week that A OK's processing fees, late charges and interest rates exceed the maximum 60 percent annual interest rate allowed under Canadian law. Noting the federal government is planning this fall to introduce new legislation aimed at regulating the industry, Hallsor argued that existing laws were originally intended to prevent no faxing payday loan sharks from setting up shop in Canada.
"There's an issue about the constitutionality of the legislation. That section of the Criminal Code was intended to deal with loan sharking," Hallsor said.
He went on to state that it's not fair to apply the 60 percent rule to the short-term lending that forms the bulk of the payday loan industry's business.
"If I charge you one per cent on a $100 loan for one week, that's already 52 per cent a year," he said.
The point being that these rates only appear to be so high when done out over the course of a full year. Last week's decision was the first civil court ruling of its kind in Canada and could affect payday loan companies across the country.
Another defender of this industry, Michael Thompson of the Canadian Payday Loan Association, criticized Justice Brown for jumping the gun just as the federal government was preparing to pass new laws.
"I don't think it is a precedent-setting case. The law on which the judge based her decision will soon be invalidated," he said.
Despite questioning the court's decision, Thompson acknowledged the industry needs proper regulation. While the association has developed a code of best business practices for its members, only 55 percent of the country's cash loan companies, including A OK, belong to the association.
Victoria-Hillside NDP MLA Rob Fleming called on B.C. Solicitor General John Les to take action in the wake of last week's ruling. Les recently told The Victoria News the province is waiting for Ottawa to make the first move, but Fleming pointed out that B.C. is among a handful of Canadian provinces that don't require special licences for payday loan industry.
"We licence pawnbrokers, but not payday lending," Fleming said.
According to the Canadian Payday Loan Association's website, the industry took off in the mid-90s in response to an unfulfilled consumer demand for small-sum short-term credit. Since then the industry has grown to an estimated 1,200 locations across the country in 2004.
Hallsor said same day payday loans are a choice that should be made available to people, especially those who have poor credit rating and can't get loans from the major banks.
"Whether or not this is the best way for people to borrow money, it's a legitimate option in the marketplace," he said.
