Canadian Editorial: Payday Loans Out of Control
By J.J. CameronPayday Loan Writer
Here's a paraphrasing of a recent editorial in The Leader-Post:
There are currently about 1,300 cash loan lenders in Canada. They generate annual revenues of more than $1 billion. Last year, in a case in which two companies were suing customers who had defaulted on their loans, an Ottawa judge called the interest rates being charged "unconscionably usurious."
In one case, as the result of compound interest and penalties, a $280 loan rose to $551 in a month. That's an annualized rate of more than 2,000 percent.
The problem is that at present, the industry is largely unregulated. While the provinces are responsible for setting the rules that regulate how providers of cash loans online operate, they cannot set a limit on interest rates. That falls under the federal government's Criminal Code, which limits annual interest rates to 60 per cent.
Most payday lenders usually keep their interest rates right around 60 percent, but then add on fees and extra charges they claim are not "interest."
The result is rates significantly above the limit.
But because provincial authorities and police were uncertain they could make charges stick, so far only one charge of levying criminal interest rates has been laid, in Manitoba.
A number of provinces, including Saskatchewan, believe the best way out of this dilemma is for the federal government to give them the right to all regulation of the faxless cash advance industry, including interest rates.
Indeed, Manitoba has introduced a bill to limit interest rates, but it can't proceed with the legislation until the federal government gives it the authority to do so. Federal Finance Minister Vic Toews is looking at the issue and, according to a spokesperson for his office, legislation can be expected "soon."
That's good news. Those who are compelled to turn to bad credit payday loan lenders deserve to be protected.
