Payday Advance Story Backs Proposed Legislation in Canada
By J.J. CameronPayday Loan Writer
While one payday loan company in Canada is praising possible new legislation that will allows provinces to regulate the industry, at least one consumer also agrees this is a good idea.
Cheryl is a Winnipeg woman who asked that her last name not be used. She had taken out cash advance loans several times this year and had always paid it back on time; with the exception of a $500 loan she acquired in mid-September.
Had she paid the loan on time, the total interest paid would have been $75.
"I was off work for a week so I phoned (the company) and told them the check would bounce if deposited. They held the check for three days, then deposited it and it, of course, bounced," she said.
A bounced check on a payday loan: This is never good news. Thus far, service charges have run up nearly $320 of interest within a month of taking out the $500 cash loan.
"They've charged me twice for the bank fees and there is nothing to stop them to continue with the charges," she said."Once you get in, you can't seem to get out."
The Criminal Code sets the maximum annual interest rate at 60%. If proposed legislation is passed, however, provinces will deal with regular and/or no fax payday loan institutions as a consumer protection issue, said Toews.
Manitoba Finance Minister Greg Selinger has promised to re-introduce legislation giving the Public Utilities Board (PUB) the authority to set maximum cost of credit lenders may charge. A Selinger spokesman said the law should be in effect by Christmas.
The faxless cash advance companies will also have to be licensed and bonded, while borrowers will have to receive a documented warning about the high cost of the loan.
Borrowers will also not be able to borrow money on wages they haven't earned yet and will have a 48-hour cooling off period to cancel the contract without penalty. Federal NDP finance critic Judy Wasylycia-Leis welcomed the bill.
"We'll be looking for quick passage to enable provinces like Manitoba to move ahead," said Wasylycia-Leis, a longtime proponent of curbing the high costs of short-term loans.
