Make Way for Canadian Payday Loan Legislation
By Paul RizzoPayday Loan Writer
Federal legislation giving provinces the power to regulate the sometimes faxless payday loan industry has cleared its final hurdle.
The Senate has approved a bill, in the works since 2005, aimed at ending legal uncertainty over the high-interest, short-term loans provided by payday loan operations. The Conservative government has said the bill is also designed to protect consumers from questionable business practices.
It is currently illegal under federal law to charge annual interest of more than 60 percent. Bad credit cash loan outlets usually lend money for only a matter of days but, if calculated on an annual basis, they are effectively charging up to 1,000 per cent interest.
Payday loan companies have complained that imposing the 60 percent limit on short-term loans is unfair and would make it impossible for them to even cover their basic administration costs.
The legislation allows provinces to permit interest charges above 60 percent, provided that they institute legal protections for faxless payday advance customers.
In anticipation of the federal law being approved, Manitoba and Nova Scotia have already passed the required consumer protection legislation. Similar legislation is in the works in British Columbia and Saskatchewan, and other provinces are expected to follow suit.
The Canadian Payday Loan Association, which represents 500 of the 1,350 outlets operating in Canada, congratulated the government and Liberal-dominated Senate for finally passing a law that “balances consumer protection with a viable industry.”
“For the first time, provinces will be given real authority to regulate the best players in the industry while putting the worst players out of business,” said association president Stan Keyes.
The association estimates that more than 2 million Canadians use payday loans every year to make ends meet between paycheques.
