Payday loan companies may be regulated

Friday, April 04, 2008

The province could soon regulate payday loan companies, a move that would be welcomed both by critics of the industry and by an association representing much of the industry itself.
The number of stores offering high-cost, short-term loans has expanded by leaps and bounds in recent years as Canadians save less and banks have closed branches and opted out of much of this business. The $2-billion industry now boasts 1,350 stores across Canada, including 170 in Alberta.
Several provinces, including Manitoba, Saskatchewan and Nova Scotia have legislation governing the industry and Ontario just introduced its legislation this week, but in Alberta they are totally unlicensed and unregulated.
Under the Criminal Code of Canada, it is illegal to charge more than 60 per cent interest annually on a loan, but the payday companies get around this by charging various fees; for instance, the online "loan calculator" of Cash Mart Corp. shows that a borrower of $500 will have to pay back $605 on their next payday.
The province has been holding consultation meetings with industry representatives and various groups, and both sides agree there should be licensing as well as limits to how much they can charge.
Eoin Kenny, spokesman for Service Alberta, said the province should be able to get a broad cross-section of the public through its consultation meetings, and doesn't think there is a need for public hearings.
"This consultation set out includes the industry, poverty action groups, consumer groups and everyone who contacted the ministry (on this issue) over the past few years," Kenny said. "We feel we have very good consultation with the public."
The department will collect information until April 21, and that information will be used to help develop regulations, he said.
Source: http://www.canada.com/edmontonjournal/news/