Controls on payday loans postponed

Thu, Nov 6, 2008

Alberta won't place controls on payday lenders' fees and interest charges for another year, after deciding more consultations are needed before it acts. Earlier this year, Service Alberta signalled it was readying a new consumer protection bill for the spring, to follow the lead of Manitoba and Nova Scotia in limiting the fees borrowers must pay for the small, short-term loans.

According to Statistics Canada, two-week loans of $100 can cost the equivalent of a 650 per cent annual interest rate. The province has begun gauging the opinions of borrowers themselves, after already consulting consumer groups, lenders and others, said government spokesman Mike Berezowsky. That means no new rules until at least next fall.

Service Alberta Minister Heather Klimchuk said she wants to make sure the province gets the "whole picture" and that consumers' issues are understood as well as the industry associations' views. "So that's why I'm approaching it very cautiously, being respectful of what people have to say and why more people are using it," she said.

Liberal MLA Laurie Blakeman, who pressed the Conservative-dominated legislature Monday to approve a motion to cap the fees, said the government's delay seems excessive -- particularly with the economic downturn threatening to hike demand for the convenient but costly loans.

"You're looking now at some people in the oil and gas sector facing layoffs, so you'll get more people squeezed and in need of cash," Blakeman said.

The Canadian Payday Loan Association has applauded six other provinces for starting to regulate its sector. But it has urged lawmakers to set rules that still allow for a competitive industry, and has criticized Manitoba's cap of 17 per cent fees and interest for loans up to $500.

The group, which represents less than half of Alberta's storefront lending shops, prefers Nova Scotia's limit of $31 per $100 loan. "The right rate cap and the right regulations can only come with consultation," association president Stan Keyes said.

Source: http://www.canada.com/calgaryherald/news/