B.C. slaps limits on payday loans
The B.C. government has introduced new payday loan regulations to protect financially vulnerable people from abusive lending practices.
Starting Nov. 1, interest rates and fees from payday lenders will be capped at 23 per cent of the money borrowed.
Payday lenders will also be prohibited from lending more than 50 per cent of a borrower's take-home pay or requiring repayment before the borrower's next payday.
People will also have the right to cancel a payday loan by the end of the following day without charge, by returning the money borrowed.
Under the new rules, payday lending companies can no longer operate unless they're licensed by the Consumer Protection Branch.
Payday loan companies have faced class-action lawsuits from borrowers and criticism from consumer advocates for their exorbitant interest rates and fees, and most provinces have moved to more closely regulate the industry.
The regulatory changes follow amendments the federal government made to the Criminal Code in 2007, allowing provinces to set their own rates for payday lenders.
Five provinces have limited loans
In Nova Scotia, regulations that took effect Aug. 1 include a maximum interest rate of 60 per cent per year and the total cost of borrowing must not exceed $31 per $100 borrowed.
Manitoba caps the cost at 17 per cent of the amount borrowed for loans up to $500.
As of Jan. 1, payday loan operators in Alberta will not be allowed to charge more than $23 interest for every $100 loaned.
Quebec has effectively banned payday loans outlets by limiting the annual interest rate they can charge to 35 per cent.
Credit Counselling Society of B.C. vice-chairman Skip Triplett has said the new regulations are an important first step in protecting people who are battling mounting debt loads.
He has recommended that people first visit a bank or credit union to find out if they're eligible for a loan at a more reasonable rate.
A payday loan is less than $1,500 borrowed for a maximum of 62 days and is not secured.
The borrower must provide a post-dated cheque or pre-authorized debit form to repay the whole loan at the end of the term, which is usually the next payday.