Payday loan companies that operate in Alberta will soon have to follow new rules announced by the province Wednesday to protect consumers from high borrowing costs.
Starting in September, businesses will be prohibited from charging more than $23 in fees and interest for each $100 borrowed.
"This is a very good day for consumers in our province," Service Alberta Minister Heather Klimchuk said. "We've heard from Albertans, we've listened and we've acted."
Other measures include:
- Giving customers a two-day cooling-off period in which they can return the money and cancel the loan without paying any costs.
- Ordering companies to use plain language in contracts.
- Requiring them to post their costs prominently in outlets.
Rollover loans — where people with more than one loan pay extra charges — will be banned.
The province will also license any companies that wish to operate in Alberta.
Service Alberta will conduct random audits of payday loan companies to ensure they are following the new rules. Penalities will include fines up to $100,000, up to two years in jail or both.
The government also plans to educate the public so more people know what the new rules are.
"For the working poor, the vulnerable or people on lower income, we want to make sure that when they do use these services they know what's expected," Klimchuk said.
"And maybe it will encourage individuals to maybe go talk to a bank and try to open up a bank account and have a regular relationship and start building up their credit."
The new rules were put in place after the government consulted the industry and users. The federal government gave provinces the power to set their own rules in 2007.