Review board tackles payday loans
The Nova Scotia Utility and Review Board is looking to set limits on the fees charged by companies offering high-cost loans to people who need to borrow money between paydays.
The board, an independent, quasi-judicial body that regulates a wide range of areas including gaming, utilities, railways, liquor licensing and payday loans, began hearings into the matter Monday in Halifax.
Payday loans are short-term loans that are not available through banks or credit unions.
A group that represents some payday loan companies, the Canadian Payday Loan Association, was unable to tell the board exactly how much it costs to take out a loan.
Association president Stan Keyes said $20 to borrow $100 is the basic cost, but there are also a number of ancillary fees.
The board heard that interest of 60 per cent is a common amount charged on overdue loans.
Consumer advocate Dave Cameron said at the hearings that detailed information about payday loans, including data showing how frequently people use them, is lacking.
"Sometimes people who have to routinely return to this source of financing to get through a week or a month have difficulty over time getting out of that cycle," he said.
Cameron said the utility and review board will likely need a lot more information — particularly data for Nova Scotia — to calculate what a fair maximum price for borrowing and additional fees would be.
Another matter of concern at the hearings is confusion over rules that ban the rollover of loans, that is, using a new loan to pay off an old one.
While Nova Scotia doesn't allow this form of repayment, it does allow loan extensions, which, the payday loan industry argues, essentially amount to the same thing.
The hearings will continue this week in Halifax.The review board is expected to set the maximum cost of borrowing and ancillary fees — including those for extensions or renewals — for all loans of up to $1,500 for a maximum 62 days.