Payday loan lending rates in Alberta lowest in Canada under new law

Legislation that took effect this month makes lending rates for payday loans in Alberta the lowest in the country, the provincial government says.

Act to End Predatory Lending came into force this month

New legislation in Alberta caps the interest payday loan companies can charge. (Bryan Labby/CBC)

Legislation that took effect this month makes lending rates for payday loans in Alberta the lowest in the country, the provincial government says.

Payday loan companies can charge a maximum of $15 per $100 borrowed, under the Act to End Predatory Lending.

Before the act came into force, companies were able to charge $23 for every $100 loan.

"Last fall, Albertans told us they want lower interest rates and stronger consumer protections," said Service Alberta Minister Stephanie McLean in a release Tuesday.

Service Alberta Minister Stephanie McLean says new legislation on payday loans puts an end to 600 per cent 'predatory interest rates' and vicious cycles of debt. (CBC)

"Today, it's the law. We have put an end to 600 per cent predatory interest rates and vicious cycles of debt, with fair rules that protect Albertans."

Prince Edward Island allows the steepest interest rates, with lenders allowed to charge $25 on a $100 loan.

Lenders can charge $23 per $100 in British Columbia and Saskatchewan, $21 in Ontario and $17 in Manitoba.

Under Alberta's new law, lenders are now barred from offering a loan when another is already outstanding, charging a fee to cash a payday loan, or soliciting directly by email or phone.

The act also calls on the province to encourage financial institutions and community groups to offer short-term loans as an alternative to payday loans.

First Calgary Financial and Chinook Financial are set to launch programs later this month that will offer micro-loans at 19 per cent interest with a payback period of six to 18 months.

"I am so pleased First Calgary Financial will launch its Cash Crunch loan on August 22nd," McLean said.

"It's credit with reasonable rates, longer payback terms and financial literacy supports that set Albertans up for financial health, not ruin."

The Cash Crunch loan program was created in collaboration with Momentum, a group that offers personal money-management training to low-income Calgarians.

A loan is considered a payday loan if it's $1,500 or less with a term of 62 days or fewer.

More than 30 payday loan companies are doing business in Alberta at more than 220 branches, the province says.