Nfld. & Labrador

Federal exemption paves way for N.L. payday loan legislation

New provincial rules were drafted, but in a holding pattern for the last two years waiting on an exemption to the Canadian criminal code.

Legislation was passed in 2016 but can't become law without the federal criminal code exemption

The provincial government's payday loan legislation can move ahead in N.L., thanks to a federal exemption. (Danny Arsenault/CBC)

After two years of waiting, payday loan legislation is one step closer to reality in Newfoundland and Labrador after the federal government provided a needed exemption.

The exemption was published in the Canada Gazette on Wednesday.

In December 2016, the provincial government passed legislation of the payday loan industry intended to protect customers and increase awareness of their rights when they get payday loans, which are small loans of $1,500 or less borrowed from a non-traditional lender for a maximum of 62 days.

That legislation:

  • limits the total cost of borrowing for payday loans.
  • requires loan agreements to provide specific terms, information and disclosure statements.
  • includes cancellation rights during a cooling-off period.
  • prohibits some payday lender practices.
  • provides remedies to borrowers when payday lenders don't honour their legal responsibilities.

However, the 2016 provincial legislation could not be proclaimed into law until the federal government provided an exemption to Section 347 of the Canadian criminal code, the criminal interest rate provision.

Now that the exemption has been given the green light, the provincial government will move forward with proclaiming the legislation in the new year, according to a statement from Service NL.

"[The exemption] also helps ensure consumers understand the agreements they enter into with payday loan companies," said Service NL Minister Sherry Gambin-Walsh. 

Service N.L. Minister Sherry Gambin-Walsh said the proposed legislation will provide some protection for people who use payday lenders. (Katie Breen/CBC)

Similar legislation is in place in other provinces across the country.

The previous provincial government elected not to bring in legislation to regulate payday companies, and without such laws in place payday lenders are technically operating in a grey area because their interest rates are well above the 60 per cent a year maximum the criminal code allows.

The provincial government formally requested the exemption in August 2017.

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