New limits for payday loan companies in N.L.
Many lenders now operate without regulations or limits on interest charged
The province is introducing new rules that would allow payday loan companies to operate in this province with restrictions on how they can operate and what they can charge.
The legislation is being debated in the House of Assembly Thursday. If passed, it will allow companies to make small short term loans in this province but place limits on what they can charge as a fee for borrowing money.
"We're not promoting payday lenders," Service NL Minister Eddie Joyce told reporters on Thursday. "But we know they are here, we know they are going to operate."
"So we want to put consumer protection in there."
The province hasn't finalized what the limits will be, but is considering allowing companies to charge $21 for every $100 borrowed.
That is more than the $15 fee that Alberta sets as its maximum, but less than the $25 fee that lenders in P.E.I. charge.
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The companies will have to be licensed and follow new rules.
Anyone taking out would a loan would have two days to cancel the loan and give back the money without paying fees, and companies couldn't just keep rolling over old loans, adding new higher fees.
According to Al Antle, head of Credit Counseling Services, that's a welcome change.
"That was the essential piece, and the most important piece … so we're delighted with this," he said.
The previous government refused to bring in regulations for payday companies. Without those rules the loans were technically illegal because they charged interest rates well above the 60 per cent a year maximum allowed under the criminal code.
The short term loans carry equivalent annual interest rates greater than 500 per cent.
That didn't stop companies from offering payday loans in Newfoundland and Labrador. The police investigated but prosecutors decided laying charges wouldn't be in the public interest, leaving firms to operate in a grey area without provincial regulations.
Joyce said his government believes short-term commercial lenders are a reality.
"I think if people need to go to that, for some unfortunate reason, they're going to find it somewhere," he said. "So what we're going to ensure is that there is protection there for them."
The new rules will also apply to online lenders. Provincial officials admit that ensuring compliance with the new licensing and interest regulations will be tricky.