Payday loan fee drop coming to Nova Scotia

Payday loan companies operating in Nova Scotia will be hit by a small cut in what they can charge for their loans — a defeat for an industry that tried to maintain the second-highest fee charged in Canada.

Provincial regulator reduces benchmark charge from $22 per $100 to $19

Money Mart is one of the companies affected by Tuesday's ruling from the Nova Scotia Utility and Review Board. (CBC)

Payday loan companies operating in Nova Scotia will be hit by a small cut in what they can charge for their loans — a defeat for an industry that tried to maintain the second-highest fee charged in Canada.

Nova Scotia regulators reduced the benchmark charge from $22 per $100 to $19 in a decision released Tuesday. The rates are effective February 2019.

The ruling affects four companies: National Money Mart, Cash Money, 310-Loan and My Canada Payday.

In its ruling, the Nova Scotia Utility and Review Board did not change the maximum that can be loaned — $1,500 — or the $40 default fee and 60 per cent interest on arrears.

How Nova Scotia compares across Canada

Only Prince Edward Island has a higher benchmark charge at $25 per $100.

The cost per $100 in New Brunswick, Ontario and Alberta is $15, and $17 in British Columbia, Saskatchewan and Manitoba. Newfoundland and Labrador has a proposed charge of $21.

Quebec does not regulate payday loans.

The Nova Scotia board rejected arguments from payday lenders who urged the $22 rate be maintained on the grounds that lowering it would hurt the industry. It accepted industry evidence that lowering maximum rates has caused some lenders to leave markets.

The board also rejected a recommendation from the Face of Poverty Coalition for a rate of $2.25 per $100, saying it would "effectively eliminate" the payday loan industry in Nova Scotia.

"The board is mindful that the elimination of the regulated payday loan industry in Nova Scotia would reduce available options of short-term credit for consumers, and would increase the presence of unscrupulous and unregulated lenders," it wrote in its decision.

56% of loans are repeats

As in previous reviews, repeat borrowers were an issue for regulators. In Nova Scotia, 56 per cent of loans were repeats in 2017, involving 18,795 borrowers.

Nearly a third of repeat borrowers had eight or more loans.

The board repeated its recommendation from previous payday hearings for restrictions on repeat or concurrent loans from multiple lenders.

The Nova Scotia government has said it is not feasible to create a loan-tracking database due to privacy reasons and cost.

The board said it will recommend to the province that borrowers get more time to repay a loan.