Payday Loans

Competition keeps payday loan rates down

Competition keeps payday loan rates down

Companies charging less than N.S. maximum, association president says

* BYLINE: Clare Mellor, Staff Reporter
* DATE: March 20, 2010

It appears that payday loan outlets in Nova Scotia aren’t charging customers anything close to the maximum borrowing rate set in 2008 by the Utility and Review Board.

“What is occurring in Nova Scotia is a competitive atmosphere that, of course, keeps the price down for a payday loan for a consumer,” Stan Keyes, president of the Canadian Payday Loan Association, said Friday.

A telephone survey of several major payday lenders in the Halifax area Friday shows costs of borrowing $100 ranges from $17.99 to $25.

Following public hearings in July 2008, the Nova Scotia regulatory board set the maximum cost of borrowing at $31 per $100 including all non-optional fees tied to the loan. It also ruled that default fees on the loans cannot exceed $40 per loan and interest rates on loans in default cannot exceed 60 per cent annually.

Other provinces that are regulating payday loans have taken a very different approach and have set much lower caps on the maximum amount that can be charged for borrowing. Rates were set at $21 per $100 borrowed in Ontario, and $23 per $100 borrowed in Saskatchewan, Alberta and British Columbia.

Nova Scotia’s regulator will review the rate this year, and has set Nov. 1 as a tentative date for public hearings on the issue.

When it last set the rate, the board said it decided to let competition in the marketplace keep payday loan prices in check.

“I think that it is working fine,” Keyes said.

The Hamilton-based association represents about 40 per cent of the payday loan industry in Canada, said Keyes. In Nova Scotia, it represents Money Mart, which has eight stores in the province.

“The companies providing (payday loans) that are in demand in Nova Scotia are providing the product at a reasonable rate, nowhere near the $31 that was declared as maximum,” he said.

Nova Scotia was one of the first provinces to place a cap on the cost of payday loans.

“There were no benchmarks at the time. Here we are now in a regulatory review in November. Now it will be the decision of the (review board) to continue the business model approach or do a study through a recognized accounting firm to learn just what it cost these companies to provide their product,” Keyes said.

Earlier this week, the board issued a request for proposals for a lawyer to represent consumers at the hearing later this year.

“As there are currently no groups or organizations formed to represent the interests of the consumer at the hearing, the board has determined that is appropriate to engage legal counsel as a consumer advocate to represent borrowers generally,” the tender says.

Nova Scotia began enforcing new regulations around payday loans in August 2009

A spokeswoman for Service Nova Scotia said Friday there have been no consumer complaints about the industry since regulations came into effect.

In 2007, federal legislation was enacted allowing the payday loan industry in Canada an exemption from a Criminal Code provision that makes it illegal to charge more that 60 per cent annual interest. However, that exemption only applies in provinces that choose to regulate the industry.

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