Critics say limits for payday loans offer little benefit
The Nova Scotia Utility and Review Board yesterday set limits on how much payday-loan companies can charge customers in interest and fees, but critics doubt customers will benefit.
The maximum cost of borrowing for the stop-gap loans provided by companies like the Cash Store and Money Mart is now $31 per $100, with a limit of $40 in case of default. Nova Scotia is the second province to use new powers to regulate the industry. Manitoba set a 17 per cent limit on the first $500 borrowed, 15 per cent on the second $500 and six per cent on loans over $1,500.
Payday loans are typically less than $300 and taken for about two weeks, the board found.
David Cameron, the lawyer who represented consumers at the hearing, is skeptical. He had argued for the Manitoba approach. He compared the board’s “market-place approach” to another regulated industry: gas prices.
“I tend to see that the price at the pumps is the upper end set by the regulator,” he said, suggesting the same will be true in the pay-day loans industry. “I remain unconvinced that (the market-place approach) will be proven to be correct.”
But Stan Keyes, president of the Canadian Payday Loan Association, said the decision will ensure a competitive lending industry and protect consumers.
“Nova Scotia heavily relied on solid evidence and expert witnesses regarding the payday-loan industry and payday-loan customers,” said Keyes. “Today’s ruling on rates recognizes the responsible, educated consumers that require access to this important form of credit.”
The board said it had to set the rate high enough to foster a competitive and fiscally viable industry while ensuring borrowers are not charged excessive rates. It also wanted to protect the “uninformed borrower” from getting scorched by unexpectedly high rates.
Rates in Nova Scotia previously ranged from $15 to $35 per $100.
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Tags: Payday Loans