The government of Newfoundland is shirking its responsibility to regulate the payday loan industry, says St. John’s South Liberal MHA Tom Osborne.
MHA Tom Osborne is challenging the province to regulate interest on payday loans. — Photo by Joe Gibbons/The Telegram
“Some people need short-term loans to get through a rough spell,” Osborne said. “We need to find a way to allow them to exist and make sure they are not gouging consumers.”
Osborne brought the issue up in the House of Assembly this week, demanding to know if the Tory government would regulate the industry, as most other provinces do.
Service NL Minister Dan Crummell said federal regulations should protect people, as it is a criminal offence to charge more than 60 per cent interest per year.
One payday loan company, however, advertises an annual interest rate of 778 per cent per year and $89.95 in fees for a $300 loan over
Province says it’s fine with federal rules
Crummell said the province is comfortable with the federal regulations, which are more reasonable than what some other provinces allow for interest rates.
“If you do look at other provinces, for instance, the lowest rate offered for 14-day loans is $17 for $100 borrowed. If you consider this in comparison with the $2.30 per $100 as allowed under the Criminal Code of Canada, at $17 per $100 borrowed, individuals could face financial hardship and debt, which we understand,” Crummell told the house Tuesday.
“What they are doing in other provinces is not even comparable with what the federal government has regulated and has legislated,” he said.
Osborne said he has been contacted by a number of people who’ve gotten stuck in a cycle of taking out payday loans and the province needs to intervene to limit the amount of service charges and to examine how rollover loans are being carried out.
One St. John’s senior citizen on a fixed pension said he was desperate and took out a loan for $200 which he rolled over every month for a year and a half until he finally had enough. But he said he had to make drastic cuts in his living expenses for a month to get out from under the payday loan cycle.
That’s because the fees that got piled on top of the initial $200 made him short of cash each month, necessitating another payday loan.
‘The trouble come when I started trying to pay it back,” he said.
“They reel you in like a trout. They got you. .… I should have quit them (the first time) but I was really stuck for money.”
The man said he turned to the payday loan company because it was the last hope and he didn’t have credit to get a loan from a regular bank loan.
“When you got no money you can’t get no money,” he said. “It’s just as well to forget about it.”
For Osborne, it’s a matter of taking action on the “outrageous” fees that are suppressing payday loan customers.
“Every other province can’t be wrong and Newfoundland be right,” he said.
Stan Keyes, president of the Canadian Payday Loan Association, which represents more than 700 financial institutions, said this province shouldn’t just rely on the federal government and should follow the other provinces who either have or are working on legislation.
“I’m ready to go back to Newfoundland in a heartbeat to sit down with the minister responsible and entire caucus if they want me there,” said Keyes, who is based in Hamilton, Ont.
“(Legislation) is practically cut and paste for them.
He said consumers in this province aren’t getting the protection they deserve from unscrupulous lenders and his organization has been trying to convince the province it’s in consumers’ best interest to draft regulations and caps that also provide balance to allow the payday loan industry to be viable.
As for the federal law, Keyes said the consumer is left unprotected if it isn’t being enforced.