Lower payday lending rates finally arrive

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For struggling Albertans with little or no credit, in need of emergency funds, help has finally arrived.

On Aug. 1, Phase 1 of Bill 15, An Act to End Predatory Lending, came into effect.

“The Central Alberta Poverty Reduction Alliance (CAPRA) is very pleased with the legislation and very pleased that it came into force so quickly,” said Danielle Klooster, community mobilizer with CAPRA. “We are very encouraged that there’s some really strong consensus around the lending practices of payday lenders that we really think will be beneficial, particularly to vulnerable people.”

These changes include reducing the maximum cost of borrowing from $23 to $15 per $100 borrowed, making it the lowest rate in Canada. In addition, all fees related to a payday loan must be included in the cost and payday lenders are now prohibited from actively soliciting individuals through direct contact, including email or phone, charging a fee to cash a payday loan cheque, and soliciting, negotiating or concluding an agreement for another form of credit with a borrower while a payday loan is outstanding.

Here in Innisfail, payday lender company Money Mart did not wish to comment on the new changes or how it would impact business. Calls to Money Mart media relations personnel in Ontario were not immediately returned.

Phase 1 of the new legislation was introduced Aug. 1 with the second and final phase of the legislation coming into effect later this fall.

Phase 2 will include several new changes, two of which are requiring payday lenders to provide all payday loans by installment plans with no penalty for early payback and providing specific information on financial literacy resources.

Penhold mayor Dennis Cooper said the new legislation is a positive step.

“It’s definitely and improvement over the previous legislation,” said Cooper. “It should help people to get out of that pay day loan routine and hopefully get on their feet.”

In the meantime, Klooster was not surprised how quickly the bill was implemented.

“I knew that they were going to bring it through committee very quickly and (the government) wanted it enforced as quickly as possible,” she said. “It’s not such a dangerous situation now for people who don’t understand what it is they’re getting into.”

Klooster said while they are pleased to see changes in the payday lending industry and the possibility of people tangled in payday loan traps diminished, there is still work that needs to be done to serve all members of a community.

“Somebody has to serve these folks and if we don’t want the payday lending industry to serve them, then the community needs to,” said Klooster. “I think the financial sector and the social sector in communities have to come together and find ways to serve the population who have poor credit scores or no credit scores and help them to build good credit.

“(Bill 15) is an important piece of the puzzle but the community needs to find other ways to serve those people that require emergency credit or need a payday advance, particularly in a tight economy where people are struggling,” said Klooster. “There still needs to be other options. The community needs to work to develop those.”

kjean@innisfail.greatwest.ca

Danielle Klooster, community mobilizer with Central Alberta Poverty Reduction Alliance

“Bill 15 is an important piece of the puzzle but the community needs to find other ways to serve those people that require emergency credit or need a payday advance, particularly in a tight economy where people are struggling.”

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Kristine Jean

Kristine Jean is a reporter with the Innisfail Province, joining the newspaper in 2013. She covers Penhold municipal politics, news and community events as well as sports in and around the town as well as in Innisfail.