Manitoba Passes New Payday Advance Regulations
By Paul RizzoPayday Loan Writer
Following in the financial footsteps of Nova Scotia, Manitoba has passed new legislation regarding payday loans.
Fast payday loan companies in the province will need to be licensed and bonded, thanks to “first of its kind” regulations the government passed Tuesday.
Politicians in the Manitoba legislature passed amendments that will regulate such companies, which offer short-term cash advance loans to those who have run out of money before payday. In exchange they charge high interest rates, which when combined with service fees can equal an effective annual interest rate of several hundred percent.
The next step for the province is to wait for the federal government to amend Section 347 of the Criminal Code, which deals with criminal interest rates. Under current provisions of the Criminal Code, a criminal interest rate is defined as more than 60 percent annually.
The amendment would create a special exemption that would allow provinces to set short-term rates for the cash advance payday loan industry, which at the moment offers the most expensive legal way to borrow money in Canada.
Ottawa is expected to introduce a bill along those lines later this year.
Finance Minister Greg Selinger said Tuesday that Manitoba’s payday loan legislation is the first of its kind in Canada.
“We want to ensure that borrowers are protected against exorbitant fees and abusive industry practices,” Selinger said in a release. “We now look forward to the federal government passing amendments to the Criminal Code that will allow us to regulate the charges associated with the industry.”
Under the provincial legislation, payday advance loan companies will need to be licensed and bonded. The province’s Public Utilities Board will set the maximum cost of credit that payday lenders could charge for loans.
Moreover, customers will be warned about the high costs of taking out loans with the companies, and customers can have the right to cancel a loan without penalty within 48 hours.
The legislation will also prohibit lenders from charging extra fees when loans are renewed, extended or replaced by new loans.
Finally, the legislation will give the Manitoba Consumers’ Bureau the right to inspect licensed payday loan companies.
