Wednesday, May 9, 2007

Will Canadian Payday Advance Bill Die?

By Paul Rizzo
Payday Loan Writer

The head of the association that represents 23 instant payday loan companies in Canada is concerned that legislation to regulate the industry might not pass before the end of the spring legislative session.

“Bill-43 (the Payday Loans Act) should be a priority of the Saskatchewan government,” said Stan Keyes, president of the Canadian Payday Loans Association. “Only then will consumers be protected; only then will industry players be able to operate viably; only then will legislation and regulation prohibit the bad business practices and excessively high fees that come with an unregulated industry.”

Payday Advance Company “Now I’m troubled that the [payday cash advance] legislation may not get passed in the next few weeks before the (legislature) breaks for the summer,” he added in an interview Monday.

The bill requires 20 hours of debate before it can be passed and, with the session scheduled to prorogue next week, the legislation could die on the order table.

Payday loans online are short-term, high-interest loans that are typically repaid to the lender by the next pay period. According to the association, which represents 500 of the 1,350 payday lender outlets in the country, two million Canadians use payday loans every year.

The federal Conservative government recently passed legislation to exempt payday loans from Section 347 of the Criminal Code, which prohibits loans with interest rates in excess of 60 percent.

A typical 14-day, $300 payday cash loan would cost the borrower $50, which would equate to an annual rate of interest of 435 percent.

But Keyes said payday loan companies can’t be compared with conventional loans offered by chartered banks and their annualized percentage rates (APRs). “It’s the wrong measure for payday lenders. We deal in short-term, small-sum loans.”

Keyes said a typical $20 fee on a $100 payday loan includes $5 for defaults, which occurs with 20 to 25 percent of the cash advance loans.

The provincial legislation, which was introduced March 12, would set maximum limits on payday loans, allow consumers to cancel loans without penalty the day after the loan was made, prohibit more than one payday loan per customer and prohibit lenders from making claims on future wages and making loans contingent on purchase of other product or service.

Keyes said he hopes Saskatchewan will join Manitoba and Nova Scotia in passing the legislation regulating the cash advance payday loan industry.

“If you want to ensure you’re offering maximum protection for the consumer, the only way you do that is to pass legislation, then begin to work on regulations,” Keyes said.

Justice Minister Frank Quennell said Bill 43 is a “specified bill” and, as such, must be passed in the current session, which ends May 17.

“So there’s no danger of the bill not passing,” Quennell said. “It’s one of the bills the government had the opportunity to specify as a bill that had to pass in the session. Therefore, it will pass.”

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