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Federal Government to Give Provinces New Powers to Regulate Payday Loans

Posted on: Thursday, 8 September 2005, 21:00 CDT

WINNIPEG (CP) - After months of lobbying, the federal government has apparently agreed to give the provinces new powers to crackdown on the payday loan industry.

Ottawa will table amendments to the Criminal Code this fall to give provinces the right to set and enforce maximum interest rates and fees, according to Manitoba Finance Minister Greg Selinger, who said he was given the assurance by federal Justice Minister Irwin Cotler during a phone conversation this week.

"This change would allow the province to put in place what is considered to be a reasonable set of charges for the payday lending industry," said Selinger, who is also Manitoba's minister for consumer affairs.

"(Cotler) has indicated to the province of Manitoba and to myself personally that he will support an amendment to the Criminal Code to allow provinces to licence and regulate payday lenders," Selinger said.

When asked about the issue outside a federal cabinet meeting Thursday, Cotler did not mention legislative changes.

He would only say the federal government is in discussions with the provinces "in order to come up with a kind of initiative which will dovetail with what the provinces have indicated to us is their primary concern, namely consumer protection."

The Criminal Code currently limits interest rates to a maximum of 60 per cent per year. But Selinger and other provincial ministers have complained that the law is rarely enforced.

Selinger also said that when administrative fees are added to the already-high interest rates, people who take out short-term loans can find themselves spiralling deeper into debt.

"Some people get buried under a spiral of debt. And even though they wind up paying more, they never actually get out from underneath their debt," Selinger said.

The Ontario government has also called for tougher enforcement of interest rate limits, and expects a countrywide strategy will be hammered out this fall at a meeting of federal and provincial ministers responsible for consumer affairs.

"We all agree that a national approach is needed to protect Canadian consumers who use payday lenders, and certainly Ontario feels that the federal government needs to take greater responsibility in this area," said Julie Rosenberg, spokeswoman for Ontario's ministry of government services.

Ontario and Manitoba have recently tabled legislation that requires all loan companies - not just payday lenders - to include all their fees in their advertised interest rates.

Selinger is also planning new provincial legislation this fall that will forbid loan companies from offering so-called "rollover" loans, where a customer takes out a second loan to pay off the first and the interest is compounded.

A lobby group that represents about two-thirds of Canada's payday loan stores said Thursday it welcomes new government rules.

The Canadian Payday Loan Association already bans rollover loans under a voluntary code of conduct for its members, and said new laws would put all loan companies on a level playing field.

Source: Canadian Press

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