The borrowing rates of high-cost, short-term cash loans – payday loans – will be lowered under regulations coming into effect Jan. 1, 2017.
The Province also announced plans to consult with stakeholders to help determine how best to further strengthen consumer protection for British Columbians who use high-cost alternative financial services, and whether more affordable options exist.
As of Jan. 1, 2017, the maximum allowable charge for a payday loan in B.C. will drop from $23 to $17 for every $100 borrowed, making it the second-lowest rate in Canada. This builds on regulations the Province implemented in 2009, before which time borrowers paid whatever the lender charged – as much as $30 per $100 borrowed. Borrowers also had few, limited protections and little recourse against harmful lending practices, such as rollovers, extended repayment terms, disclosure requirements, among others.
Payday loans – along with other alternative financial services, such as instalment loans, rent-to-own plans, cheque-cashing and vehicle title loans – are expensive for consumers. The 30-day consultation with credit counsellors, advocacy organizations, loan providers and other stakeholders is to hear their thoughts and ideas on a wide range of topics, including: consumer education and information, community partnership opportunities, regulations to further protect borrowers, and innovative lower-cost loan products to shift people away from more expensive options.
Mike Morris, Minister of Public Safety and Solicitor General –
“We made a commitment to reducing the maximum charges payable on payday loans and we are doing that. We strive to keep as much money in people’s pockets as possible, through low taxes, balanced budgets and creating jobs that pay well. And we will continue to look for ways to make alternative financial services as affordable as possible and to ensure strong consumer protections continue to be in place.”
Tyler Shymkiw, councillor, Maple Ridge –
“It’s encouraging to see the Province take this step to protect consumers. As a city councillor, and the former chair of our local food bank, I saw for myself the devastating effect these short term, high-interest payday loans have on our communities. This is a positive step towards improving the lives of families and working people in this province."
Scott Hannah, president and CEO, Credit Counselling Society –
“High-cost financial services can contribute significantly to people’s financial problems, so I am glad government is looking to provide greater protection for consumers. Our association is looking forward to participating in finding solutions.”
Linda Morris, senior vice-president, Vancity credit union –
“People’s financial well-being depends on access to affordable credit and their ability to understand and use financial information in a way that helps them make good decisions. This has long been a priority for Vancity, which is why we are actively involved in helping people build a better credit history.”
Anna Hardy, regional director (B.C.), Central 1 Credit Union –
“Central 1 is very pleased that the B.C. government is undertaking a consultation with stakeholders on payday loans and other high-cost alternative financial services. Providing accessible and low-cost financial services for members is at the core of what credit unions do. We are highly supportive of measures and solutions to prevent borrowers from becoming trapped in a cycle of personal debt and look forward to providing our input to government on this important issue.”
- In 2009, British Columbia became one of the first provinces in Canada to regulate payday loan companies.
- A payday loan is a loan of $1,500 or less, for a term of 62 days or less.
- Typically, borrowers have a bank account and a regular source of income. They provide a cheque or pre-authorized debit for the full amount of the loan, plus fees, to be repaid on their payday.
- Payday loan companies doing business with B.C. consumers, including those operating online or by phone, must be licenced by Consumer Protection BC.
- In addition, B.C. laws provide a number of protections to payday loan borrowers including cancellation rights, disclosure requirements, prohibited practices and penalties for violations.
- Payday lenders must publicly display the cost of credit, and disclose all charges, terms and conditions in the loan agreement.
- They must not roll over one loan into another with new charges, nor issue more than one loan to a borrower at the same time.
- A payday lender cannot issue a loan for more than 50% of a borrower’s net pay for the period over which the loan is written.
- If a borrower is taking out his or her third loan in a two-month period, repayment must be phased over two or three pay periods
- Through Consumer Protection BC, people who have been over-charged for these loans have recourse against the companies. Since 2012, several payday loan companies have been ordered to refund a total of more than $1 million to consumers who were over-charged.
- Almost 159,000 British Columbians took out payday loans in 2015, according to information provided to Consumer Protection BC by the payday loan industry.
For a link to Consumer Protection BC: https://www.consumerprotectionbc.ca