Payday Loans: New Regulation, New Ideas
Yesterday, the city of Maple Ridge, BC, announced municipal regulations that would ban payday loan and cheque-cashing businesses from continuing to create a climate of predatory lending and unstable financial options for its citizens. Also in recent days, the provincial government of New Brunswick previewed plans to regulate borrowing costs. This news comes on the heels of announcements by the United States government aiming to increase the regulatory restrictions on similar businesses, leaving many Canadians asking why our government has not followed suit.
Canadian provincial governments have had the power to regulate payday loan businesses, helping control the rates and terms of their agreements in a bid to protect consumers, since 2006. Payday loans in Canada are permitted under section 347.1 of the Criminal Code, so long as the province of the borrower has enacted sufficient provincial legislation concerning their regulation and provisioning. According to the Canadian Payday Loan Association, more than 760 quick-cash operators loan to about two million people each year.
As the UrLoan blog has previously noted on several occasions, payday loans set a dangerous precedent. Even as the global number of the “unbanked” shrinks, 13 percent of Canadians still need access to financial services that will not present a further impediment to financial stability and future development. Whether or not further regulation is put in place around payday lenders, alternative financial services with a fairer and more sustainable model of access will need to step up and fill the gap.