Soon after the province of Alberta proposed new legislation that would rein in the payday loan industry, one city’s task force began to also seek out new regulations for the industry that has been accused of being predatory. Is it necessary when the provincial government is already clamping down on the industry?
Calgary’s City Hall task force on payday loans is looking to install extra oversight to the often criticized industry. It suggests that the municipality introduces brand new licensing rules and exorbitant fines for violators for payday loan companies.
As part of the proposal that is scheduled to be presented to a council committee Wednesday, some of the new regulations would see operators be required to display signs on money management and debt counselling. Also, the payday loan stores would be legally required to verbally inform customers about these personal financial services.
If the businesses refrain from following these rules then they would face a $1,000 fine.
“We’re all wanting to have responsible lending practices,” said Shelley Vandenberg, president of First Calgary Financial and a member of the task force. “This is a practice that does ensure you’re lending for the right reasons and the borrower knows all their choices.”
The industry is already airing its grievances over the proposed new rules. One industry group stated that any such changes would be unnecessary and duplicate other laws that are currently in place. It would also apply additional headaches to payday loan stores that are facing heavy restrictions from Alberta’s New Democratic Party.
Tony Irwin, president of the Canadian Payday Loan Association, argued that stores already offer clients financial literacy literature, adding payday loan stores are provincially licensed.
Calgary’s task force concurred that it does mirror the NDP legislation at the provincial level, like suggesting to clients to seek credit counselling. But members averred that the city should move ahead with the modifications anyway.
“What’s being proposed by the City of Calgary seems to me to be a lot of duplication from what the province already requires us to do,” Irwin said. “We are a compliant industry.”
There are many businesses that provide consumers with payday loans bad credit which are complemented with very high interest rates. A lot of customers use these alternative financial services to pay their rent or cover the lighting bill, and they can’t use credit because they have don’t have access to it. Moreover, due to the enormous and numerous fees and interest charges, customers can’t cover the first loan so they take out several new loans to pay off old ones. Critics say this places them at a disadvantage and sends them into a never ending spiral of debt.
Representatives from the industry note that payday loan companies are needed, particularly in the province’s fragile economy. However, Lisa Holmes, president of the Alberta Urban Municipalities Association, says because Alberta’s economy isn’t performing well that these kinds of restrictions and regulations are needed.
“The economy in Alberta is not the greatest right now,” Holmes said. “We’re seeing more people that are laid off. More people will be accessing these types of loans and so this is an important way to be able to protect them in a proactive sense.”
If payday loan stores begin to close down in Calgary then they do have the choice to use First Calgary Financial. It’s a credit union that does offer short-term loans to borrowers up to $1,500 with an 18-month repayment period that has a 12 percent interest rate.