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New payday loan regulations in BC: 600 percent interest

The British Columbia government made the hole people get into borrowing from payday lenders just a little shallower today.

The regulation announced today, which won't be in effect until Nov. 1, 2009, will reduce the charge on a two-week loan to 23 percent of the amount borrowed, down from 30 percent. Calculated over a year, that leaves the annual rate at 600 percent.

“It's certainly not a form of credit we would encourage consumers to use,” said Solicitor General John van Dongen. “It is a high interest rate,” he said, adding that the rate strikes a balance between protecting borrowers and allowing lenders to do business. “Some payday lenders believe this rate will not allow them to be viable,” he said.

The changes also require lenders to set out all charges and fees, including the annualized rate, in loan agreements and on posters. And borrowers will have the right to cancel a loan at no charge by the end of the following day.

Penalties will be up to $50,000, but the government will not actively enforce the new law. “It will generally be complaint driven,” said van Dongen. “If people can't resolve a problem with their lender they can apply to the consumer protection authority for assistance.”

The NDP MLA for Victoria-Hillside, Rob Fleming, has for several years advocated tighter restrictions on payday lenders. “This is a growing, exploding industry in British Columbia,” he said. “This legislation ensures that payday lenders will continue to prey upon people in British Columbia.”

There are more payday lender storefronts in B.C. than anywhere else in Canada, Fleming said, and yet the province has been one of the slowest to regulate the industry.

“Consumers have been left in the lurch for years,” he said. “This government has landed on a figure that's totally in the interests of the big corporations that are in the payday lending business now and its ignoring the needs of consumers.”

The vice-chair of the Credit Counseling Society of B.C., Skip Triplett, who spoke at van Dongen's announcement, said payday lenders fill a need in some emergencies, but should be avoided when possible. “Go to a bank first, or a credit union, one of our financial institutions because I think a lot of people would find they are eligible for a loan from those at much more reasonable rates.”

Andrew MacLeod is The Tyee’s Legislative Bureau Chief in Victoria. Reach him here.

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