At the federal level, the payday loan industry isn’t at the forefront of political discourse during the election season. At the provincial level, however, that is a different story as many provinces are seeking out ways to reform the often criticized payday loan industry.
One of these provinces is Alberta, whose government is now being run by a newly-elected New Democratic Party, a heavily left-of-center political party. With the NDP government turning its attention to payday loans, cabinet ministers are expressing concerns with payday lenders’ business practices.
Over the next few months, the province is expected to unveil a series of consultations to review the industry. Since payday loan regulations are expiring next summer, the government will want to ensure it’s ready for reforms. The new round of consultations began under the previous Conservative government, which lost after leading the province for several decades.
Deron Bilous, Service Alberta Minister, confirmed that an announcement will be coming in the next several weeks. He refrained to provide any details on the matter, but he noted that one aspect of the industry that the government will be scrutinizing is interest rates.
In the western province, bad credit loan lenders are permitted to charge consumers $23 for every $100 borrowed, and a short-term, two-week $300 payday loan can come with a 600 percent interest rate.
“It is a cause for concern and we want to make sure we’re protecting Albertans,” said Bilous in a statement at the Alberta Urban Municipalities Association convention last week. “I’m quite excited to look at different options.”
Others within the NDP are urging the government to implement new rules that would permit customers to pay back the loans in installments instead of an immense lump sum payment.
Critics in Alberta present the case that payday loan lenders are popping up since the crash in oil prices. Due to the fact that Alberta has been hit very hard by the oil slump, the standard of living of many who worked in the oilsands has greatly diminished, and some believe bad credit loan lenders are taking advantage of this.
“It is the working poor that get targeted by the businesses, so in the downturn you would expect more people to access payday loans, especially if they have lost their jobs or come into some economic insecurity,” said Mike Brown, public policy co-ordinator with Momentum, in a statement.
“So the downturn is really a boon for these types of businesses. They certainly cluster in low-income neighborhoods in Calgary. So for a lot of people, that might be all they see for a lender.”
This comes as many Albertan cities and non-profit organizations have partnered to encourage the province to take action against the payday loan industry. Everyone from municipal governments to religious institutions have collaborated in supporting any sort of reform applied to the industry.
The Central Alberta Poverty Reduction Alliance, for instance, argued that payday lenders are exempted from the criminal code. The criminal code states a maximum interest rate of 60 percent on loans is permitted, but exceptions are allowed if a province regulates the payday loan industry. Alberta had installed those regulations in 2009 and gives payday loan licensed firms to charge 600 percent interest rates.Read More