After months of being lambasted by the opposition parties, the Liberal government has finally moved ahead with reining in the payday loan industry, a contentious issue in the province.
British Columbia announced that it will reduce the maximum charge on payday loans. As of January 1, the maximum allowable charge for a payday loan will be $17 for every $100 borrowed. This is down from $23, and nearly half of the $30 charged before 2009.
The Ministry of Public Safety and Solicitor General said in a statement that the changes to how much lenders can charge for short-term, high-interest loans will be the second-lowest in the nation. The province of Alberta has the lowest with $15 per every $100 borrowed.
“Payday loan business are making a reasonable profit at this level. We don’t believe in gouging customers and have no objections to the new regulations,” stated Landmark Cash media relations manager Ryan Murphy.
In a news release, officials say that this move will help protect “vulnerable” consumers from entering into a spiral debt and assist them in saving money as they take out expensive payday loans.
“We made a commitment to reducing the maximum charges payable on payday loans and we are doing that,” said Mike Morris, Minister of Public Safety and Solicitor General, in a statement.
“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.”
Moreover, the ministry will establish a 30-day consultation period. This will allow lenders, credit counselors, advocacy groups and consumers to study and examine an array of issues, including consumer education and the development of low-cost loans.
The payday loan industry has been exploding in British Columbia. According to a report entitled “Short-Term Gain, Long-Term Pain,” the number of payday loan borrowers expanded 58 percent between 2012 and 2014. The industry grew from $318 million to $385 million in that same time period. Many officials and consumer protection organizations have expressed concerns.
The rest of the province has been tackling the issue of payday loans. For instance, the city of Maple Ridge passed a bylaw that prohibited new payday loan stores from opening.
Tyler Shymkiw, a Maple Ridge Councillor, lauded the provincial government for finally taking action to protect consumers.
“As a city councilor, 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,” he said. “This is a positive step towards improving the lives of families and working people in this province.”
It isn’t just British Columbia that is looking to rein in the payday loan industry. Jurisdictions across Canada and the United States have implemented new rules and regulations that limit the reach of payday loans. The reason for this is that opponents argue that payday loans tend to burden impecunious consumers with immense piles of debt that can be nearly impossible to pay off.
Proponents have countered that argument by noting that some of these same consumers do not have access to conventional forms of credit or banking options. Therefore, payday loans help fill that gap. Also, they present the case that adult consumers are free to choose whether or not to borrow these funds.