New payday loan legislation takes effect
Monday, Aug 08, 2016 06:00 am
New legislation has stopped so-called “predatory lending” and enacted the lowest payday borrowing rate in the country, down from $23 for every $100 borrowed to $15.
“It was really easy for people to be taken advantage of,” said Service Alberta Minister Stephanie McLean. “We wanted to put some consumer protections in place. There is still the need for people to take out micro, short-term loans in many cases. That option still exists, but in a more financially healthy way.”
The bill, dubbed An Act to End Predatory Loaning, took effect Aug. 1. All fees related to payday loans must also be included in the cost, eliminating any potential hidden fees or charges.
“They can’t solicit you directly by email or phone,” McLean said. “And they can’t offer you a loan when you have one outstanding with them.”
The legislation will affect money-lending companies such as Cash Money and Money Mart. More than 30 payday loan companies operate more than 220 branches in the province currently, according to the Province.
Christian L’Archeveque, a financial planner with TD Wealth Financial Planning in Cochrane, said he would still advise Albertans to stay away from payday loans.
“I would look at any other option before,” he said. “I would never advise that kind of thing, even if it’s short-term. There’s other options that you can use in the short-term.”
Payday loans include those loans of $1,500 or less with a term of 62 days or less.
McLean said future changes to payday loans could be on the way in the winter.
“What phase two will do is bring in installment payments and requiring the payback in installments,” she said. “That will bring the annualized percentage down to that 80 per cent-ish range, and make it even more affordable.”