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Payday loan practice in Calgary defenced

Stan Keyes, the head of a Canadian payday lenders association, says a push by city councillors for tighter restrictions on the industry in Calgary to reduce poverty is uniformed and misguided.

“It’s easy to say they take advantage of people,” Keyes said. “The truth is that among other small credit options … a payday loan might be the smartest option. These loans are less expensive than a series of overdrafts or defaulting on an auto loan or mortgage.”

At Monday’s council meeting, Brian Pincott, Druh Farrell and Andre Chabot will introduce a motion that calls on a clear definition of “payday loan businesses,” for bylaw amendments to prevent clustering of payday businesses and for higher licensing fees.

The motion says payday loan businesses and other “fringe financial lenders,” such as pawnbrokers and cash-for-gold operations, thwart poverty-reduction efforts by municipal and provincial governments.

“They rely on repeat customers. They encourage repeat loans,” Farrell said Sunday. “Often if people are unable to pay back the loan they encourage them to renew the loan and those are at usury interest rates.”

The motion follows recommendations made last June by a Calgary social services agency for the city to adopt stricter regulations on the payday loan industry.

‘The Real Cost of Payday Lending’ report by Momentum Community Economic Development said consumers should be adequately shielded through regulations and for governments, financial institutions and non-profits sectors to fill the void created by tighter rules.

“Consumers should be able to access it at a reasonable annual rate of interest,” said the report.

Canada’s Criminal Code allows for loans up to $1,500 for a maximum 62 days and caps the annual interest rate of 60 per cent. However, provinces can circumvent that cap and allow payday lenders to charge higher, annualized, rates.

Alberta, for example, allows payday lenders to charge up to 23 per cent interest on the principal amount.

Momentum said the provincial government should repeal the Alberta Payday Loans Regulations and adopt the Criminal Code’s maximum rate.

“(Payday lenders) are focusing on neighbourhoods where they can exploit the residents that can live there,” Farrell said. “We need people living in poverty, low-income wage earners to have more stable financial practices.”

Keyes dismissed the suggestion the payday loan industry targets low-income people, saying the businesses are often in walkable corridors and in stripmalls near banks.

He said the payday loan industry would welcome traditional financial institutes introducing similar short-term, small sum loans because the consumer would benefit from more options.

“The repercussions of putting too many restrictions on our industry could result in the industry in saying, ‘We’re scaling back,’ ” he said. “Where does that put the consumer? Going to unregulated, unlicensed online lenders is a real threat right across Canada today.”

Keyes hoped to speak on behalf of the industry at an upcoming SPC planning and urban development meeting later this month.

thowell@calgaryherald.com

Twitter@TSHowell

Continued here:
Payday loan practice in Calgary defenced

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