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URB hearings target payday loan services in Nova Scotia

Nova Scotia’s payday loan industry could be in for an overhaul as the provincial Utility and Review Board gears up for public hearings next month.

Among the issues to be discussed is whether restrictions should be placed on repeat loan customers.

The board will also examine the maximum fee charged by the businesses, the maximum interest rate, which is now set at 60 per cent, and whether the Internet payday loan industry is adequately regulated in the province.

Board-appointed consumer advocate David Roberts said he would like to see the maximum fee of $25 per $100 borrowed reduced to be better aligned with that of other provinces.

Lenders in Manitoba, for instance, charge a maximum fee of $17 per $100, while Ontario lenders are permitted to charge up to $21 and companies in British Columbia, Alberta and Saskatchewan can charge up to $23.

“The primary issue remains the cost,” Roberts said.

“From my perspective, certainly, there is a need to justify the fact that we are the most expensive province in the country.

“The other issue has to do with repeat loans and whether there’s anything that can be done to either relieve people of some of the cost of repeat loans or to require breathing space between loans.”

In documents filed to the review board, the Canadian Payday Loan Association says the board should not change the maximum cost of borrowing.

It adds that “lenders are not making inordinate profits” and argues that the maximum fee charged on defaults should be raised from $40 to $45 to conform with fees charged by banks for invalid cheques.

The association’s president, Stan Keyes, said the costs associated with running a payday loan company are substantial, and reducing customer fees could prompt some stores to close, threatening the viability of the industry.

“Then that’s when the door opens for the unlicensed online lender to make their product available, which puts the consumer at a terrible risk,” Keyes said.

The association notes in its submission to the board that any attempt to restrict borrowers’ ability to take out repeat loans will not be effective.

“If you limit the number of loans a borrower can obtain from licensed lenders, the borrower will merely turn to unlicensed lenders to obtain credit,” the document says.

“That will only drive the market for the offshore unlicensed lenders. There is no consumer protection for borrowers who obtain loans from offshore unlicensed lenders.”

The association also takes issue with Nova Scotia’s requirement for lenders to have at least one brick-and-mortar outlet in the province, and to process requested transfers within one hour.

Those regulations “pose an obstacle to obtaining an Internet lending licence” and add to the proliferation of unlicensed Internet lenders, the group says.

Tim Houston, finance critic for the provincial Progressive Conservative Party, has requested intervener status at the hearing.

“We need to make sure that the people who use these loans are not being treated unfairly, so we just want to keep an eye on the process.”

While Houston won’t be lobbying for change one way or the other, he is concerned about the fees that lenders now charge.

“I’d be concerned about attempts to increase the rates. The fees that are being charged now I think, for the most part, seem to be pretty fair. I want to make sure there’s no undue increase.”

The hearings, set for Feb. 10 to 12, come after federal and provincial government officials accepted recommendations of a consumer measures committee to target repeat borrowing, to improve electronic tracking systems of loans and to begin a public awareness campaign about high-cost loans.

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URB hearings target payday loan services in Nova Scotia

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