Lawyer Says Reduced Payday Loan Fees Are Not A Substitute For Poverty Reduction Strategy
In February, Nova Scotians will pay a little less for payday loans, but a Halifax attorney says the province needs to look into why more people depend on them.
“The information we receive from these lenders shows that people take these loans one at a time because they have a gap between their needs and their income,” said David Roberts. “What we are seeing is a gradual change in the absence of a provincial poverty reduction strategy and an improvement in what we have now.”
The Nova Scotia Utility and Review Board has reduced the maximum cost of borrowing payday loans to $ 19 per $ 100, from $ 22 per $ 100. Tuesday’s decision was the result of a review of the payday loan industry. Roberts, a consumer advocate, called for a steeper cut to $ 17 per $ 100 as part of his submission to the board. Roberts said he was generally satisfied with the reduced rate of about 13 percent. The changes will take effect in February.
But he also admits that it doesn’t go far enough to exonerate those exposed to interest rates of up to 600 percent.
“People must demand from their elected representatives a poverty reduction strategy that alleviates and completely eliminates the factors that lead people to have a need that can only be met by a payday lender.”
The review board did not change the maximum amount that can be borrowed from $ 1,500. The current $ 40 late fee and 60 percent interest on late payments are also unchanged. Nova Scotia currently charges the second highest payday loan fee in the country, alongside PEI’s lending rate of $ 25 per $ 100. The cost per $ 100 in New Brunswick, Ontario, and Alberta is $ 15. Quebec does not currently regulate the industry.
Roberts said the board had acted sensibly within the limits of the provincial regulatory framework
“For now, we seem to be able to come to terms with this because we generally have no other options for this type of loan – for these people who need short-term credit and” may not have access to other forms of credit. “
“Unless our governments offer other options, these payday lenders will be there and they will be a better option than online sources of credit that are unregulated and who know where exist.”
Repeat borrowers remain a problem in the province, accounting for 56 percent of loans issued in 2017. That’s 18,795 borrowers, up from 15,545 in 2013. In 2017, the total number of payday loans in Nova Scotia was 209,000, up from 148,348 in 2011.
Payday lenders had been pushing to keep the $ 22 rate, arguing that cutting it would drive outlets out of the market. In New Brunswick, several outlets have gone missing since the price was fixed at $ 15 per $ 100. The board also turned down a proposal from Face of Poverty Consultation that would put an end to payday loans in the province by drastically cutting the loan fee to $ 2.25 per $ 100.
“I don’t think it is irrelevant for the board of directors to consider what would happen if payday lenders were cut down on a large scale,” said Roberts. “That would probably mean that people would fall back on less regulated and less reliable forms of credit, which of course can be found all over the internet.”
The board said it would recommend that the province give borrowers who have multiple loans more time to repay the debt.
Roberts says it’s a recommendation he hopes the province will adopt, but he’s not convinced it will happen.
“The board has made many recommendations to the government over the years and it has been very slow to take them, so to speak. The province was non-binding in dealing with extended repayment periods. “
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