NDP bill gives Nova Scotians an alternative to payday loans



New Democrats tabled a bill on Tuesday that would provide consumers with an alternative to expensive payday loans.

“Due to the sky-high interest rates and the way interest combines with payday lenders, many people who use the money go into a cycle of debt,” said Susan Leblanc, NDP representative for Dartmouth. -North. “It can get out of hand very quickly. Our bill essentially provides an alternative to these types of loans, which are much lower interest microloans that would be offered through the credit union system. “

There are 42 payday loan outlets in Nova Scotia, according to a report commissioned for consumer advocate Dave Roberts and submitted to the Nova Scotia Utility and Review Board. The board conducts reviews of the payday lending industry every three years to discuss restrictions on concurrent and repeat loans.

The council hearing took place this month and a decision is pending.

Roberts, a lawyer in Halifax, called for a reduction in the maximum cost of borrowing, which is now set at $ 22 per $ 100 loaned. He would like the maximum cost to be reduced to $ 15 per $ 100.

“Payday loan companies exploit the poor by charging effective interest rates of up to 600%,” Leblanc said. “Many Nova Scotians are forced to use payday loans due to a lack of other financial alternatives and then find themselves stuck in a vicious cycle of repayment. This legislation would help thousands of people take back control of their finances from destructive payday loan companies. “

The report commissioned by Roberts and completed by Michael Gardner of Gardner Pinfold Consultants in Halifax shows that more than 1,400 payday loan outlets in Canada provide between $ 2.3 billion and $ 2.7 billion in loans to borrowers per year.

The industry offers low-value, short-term loans through physical storefronts and online sites, and Patrick Mohan, president of the Independent Payday Loan Association of Canada, said in a submission to the utilities commission and review that his organization is not the villain of usury. it is often made to be.

“Installment loans engage the consumer in long-term debt, perhaps never to be repaid, which is precisely the purpose of the lender,” Mohan said of installment loans offered by banks to consolidate. consumer debts. “Just like with Visa and MasterCard, banks never want you to pay off the entire balance on a monthly basis. They have even deeper pockets than Money Marts and Cash Moneys. They want their money to be fully deployed at all times to maximize their income. “

Mohan said payday loan outlets are not the root cause of “poverty, household debt, bankruptcy or any other financial hardship.”

“Although we offer unsecured loans at a high cost, it is a short term loan that does not continuously burden the consumer like Visa cards. Our loans are normally for two weeks, not for life. … Maybe something should be done about the high cost of these credit cards before we even consider shutting down or restricting people’s access to our service by limiting our storefronts and our ability to deliver our product. profitable way.

Leblanc said the NDP is suggesting the credit union path because the province regulates both credit unions and payday lenders, while the banks are regulated by the federal government. She said the party has spoken to representatives of credit unions who have indicated they would like to offer the service, but only if the provincial government offers loan guarantees like those offered for small business loans.

“If there was a will from the government, the credit unions could certainly step up,” she said.

Leblanc said the legislation would cover short-term loans for small amounts.

“The average loan from a payday lender is around $ 500,” she said.

“It’s a win-win situation. Essentially, it would be providing an alternative to people that won’t necessarily shut down payday lenders, but will offer them some competition, which is good for everyone. Our hope is that people turn to credit unions or that payday lenders are forced to lower their interest rates and watch how they work.

Leblanc hopes the government will call debate on the bill before the end of the legislative session.

“We review all laws in the House,” Government House leader Geoff MacLellan said via email. “It is too early to comment on this bill as we would need to analyze its impact and discuss with stakeholders before making a decision.”

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