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Alberta payday loan regulations make lenders start to feel bad

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Garish yellow storefronts promising quick and easy money are starting to wane in Alberta as the payday lending industry says provincial regulations put in place last year have made its flagship product unsustainable.

The number of convenience stores has dropped to about 195 from 220 at the same time last year, according to Service Alberta.

Cash Money says it has reduced the number of loans it issues from about 30,000 a month a year ago to a range of 1,500 to 1,800 because it turns down all but the least risky borrowers.

“The situation in Alberta is unfortunate,” said Cash Money spokesperson Melissa Soper. “Without profit, we cannot risk losses, so we must refuse those with riskier credit scores.”

Alberta regulations require a payday loan of no more than $ 15 for every $ 100 borrowed and a term of at least 42 days. They are part of a larger crackdown on an industry that made nearly 4.5 million short-term, high-interest loans totaling $ 2.2 billion across Canada in 2014.

Other provinces are implementing regulations

Earlier this year, British Columbia and Ontario both implemented reduced borrowing costs and are exploring other lending options. Newfoundland and Labrador is committed to adopting its first industry regulations by the end of the year.

But it’s Alberta that has seen the most dramatic change recently, with the combined effect of lower cost and longer borrowing time dropping the annual percentage rate from 600% to 202% for payments. weekly over the 42-day period.

“Alberta is the most extreme,” said Tony Irwin, president of the Canadian Consumer Finance Association, which represents the payday loan industry.

“The six week term fundamentally changed the product.”

“A Fair Market for Albertans”

Alberta’s End Predatory Lending Act, passed last year, is designed to prevent vulnerable borrowers from getting trapped in debt cycles, said Stephanie McLean, Minister of Service Alberta.

“My view has always been that we will put in place regulations that will create a fair market for Albertans,” said McLean.

She said she is encouraged by a partnership between ATB Financial and Cashco Financial to secure bank accounts, as well as the payday loan alternatives that the province’s credit unions started last year, although the total loans issued by the three credit unions thus offering them far only total in the hundreds.

Minister Stephanie McLean said Alberta’s Act to End Predatory Lending is designed to protect vulnerable borrowers. (Travis McEwan / CBC)

The transition will take time as people find out about new offerings, McLean said, adding that policies should not revolutionize the lending market overnight.

“Instead of popping a balloon, we slowly let the air out.”

People don’t want help, just money

Similar efforts are underway in other provinces with varying results.

In Ontario, the Windsor Family Credit Union launched its own payday loan product last August. President Eddie Francis said more than a thousand loans at 37% interest had been made under the program.

“The adoption was quick, it was immediate, which means it is doing its job,” Francis said. “People can contact us for quick, easy, hassle-free loans at a greatly reduced interest rate.”

He said the average loan for the program is around $ 300 over a two-week pay cycle, compared to around $ 1,600 at Servus Credit Union, one of the institutions in Alberta.

“We didn’t come here to try to create a product that would force a change in behavior,” Francis said. “They don’t want a two-month loan. They want a two-week loan.”

Shelley Vandenberg, president of First Calgary Financial, said the credit union offers a low-cost payday loan and budgeting advice to make sure a loan doesn’t make it worse, but some people don’t. interested in this.

“Sometimes people just don’t want help, they just want the money,” Vandenberg said.

Industry is looking for alternatives

Irwin, of the Canadian Consumer Finance Association, said with limited lending options, some borrowers turn to online lenders who may not face the same restrictions as the payday lending industry.

He said the industry is also considering alternatives such as installment loans and other products to stay afloat.

In Quebec, where a 35% annual interest rate limit has kept the payday lending industry from taking off in the province, Money Mart offers check cashing, gold buying and money transfers. money, but no loans.

Irwin said the payday lending industry also provides brochures on financial counseling and has partnered with some credit counselors, but ultimately people have to decide what is right for them.

“You can provide the information, but of course after that people have to make their own choices.”


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