Group calls on Prince Edward Island to cut highest payday loan rates in country

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Prince Edward Island has the highest allowable fees in the country for payday loan companies, something a national policy research group is calling on the provincial government to change over concerns that vulnerable islanders no longer go into debt during the pandemic.

Prince Edward Island allows payday lenders to charge a fixed maximum fee of $ 25 per $ 100 of borrowing, for a term of less than two months. For a typical loan extended over a two week pay period, this works out to 1.79% interest per day. Over 365 days, this equates to an annual interest rate of 652 percent.

Ricardo Tranjan, an economist at the Canadian Center for Policy Alternatives (CCPA), describes these maximum fees as “exorbitant”, which could push households already on the brink of a “more financially vulnerable situation”.

Cost of Payday Loans in Canada
Maximum fee per $ 100 borrowed Annual interest rate
(on the basis of a two week loan)
PEI 25 $ 652%
Newfoundland and Labrador $ 21 548%
New Scotland $ 19 495%
Manitoba $ 17 443%
Saskatchewan $ 17 443%
Alberta $ 15 391%
Before Christ $ 15 391%
New Brunswick $ 15 391%
Ontario $ 15 391%
Quebec n / A 35%

Source: Canadian Center for Policy Alternatives / Financial Consumer Agency of Canada

In comparison, Tranjan said a typical cash advance on a credit card – often seen as a high-cost borrowing option – charges 23% annual interest.

“So 23% to 652%. That’s too much.”

Prince Edward Island missed ‘second wave’ of loan regulations

Tranjan said Prince Edward Island was one of the last provinces to pass legislation to regulate the payday lending industry when the province’s Payday Loans Act came into effect in 2015 ( six years after the law was first passed by the Legislative Assembly).

At the time, the charges allowed in Prince Edward Island were comparable to those in a number of other provinces.

But since then, Tranjan has said there has been a “second wave” of regulatory changes, which has so far missed the island.

Ricardo Tranjan, an economist at the Canadian Center for Policy Alternatives, says the more economically vulnerable a family, the more likely they are to access high-cost payday loans, according to data collected by Statistics Canada. (SRC)

Ontario, Alberta, British Columbia and New Brunswick have since lowered their eligible fees from $ 25 for every $ 100 borrowed to $ 15.

Tranjan said there had also been changes in other provinces to add more transparency to payday loan transactions – in some cases requiring lenders to show borrowers what the annual interest rate would be on their ready.

These steps allow borrowers “to make a more informed decision,” said Tranjan, and to understand the high cost of borrowing compared to other possible options, if they exist.

The cost of loans is a “major problem”, according to the opposition

But Prince Edward Island opposition finance critic Michele Beaton said in many cases Islanders who took out a payday loan “have already been turned down for d. ‘other debt financing options with significantly lower cost of borrowing’.

Beaton said the high cost of borrowing via payday loans was already a “major problem” before the pandemic hit.

“As the economic impacts of COVID-19 set in, people are desperate and have bills coming in with very limited resources to pay them,” Beaton said.

Opposition financial critic Michele Beaton said the high cost of payday loans in Prince Edward Island was already a “major problem” before the COVID-19 economic crisis was raised. the possibility that Island households will seek to increase their borrowing. (Ken Linton / CBC)

Tranjan and Statistics Canada both found that some households – such as lone-parent versus two-parent households, and those who rent instead of owning their homes – are more likely to access payday loans.

“The more economically vulnerable a family is, the more likely it is to resort to payday loans,” according to the latest CCPA report.

Quebecers are doing well without a payday loan

Tranjan highlighted the opportunity for Prince Edward Island not only to catch up with other provinces, but also to “take the plunge and just move towards a much tougher set of payday loan restrictions.” “.

Tranjan and Beaton both mention Quebec, which limits interest charges to 35 percent on an annual basis, a restriction that Tranjan says essentially regulates industry inactivity in that province.

“Quebeckers are doing very well” without payday loans, he said.

“It’s important to understand that payday loans don’t solve people’s problems, right? In many cases, you could just make those problems worse.”

CBC attempted to contact several companies that offer payday loans in the province, as well as the Canadian Consumer Finance Association, which represents the payday loan industry, but was unable to secure an interview.

In 2015, an industry spokesperson told CBC that it was misleading to calculate interest charges for payday loans on an annual basis because loans are only offered for periods of two or more. four weeks. In PEI, the maximum length is 61 days.

They said the loans cost more because it costs more for businesses to provide them.

Avoid “high cost” borrowing, depending on the province

The payday loan industry is regulated in PEI. by the provincial Department of Justice and Public Safety.

A spokesperson for the department told CBC via email “that in these times of stress and uncertainty, Islanders may seek financial assistance from a variety of sources.”

A number of financial supports have been announced in recent weeks, details of which can be found on the government’s website, the email explained.

“Whenever possible, it is encouraged not to seek sources of high cost borrowing such as payday loans, recognizing of course that everyone’s situation is unique to their situation,” said the e- mail.

The email explained that when Prince Edward Island’s legislation came into effect, the province’s cap rate for payday loans “was in line with a range of different cap rates set by other jurisdictions in Canada. the time. Many other jurisdictions have since decided to reduce the amounts that payday lenders can charge. “

The province said it was monitoring “developments in other jurisdictions for possible legislative changes here.”

The province also said it typically receives one to two complaints a year about payday loans, typically related to collection practices and overdue accounts, and had not received any complaints in the past six months.

COVID-19: what you need to know

What are the symptoms of COVID-19?

Common symptoms include:

But more serious symptoms can develop, including difficulty breathing and pneumonia, which can lead to death.

Health Canada has developed a self-assessment tool.

What should I do if I feel sick?

Self-isolate and call 811. Do not go to an emergency room or emergency care center to be tested. A healthcare professional at 811 will give you advice and instructions.

How can I protect myself?

  • Wash your hands frequently and thoroughly.
  • Avoid touching your eyes, nose and mouth.
  • Regularly clean the affected surfaces regularly.
  • Practice physical distancing.

More detailed information on the outbreak is available on the federal government’s website.

More COVID-19 Stories from CBC PEI

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