Cash Advance Loans

Alberta will join most other provinces and cap the interest rates that payday loan companies can charge customers.

The province also plans to regulate other aspects of the industry. That will include licensing payday loan businesses and requiring that they clearly disclose their rates, Service Alberta spokesman Eoin Kenny said yesterday.

Kenny said the changes to the Fair Trading Act, including details of the interest rate cap, are expected to be made by the spring.

"We are looking at taking the responsibility for setting the interest rates for payday lenders - setting a cap, or maximum rate they can charge," Kenny said.

"We recognize that there is need for improvements on how the payday industry is regulated. These are some of the most vulnerable consumers who use these services, and we want to determine the most practical and effective way of protecting consumers."

Critics say the payday loan industry has been gouging consumers by charging annual interest rates of up to 800%. Anti-poverty groups and political parties such as the federal NDP have accused the industry of preying on transients and people who live in low-income neighbourhoods.

Last spring, Alberta began a review that included about 170 outlets run by half a dozen different companies. A final report with recommendations is expected to be complete before Christmas, Kenny said.

Under the federal Criminal Code, it is illegal to charge interest rates that exceed 60%.

Last year, Ottawa passed a bill that gives provinces the option of regulating the industry if they impose a rate cap, but so far Manitoba is the only one that has announced details of limits.

The province's Public Utilities Board plans to cap rates at 17% for loans up to $500 starting this fall. Some payday loan companies plan to appeal that ruling in court next week, saying the rate is too low for their businesses to survive.

Kenny said Alberta is watching the Manitoba case and is also monitoring how other provinces are dealing with payday loans.

"We just want to get it right the first time. The major banks have gotten largely away from providing short-term, unsecured loans. We recognize there is a need for that, but we want to ensure that people aren't taken advantage of."

Ontario, B.C., Saskatchewan, Nova Scotia and New Brunswick have also announced intentions to cap payday loan rates, but haven't announced yet the maximum fees or charges they will allow.

Stan Keyes, president of the Canadian Payday Loan Association, said the industry wants to be regulated, but he warns provincial governments must set reasonable interest rate caps or it will drive some companies out of business.

Keyes said people who need payday loans will be driven underground if that happens.

Source : http://www.edmontonsun.com