GOVERNMENT INTRODUCES LEGISLATION TO REGULATE PAYDAY LOANS

The Government of Saskatchewan is proposing new legislation which would establish a comprehensive framework for the regulation of the payday lending industry and provide protection for borrowers who use payday loans.

The Payday Loans Act responds to the concerns of consumer groups and members of the industry about current lender practices, including the high cost of payday loans, inadequate disclosure of terms, excessive fees and unfair debt collection methods.

“Payday loans are a very expensive way for consumers to meet their temporary credit needs,” Justice Minister Frank Quennell said.  “However, there is demand for these short-term loans as seen by the tremendous growth in the industry.  It is important that we protect consumers who access these loans by putting appropriate regulations in place.”

A payday loan is a short-term cash advance in a relatively small amount that is to be repaid to the lender at the time of the borrower’s next payday.  In the last decade, the payday lending industry has grown substantially and is one of the fastest growing industries in Canada.

The proposed legislation will:

• require payday lenders to be licensed;
• allow maximum limits to be set on the costs of payday loans;
• prohibit a payday lender from charging a fee that is not provided for in the Act or regulations;
• allow a borrower the right to cancel a payday loan without penalty before the end of the business day following the date the loan was made;
• prohibit payday lenders from having more than one payday loan with the same borrower at the same time;
• prohibit payday lenders from taking any security on the loan;
• prohibit payday lenders from requiring a borrower to sign over future wages;
• prohibit payday lenders from making a loan contingent on the purchase of another product or service;
• allow limits to be set on the amount a lender can loan based on the borrower’s net pay; and
• require payday lenders to comply with collection practices set out in The Collection Agents Act.

This Bill includes investigation and enforcement provisions to ensure compliance by the industry.

Currently, the only legislation controlling the rates that can be charged on loans in Canada is section 347 of the Criminal Code.  This section makes it a criminal offence to charge more than 60 per cent interest per year.  Based on consultations with federal, provincial and territorial ministers responsible for consumer affairs, the federal government has introduced amendments to section 347 which will allow provinces and territories to set limits on the cost of payday loans as part of a comprehensive framework for the regulation of payday lenders.

This Bill will harmonize Saskatchewan’s payday loans legislation with the legislation that has been passed in Manitoba and Nova Scotia.

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For more information, contact:

Andrew Dinsmore
Justice
Regina
Phone: 306-787-8606
Email: adinsmore@justice.gov.sk.ca