New regulations have been announced at Saskatchewan concerning the short-term loans (commonly known as payday loans) which are expected to be enacted within six months.
The new rules indicate that the cost of borrowing cannot exceed 23 per cent of the principal.
The interest rate may however, climb to 30 per cent on a defaulted loan. Someone cannot borrow more than 50 per cent of the net amount of their next pay.
The province has implemented a $2,000 licensing fee per location for companies offering payday loans. The spokesperson for Saskatchewan Financial Services Commission had firmly stated that failure in compliance with the rule can lead to the company’s license being suspended or even revoked. “There can be terms of conditions added to their licenses that will restrict how they operate. In addition, there can be an administrative penalty that can be imposed on payday lenders.” He added
Peter Gilmer, an advocate for people with low incomes had pointed out that the payday loan industry needs more regulations. “Certainly, this does move towards some greater protections preventing excessive loans that get low income people into trap situations,” the spokesman for the advocacy group Regina Anti-Poverty Ministry said. Gilmer went on to say that he thinks it is “basically positive” even if the maximum allowable cost of borrowing is still too high. Saskatchewan implemented these rules following similar ones by the provinces of Alberta and B.C.
There are currently eight different payday loan companies operating in 40 locations throughout the province. These are typically used by consumers looking for quick cash to make ends meet between paycheques. The industry estimates that the average loan is for $280 which is then paid back in 10 days.