Category: Canada

  • Canada’s payday lenders have it pretty good

    Most of Canada’s provinces have capped rates. The lowest cap is $17 per $100. That’s pretty good if you’re a lender.

    Compared to the US market, Canada is pretty small. According to Wikipedia, Canada has about 35M residents compared to close to 325M for the United States.

  • British Columbia new payday rules

    The new rules are effective Nov. 1st in British Columbia. Compliance and enforcement will be administered by Consumer Protection BC, a not-for-profit organization that operates at arm’s length from government.

    Here are the rules in a nutshell:

    • Practices that unreasonably increase the borrower’s debt load, including rollovers that require borrowers to pay significant extra fees for extending the time to pay a loan.
    • Requesting an assignment of wages, or collecting from a borrower’s employer.
    • Charging more than 23 per cent of the amount borrowed in interest and fees.
    • Lending more than 50 per cent of a borrower’s take-home pay or requiring repayment before the borrower’s next payday.
    • Operating unless licensed by Consumer Protection B.C.

    You can read more at the Canadian government website.

  • The Cash Store acquires 10 store chain

    The Cash Store bought Affordable Payday Loans, a 10 store operation in Ontario and Edmonton for an undisclosed amount.

    Three of the locations will be consilidated with nearby Cash Store or Instaloans branches.

    You can read the full article in RTT news.

  • Dollar Financial settles class action suit in Canada

    Here are the facts: it includes $27.5 million in cash, $43 million in forgiven debt and $30 million in credits – is approved by the court, the average payout will be about $380.

    Lawyer Harvey Strosberg played it cool in this statement: “We think it’s fair and reasonable and in the best interest of the class members,”.

    Yah, right Harvey. You just got the biggest payday of your life.

    Dollar’s CEO Jeff Weiss said in a statement: “While we admit no wrongdoing … this settlement will allow us to avoid the continuing substantial litigation expense that would be expected.”

    You can read more details in this article titled “Payday loan victims get $100 million.“

  • A very sticky class action suit

    Money Mart and Dollar Financial Corp are being sued for allegedly charging an illegal check cashing fee that violated Canada’s small loan laws. The class action is looking for $185M by 264,000 former borrowers for check-cashing fees and interest plus punitive damages between 1997 and 2007.

    Vancouver based Money Mart is claiming to only have a received a small percentage of the proceeds, siting the franchise owners as the main beneficiaries of the deal. They also contend that many fees could not be considered as interest. The trial is scheduled for May 4th.

    I’m a bit confused b/c I was under the impression that payday loans in Canada are not illegal.

    You can read the full article at Bloomberg.

  • A Note on Capping Rates

    In Ontario they’re debating about capping rates on payday loans. On the surface this may seem like a good thing, but my opinion is that it disables market forces and will effectively never make price competition a factor.

    I’ve felt that most regulation is aimed at making payday loan companies less profitable, when they should really focus on educating consumers.

    You can talk about usury, but there is a cost of doing these loans that isn’t profitable when charging double digit interest rates alone.

  • Finally, an independant and reputable payday loan report.

    This is an older post that’s been updated:
    “Instead of regulating prices charged on small, short-term loans, the authors argue that increasing competition will drive prices down” says Signe-Mary McKernan and Caroline Ratcliffe. This new report by the Urban Institute finds that if payday advances are eliminated they “could be replaced by alternatives that make families even worse off.”

    Now, guess who funded this report? They’re not payday lenders. This study was financed by the Charles Stewart Mott Foundation. I think it took a lot of guts. This foundation is committed to supporting projects that promote a just, equitable and sustainable society, since 1926.

    Nobody claims that a payday loan is THE solution, but it can be A solution for some people. This is about choice. This report is saying, don’t get rid of it; lets just get it right.

    Just like no one likes negative loan amortizations or $4 gallon of gas. Imagine if the government stopped selling us fuel when the price goes over $4? It’s just not the solution and neither is making payday loans unprofitable or making them go away.

    Consumer groups should just face the big, pink elephant in the room. There is a huge credit gap in our financial systems. They need to work to fill it and not eliminate it.

    These consumer groups should be empowering peoople, not treating them like children.

    Here is the full report. Please send it to your legislators.

  • Canada’s working with lenders

    Cananda is systematically placing caps on payday loans. The average cap is around 25%, which in my opinion is pretty reasonable for the lender.

    Nova Scotia is in the process of setting a cap and British Columbia will probably be next. Manitoba recently set it’s cap at 17%.

    Apparently, payday lending is a billion dollar industry in Canada.

    Stan Keyes, president of the Ontario-based Canadian Payday Loan Association, said he’s hopeful Victoria will come up with a cap that is fair to both consumers and the industry.