The blogosphere has been a awash with articles concerning Payday loans in the US. Several states seem bound and determined to kill the industry. Ohio for example has passed legislation which the governor is expected to ‘rubber stamp’ capping the interest rate at 28%. This effectively means that the Payday lender will make pennies for every $100 loaned. Clearly this is not viable and the industry will be forced to move out of the state, this will result in something like 6000 jobs lost, and great hardship for anyone that needs a short term (14 day loan).

Similar legislation is being considered in South Carolina, and several other states.

I was curious to find out what our northern cousins in Canada were approaching the industry. I was lucky enough to get some time with Nathan Slee who explained a little about the Canadian situation.

Hi Nathan, thanks for taking some time out to talk with Blogger News. Maybe you could tell us a little anout your involvement with the industry?

I represent BC’s payday lenders through the BC Payday Loan Association (www.bcpla.ca). Myself and Kevin Isfeld are the co-representatives of that association – although Kevin has been the public face to-date. I have also done some work to put forth a common voice for Canada’s online payday lenders.

As I understand it, Canada is somewhat like the US in so far as the Provinces are deciding the issue rather than central government.

My blog (Advance View) entries give most of the background that I feel is relevant to what is going on in Canada right now. I think it is no secret that five provinces (BC, SK, MB, NS, NB) have passed what is referred to in the industry as enabling legislation and Ontario’s bill is at second reading. All of the indications have been that these provinces will set rates that enable a viable and competitive payday loan market. Some of my notes from the debates on the Ontario bill shed some light on the philosophy of the Ontario Liberals. The last major province that we are waiting for is Alberta and they have given every indication that they will follow suit with the rest of the enabling provinces.

Quebec has followed the route of Ohio and others in setting a rate so low that payday lenders cannot operate. There is some interesting data on how credit unions have stepped up in that province in the absence of payday loans (or perhaps more accurately, how they haven’t). I will have a blog post with more info about this in the next week or two.

Of the enabling provinces, Manitoba was the first to set a rate cap and they have set what is expected to be the low end of the rate caps that we will see in Canada.

Why the big difference between the two countries approach to the industry?

I think the difference between the Canadian approach and the American approach is that the issue is far less politicized here so governments have taken a more pragmatic approach to regulating the industry. A joint federal/provincial body called the Consumer Measures Committee studied the industry for over ten years before we got to the point of regulations so there has been a coordinated effort to understand the product and how it fits within the credit options that are available to Canadians.

Nathan I want to thank you for your input. Maybe some of the States considering legislation should take a long hard look at our Northern Cousins.

Simon Barrett

http://zzsimonb.blogspot.com
 

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