FRANCAIS

March 13, 2006

Payday loan companies would be required to operate within a comprehensive regulatory framework under amendments to Manitoba’s Consumer Protection Act introduced today by Finance Minister Greg Selinger.

“Short-term loans usually come with a very high price,” said Selinger. “We want to ensure that borrowers are protected against high fees and industry practices that contribute to the debt spiral that borrowers can encounter.”

The amendments would require the company be licensed and bonded and that borrowers receive warnings about the high cost of the loan. Maximum cost of credit that lenders could charge for payday loans would be set by an order made by the Public Utilities Board (PUB).

“By requiring the PUB set the fees for payday loans, we are providing a transparent process that will permit borrowers, community groups and the industry to be heard in a public forum,” noted Selinger.

The proposed legislation would also prohibit additional fees when loans are renewed, extended or replaced by a new loan unless these additional fees are authorized by the PUB.

The practice of signing over future wages and title loans would also be prohibited under the new requirements. Lenders would also have to inform borrowers in writing that the loans are high-cost. Borrowers would have the right to cancel a loan without penalty within 48 hours.

The proposed legislation would also give the Manitoba Consumers’ Bureau the right to access licensed premises to inspect the operations and make copies of records. If there is evidence that payday loans are being offered through unlicensed premises, the Consumers’ Bureau would also have the right to access and inspect that operation.

Under the proposed amendments, the bureau would also be able to suspend an operator’s licence, call in the bond or take other enforcement action under the act if the operator fails to meet operating requirements.

Under the Constitution, the federal government has responsibility for interest. Section 347 of the Criminal Code establishes that interest rates over 60 per cent are criminal. Interest and administrative charges typical for small-sum short-term loans provided by payday lenders generally exceed this amount.

Recognizing that there is a strong consumer demand for this type of service, the province has requested an amendment of the Criminal Code to allow a province to regulate the charges associated with payday loans. The province has proposed these be defined as loans for $1,500 or less and for a term of 62 days or less.

When federal amendments to the Criminal Code are in place, public hearings would be held by the PUB to allow consumers, community groups and business to make suggestions about the fees. PUB orders setting fees to be charged for payday loans would follow the hearings.