Government Services
June 16, 2010
Provincial Government
Will Not Regulate Payday Loan Companies
After significant research and careful
consideration, the Provincial Government has decided not to regulate
payday loan companies operating in Newfoundland and Labrador. Rather, it
will uphold the maximum interest rate set out in section 347 of the
Criminal Code of Canada, which is 60 per cent per annum, as the
maximum rate to be charged by payday loan companies.
"As a government, we could not in good
conscience implement regulations that potentially could result in annual
interest rates equating to nearly 550 per cent being charged to
consumers in our province," said the Honourable Kevin O'Brien, Minister
of Government Services. "By putting in place provincial regulations for
payday loan companies that permit annual interest charges above 60 per
cent, we would not be protecting consumers' best interests. We do not
want individuals being gouged or putting themselves more in debt and
having a hard time catching up because of high interest rates for these
types of short-term loans. We have reviewed the terms and conditions
relating to maximum interest rates outlined in the Criminal Code of
Canada, as well as regulations of other provinces and territories
for payday lenders, and have decided that payday loan companies in this
province will continue to be subject to section 347 of the Criminal Code
of Canada."
Section 347 of the Criminal Code of
Canada makes it a criminal offence to charge more than 60 per cent
interest per year which would work out to payday lenders not being able
to charge more than $2.30 per $100 for a 14-day loan. If all charges
including interest and any fees charged as a condition of the loan
exceed this limit, the payday loan companies will be in contravention of
the Criminal Code of Canada. The lowest cost of borrowing
currently allowed by provinces which regulate payday loan companies is
$21 per $100 borrowed for a 14-day loan. This represents an annual
interest rate of 547.5 per cent. For provinces and territories that wish
to regulate payday lenders, amendments were made to the Criminal Code in
2007 to allow payday lenders to operate legally under a number of
conditions. One of these conditions is a province's willingness to enact
regulations.
"This government has made significant
strides over the last several years to reduce poverty in our province,"
said Minister O'Brien. "Our Poverty Reduction Strategy was put in place
with the goal of Newfoundland and Labrador becoming the province with
the lowest poverty rates in the country within 10 years from the launch
of the strategy. Developing a set of regulations that would permit an
annual interest rate greater than 60 per cent would be
counter-productive to the great work being carried out under this
strategy."
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Media contact:
Vanessa Colman-Sadd
Director of Communications
Department of Government Services
709-729-4860
vanessacolmansadd@gov.nl.ca
2010 06 16
3:00 p.m.
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