Provincial authorities have been hampered in their prosecutions of payday loan abuses because they have few legal tools other than Section 347 of the Canadian Criminal Code that deems annual interest higher than 60 per cent to be illegal. The Government of Manitoba has been pushing the federal government to amend the criminal code so that the payday loan industry would be exempt from the 60% interest rate, and become subject to fees and consumer protection mechanisms regulated by individual provincial governments.
The payday loan industry has received much criticism for their near usurious interest rates. Last year, an Ottawa judge in small claims court ruled that two payday loan companies suing clients who had defaulted were exploiting the vulnerable and charging interest rates that were “unconscionably usurious.” In one of those cases, a loan of $280 rose with interest and penalties to $551 in a month, indicating an annualized rate of more than 2,000 per cent. Despite his harsh criticism, the judge ruled that the companies were entitled to repayment, though only the actual amount their clients had borrowed.
The Canadian Payday Loan Association, a group that represents the payday loan industry has come out in favour of government regulation.
More information in this Vancouver Sun article.
For most people borrowing money is not the way they would choose to go IF they had a choice; for people with bad credit it’s a double nightmare.It can require a great deal of paperwork and turn into an embarrassing situation. Thus, consumers prefer payday loans to face small, unanticipated expenses while avoiding costly bounced-check fees and overdue payment penalties.
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