Changes to the way payday loan companies conduct business in Manitoba were outlined on Tuesday and will take effect on October 18, 2010.
The provincial government has introduced changes to Manitoba’s Payday Loans Regulation, which were examined earlier this year.
The new maximum rate that can be charged for a payday loan is $17 per $100. The maximum amount of a loan can only be 30 percent of a person’s next net pay. Manitoba’s rate is the lowest in the country among provinces that effectively allow payday loans.
Here’s how these new rates compare to the rest of Canada:
(Source: Province of Manitoba)
“These changes will offer consumers protection from high interest rates, unfair business practices and a cycle of debt that many people have trouble getting out of,” said Family Services and Consumer Affairs Minister Gord Mackintosh. “We recognize there is a demand for these types of loans and have designed the legislation to ensure the strongest possible level of protection for consumers.”
Other regulations include making sure the borrower can make sense of the loan agreement, which has to be disclosed in a clear and understandable way.
- All fees are to be included in the cost of credit, whether or not they are optional;
- The maximum fee for a replacement loan is five per cent;
- Lenders, including brokers, must be licensed and bonded;
- Internet lenders will be regulated, ensuring they operate with the same rules as a lender with a storefront location;
- Written consent is required for a lender to verify a borrower’s employment; and
- Lenders cannot make unauthorized withdrawals from a borrower’s account or use rewards or incentives to entice borrowers to get a loan.
The changes come after consultations with the Consumers’ Association of Canada (Manitoba), Manitoba Society of Seniors, Winnipeg Harvest, the Canadian Payday Loan Association and a number of payday lenders.