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The Liberal chair of the Commons finance committee, MP Wayne Easter, is trying to change to regulations surrounding payday loans, according to Blacklock's Reporter, who yesterday referred them 'ungodly.'
Interest rates over 60 percent were made illegal by the Criminal Code, but in 2007 Parliament made an exemption for payday lenders from the usury law and the provinces were left to determine their own regulations from there. The Parliament's usury law was written in 1978 and has not been rewritten since.
Easter made the remarks after new data revealed that eight percent of Canadian single parents are borrowing money at interest rates that could be considered highly unfair.
“What’s the regular interest rate on payday loans? It is desperately, desperately high,” said MP Wayne Easter (Malpeque, P.E.I.): “You pay high fees. The cost may be equivalent to an interest rate of 500 or 600 percent. That’s usury. That’s ungodly. I know they’re legal but, man, we’ve got to do something about that.”
Interest on a two-week payday loan can be charged at the equivalent of 800 percent annually, for example a loan of $100 could be charged at $31, as determined by the Senate banking committee during the 2018 hearings.
A 2019 federal Financial Capabilities Survey found that 2 percent of Canadians are payday borrowers.
“But then you see that percentage rising for specific vulnerable subgroups,” said Ruth Stephen, research director for the Financial Consumer Agency of Canada. “For example, four percent of low-income households use payday loans,” continued Stephen. “It’s eight percent of Indigenous people and three percent of individuals with lower educational attainment, and eight percent of single parents.”
“I’m absolutely shocked there’s eight percent of Indigenous people and eight percent of single parents using payday loans,” said Chair Easter. “I never realized it was anywhere near there.”
The last Parliament saw the lapse of a private Liberal bill, entitled bill S-237 An Act To Amend The Criminal Code, which was designed to cap payday loans and all interest at 45 percent. Unfortunately the bill failed, as have similar bills in the past such as in 2005 and 2015.
Some courts have ruled against lenders as the payday rates have become so high. For example, in 2019, the Alberta Court of Queen's Bench ruled against a lender over their 164 percent loan, under the Unconscionable Transactions Act. The court called the interest rate "grossly disproportionate."
In Ontario, using the provincial Unconscionable Transactions Relief Act, a Small Claims Court ruled against a 548 percent interest loan in 2018.
Similarly in 2019, British Columbia Provincial Court called a pawnbroker's 300 percent loan "a criminal rate." The borrower pawned an accordion for $500 at an interest rate of 25 percent monthly, later selling the instrument for $3,900. The court ruled against the pawnbroker, saying that the borrower was obviously "desperate for money."