TRURO — Payday loan customers rejoicing over a proposed rate cap will have to wait at least a few more months before they can celebrate in earnest.
Nova Scotia’s Utility and Review Board has set out new guidelines for the province’s payday loan companies which cap the maximum interest rate at $31 on $100 of borrowing (fees and interest included). However, the board’s recommendations still require cabinet approval before going into effect.
“The rate is confirmed,” said Deborah Bayer, spokeswoman with the Department of Service Nova Scotia and Municipal Relations. “We just don’t know when (it will be approved). We are working towards the fall.”
The board’s recommendations were drafted following complaints from consumer groups opposed to the rates charged by some companies. The groups have long accused provincial governments of not doing enough to prevent the poor from being trapped by huge debt loads, created by some payday lenders who charge rates and hidden user fees that amount to more than 1,000 per cent annually.
Truro resident Linda Evans, a customer with The Cash Store, welcomed the news until she called yesterday and learned the new rate was not yet in effect.
“I was so excited,” she said, until being told the capped rate is not yet applicable.
“I think if it’s gone as far as putting it in the (news)paper then it should be implemented today,” she said. “It just amazes me because I have done this for the past three or four years and it’s getting to the point where it is just scandalous.”
Evans said her minimum rate is $38 on a $100 loan and even higher if she does not pay it off right away.
However, Michael Thompson, vice-president of The Cash Store, expressed surprise at that information because he said the company’s base rate is $25 on a $100 loan.
Although he could not comment on a specific case without seeing the details of the contract, Thompson said a Cash Store customer who borrowed $100 for a 10-day period would be required to pay $26.60, when the company’s 59 per cent interest rate is factored in.
“At any case, our rates would never add up to $38 per $100.”
And Thompson said his company does not plan to hike its rates even after the cap is approved.
“We’re happy with the (market-based) approach that they took and we’re happy with the rate that they set,” he said. “Our recommendation was that they set a rate that’s high enough to make sure that there’s competition in the market and not set a rate that is so low that it would force everybody to the rate cap.”
Source: http://www.trurodaily.com/index.cfm?sid=158759&sc=68
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