The Nova Scotia Utility and Review Board has cut the maximum cost of short-term payday loans from $31 to $25 per $100 borrowed. The decision, released today, means Nova Scotia continues to allow payday lenders to charge the highest regulated rates in the country. A cost of $25 per $100 borrowed represents an annual rate of more than 650 percent.
Regulated payday loan rates vary widely across the country from $17 per $100 in Manitoba; $21 per $100 in Ontario and $23 per $100 in BC, Alberta and Saskatchewan. So far, the three other Atlantic provinces have not regulated payday loan rates. During its hearings last fall, the Board was told that payday lenders in Newfoundland, PEI and New Brunswick charge up to $25 per $100.
David Roberts, the Halifax lawyer who represented consumers during the hearings, says the decision is an improvement even though it will not reduce maximum rates to the $21 per $100 that he recommended.
"Twenty-five dollars is better than $31, I think that’s clear," Roberts says. "Having said that, we still have the highest regulated cost in the country and I guess we would have liked to have seen the overall cost go lower."
Roberts adds it would be fair to say that the Board does not seem to believe payday loan users are economically disadvantaged and need further protection from high loan rates.
"Our evidence was that a significant proportion of people who took these loans did so because they were economically disadvantaged," he says. "For that reason, it’s important that these vulnerable people be protected as much as possible."
See previous Coast cover story, The poverty machine
In today's decision, the Board also rejected the consumer advocate's recommendation that payday lenders not be allowed to issue a new loan on the same day that a previous one is repaid. Instead, the Board recommends that payday lenders be required to file information every year on the percentage of borrowers who take out a new loan within 24 hours of paying off a previous one.
During its hearings in November, the Board was told that a typical customer of The Cash Store takes out between three and six loans in a period of a few months. That means that at the Board's new maximum rate, someone who borrows $300 for 14 days would be charged $75 in interest and other fees. Six $300 loans would cost a total of $450 in fees spread over 12 weeks.
Meantime, the Board says it is "very concerned" that online payday lenders are not regulated in Nova Scotia. It says it will recommend that the province move to close this "regulatory gap" by including Internet lenders under the provisions of the Consumer Protection Act.
Finally, the Board says it will review the payday loan regulations in three years.