The exorbitant costs of so-called payday loans are going to be reined in starting next year in B.C.
Borrowing rates of high-cost, short-term cash loans – payday loans – will be lowered under regulations coming into effect Jan. 1, 2017, the province announced Wednesday, Sept. 21.
The government also announced plans to consult with stakeholders to help determine how best to further strengthen consumer protection from high-cost alternative financial services, and whether more affordable options exist.
Maximum allowable charge for a payday loan in B.C. will drop from $23 to $17 for every $100 borrowed, making it the second-lowest rate in Canada.
The limits build on regulations the province implemented in 2009, before which time borrowers paid whatever the lender charged – as much as $30 per $100 borrowed. Borrowers also had few, limited protections and little recourse against harmful lending practices, such as rollovers, extended repayment terms, disclosure requirements among others.
Payday loans – along with other alternative financial services, such as instalment loans, rent-to-own plans, cheque-cashing and vehicle title loans – are expensive for consumers. The 30-day consultation with credit counsellors, advocacy organizations, loan providers and other stakeholders will gather input on a wide range of topics, including: consumer education and information, community partnership opportunities, regulations to further protect borrowers, and innovative lower-cost loan products to shift people away from more expensive options.