Payday loan reporting shows substantial drop in costs for borrowers

Posted on: Staff Writer

From edition: November 2 2018 Strathmore Times

By Sharon McLeay Times Contributor

Sometimes the cost of living hits us right in the pocket. When that happens, many people turn to “payday loan” agencies for a quick solution until their pay cheque comes in.
The Alberta government wanted to know how many people used these loans and set out a reporting system to track their use. On Oct. 12, the province stated in a news release that in 2017, about $285 million was loaned by payday lenders to about 96,000 borrowers – almost $30,000 per borrower.
The province’s An Act to End Predatory Lending came into effect in November 2016. Costs for payday loan borrowers dropped, due to measures in the act, which deals with fixed fees, contingency fees, hourly rates, percentage fees and value-added fees. By reducing the cost of borrowing per $100, from $23 to $15, the move saved borrowers $10 million in borrowing fees.
“We know that life is better when it’s more affordable. That’s why we took swift action to protect borrowers, and this report shows that action is working,” said Brian Malkinson, Minister of Service Alberta, in the news release.
According to the 2016-17 report, Alberta has the lowest interest rates for payday loans across Canada. Lenders can lend each person a payday loan of up to $1,500 that is paid back in 62 days or less.
All fees are required to be included in the cost of borrowing, so weird fees can’t be snuck in later. It also allowed loans to be paid through instalments and payday lenders are not allowed to charge for cashing cheques.
In the meantime, banks continue to be allowed to charge transaction fees, which to some seems contrary to the ruling laid out for payday lenders. According to the Canadian Bankers Association, over $655 million was charged in fees from bank-owned ATMs in 2017. A comparison of interest rates on credit cards by Scotiabank shows banks charge interest rates anywhere from $12.99 to $19.99 per hundred dollars per year, with cash advances charging $12.99 per cent to $22.99.