Crack down on payday loan companies

Wed, 02 Apr 2008

Draft legislation was introduced in Ontario this week aimed at protecting the economically vulnerable from payday loan companies .

If successful the new law will cap the total cost of borrowing and protect vulnerable consumers by making companies be subject to inspection and enforcement action. Practices such concurrent back to back loans will also be outlawed. Other Canadian provinces have also passed similar laws.

Ted McMeekin, Government Services Minister said, "Those are the so-called roll-over loans where borrowers take a loan on a loan and are saddled with exorbitant interest rates and a damaging cycle of debt horror stories."

Companies will have to make annual contributions to a public education fund which will help consumers be able to make informed decisions.

McMeeking added, "We committed to beginning the long, hard process of addressing poverty in Ontario. We cannot and we will not allow people to take further advantage of those most economically vulnerable consumers in our society."

The Canadian Payday Loan Association (CPLA) said that many of their customers do not fall into that category. Their research shows that customers have incomes equal to the general population of Ontario.

Stan Keyes, president of an association that represents eight payday loan companies in Ontario said, "I take exception with the labelling of payday loan customers as vulnerable and poor.

"(Our research) demonstrates that customers are well educated, that they're responsible borrowers, that they have other credit options, that they're knowledgeable about the product."

According to Keyes the association, formed in 2004, has been demanding legislation similar to what has been introduced. He also acknowledged that there are non-member lenders who take advantage of customers.
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