The payday loan outfits are the convenience stores of the banking industry.
If you need something fast and the grocery store is too far away or closed, you pay a little more for the convenience factor: the store is open, it’s closed, and you can get what you want right away.
This is what payday loans provide. It’s a quick source of cash if you’re a little light in the wallet for something you need right away, and you don’t have to go through a lengthy approval process for something you want. might not qualify anyway.
But these outlets don’t just charge a little more. The small size of the loans obscures this fact, but the cost of this service is way over the extra 50 cents you pay for a bag of crisps at Needs.
Payday loan operators in Nova Scotia charge $ 22 over two weeks for every $ 100 borrowed. If you calculate that over a year, that represents an interest rate of over 500%. Consider this the next time you complain about credit card rates.
This rate is among the highest in Canada, something the province’s Utilities and Review Board is looking at when examining the rules surrounding the industry.
Nova Scotia and British Columbia are the only provinces that require these operations to report annual statistics to the province as a condition of their license.
Earlier this month, hearings on the industry were held and the board heard from Michael Gardner, a consultant who prepared a 22-page report comparing practices in Nova Scotia for consumer advocate David Roberts.
Gardner said there are good reasons to lower the fees on these loans. Lower fees appear to support the industry in several other provinces. It also recommends lowering the interest rate penalty for default on these loans.
Gardner’s recommendations make perfect sense. Final reports are expected to be tabled with Council by mid-October.
The NDP got into the debate this week by introducing a bill that would allow credit unions to provide a similar service at lower fees.
Like most opposition bills, it is probably doomed to fail, but at least it offers alternatives.
NDP MP Susan Leblanc told Francis Campbell of The Chronicle Herald that the bill contemplates offering “much lower interest rate microloans that would be offered through the credit union system.”
Since the province regulates both credit unions and payday loans, it could consider this option, at least as a pilot project. If little competition for these loans enters the market, payday loan operators may have to lower their rates, even if the province does not force them to do so.
NOTE: This editorial has been edited to reflect the payday loan award recommendations to Michael Gardner.