It’s high time the Yukon government followed the example of other Canadian jurisdictions and regulated payday loans by passing consumer protection legislation and setting maximum allowable fees for these types of loans, says Yukon NDP leader Todd Hardy.
"Short-term loans usually come with a very high price," Hardy says. "We need to ensure that borrowers are protected against high fees and industry practices that contribute to the credit spiral that can entrap borrowers."
The limits set by Manitoba are significantly below the 60-per-cent interest rate these companies can currently charge Yukoners. The province also requires these lenders to warn borrowers about the high costs of payday loans.
Manitoba also prohibits payday loan companies from charging additional fees when loans are renewed, extended or replaced by a new loan unless these additional fees are authorized by an arm’s-length regulatory board.
"None of these protective measures are available in the Yukon, so the interest rates these companies charge can easily exceed 1,000 per cent, when calculated on an annual basis," Hardy adds. "A growing number of jurisdictions across Canada are saying this is not right and intervening. The Yukon government should do likewise."
Among other things, the Manitoba legislation also:
· Defines a payday loan as a loan for $1,500, or less and with a term of 62 days or less;
· Prohibits the practice of signing over future wages or taking property as security for payday loans;
· Gives people the right to cancel a loan without penalty within 48 hours;
· Sets the maximum cost of credit at six per cent of value received for loans to people on social assistance or employment insurance, or for loans in excess of 30 per cent of net pay.
Other jurisdictions taking advantage of changes to Canada’s Criminal Code in May 2007 that allows provinces and territories – for the first time -- to regulate payday loan providers are Ontario, British Columbia, Saskatchewan, Nova Scotia and New Brunswick.
"Once again, the Yukon is lagging behind what’s happening elsewhere, and as a result Yukoners are paying the price in the form of usurious interest rates when they need to make emergency short-term loans," Hardy says.