New maximum interest rates for payday loans and additional consumer protection measures will take effect Oct. 18, Family Services and Consumer Affairs Minister Gord Mackintosh announced today.
"These changes will offer consumers protection from high interest rates, unfair business practices and a cycle of debt that many people have trouble getting out of," said Mackintosh. "We recognize there is a demand for these types of loans and have designed the legislation to ensure the strongest possible level of protection for consumers."
The proposed changes to Manitoba’s Payday Loans Regulation were announced earlier this year. Now the federal government, which has authority to set interest rates, has issued an order to allow Manitoba to set rates for payday loans. The new maximum rate that can be charged for a payday loan is $17 per $100. The maximum amount of a loan can only be 30 per cent of a person’s next net pay. Manitoba’s rate is the lowest in the country among provinces that effectively allow payday loans.
Additional regulations include:
– terms and conditions in loan agreements must be disclosed in a way that is clear and understandable to borrowers;
– all fees are to be included in the cost of credit, whether or not they are optional;
– the maximum fee for a replacement loan is five per cent;
– lenders, including brokers, must be licensed and bonded;
– Internet lenders will be regulated, ensuring they operate with the same rules as a lender with a storefront location;
– written consent is required for a lender to verify a borrower’s employment; and
– lenders cannot make unauthorized withdrawals from a borrower’s account or use rewards or incentives to entice borrowers to get a loan.
These changes result from consultations with stakeholder groups like the Consumers’ Association of Canada (Manitoba), Manitoba Society of Seniors, Winnipeg Harvest, the Canadian Payday Loan Association and a number of payday lenders, the minister said.