Consumers' group wants Manitoba to crack down on high-interest payday loans
Independent board asked to consider impact of further limiting how much a high-cost lender can charge
A group advocating for consumers wants the Manitoba government to clamp down on the payday loan industry.
The independent Public Utilities Board began hearing arguments Friday into a review of the charges and fees that consumers pay through payday loans.
The week-long hearing will specifically review a new cap on how much lenders can charge. The fee will be lowered to $14 per $100 loan, instead of the current $17 limit in Manitoba.
The new federal law will take effect on Jan. 1, 2025.
The board will also consider a proposal that restricts licensed lenders to advancing no more than 25 per cent of an borrower's net pay, rather than the present cap of 30 per cent, and will review the maximum fee that can be charged to cash a government-issued cheque, which is currently $3, plus 2 per cent of the cheque's face value.
Jennifer Montebruno, executive director of Community Financial Counselling Services, said the consumers' group will look at those issues during the hearing, but also the industry as a whole.
No review since 2016
She said some of the people getting payday loans face significant financial hurdles, and they need a path out of their hardships.
"What we're looking for is some action to respond to these pressing and persistent problems that are impacting consumers, so things like limited financial flexibility, limited choice and inadequate regulator protection on the industry means that we as Manitobans are being left behind," Montebruno said.
The province's regulations around payday loans and government cheque-cashing services haven't been reviewed since 2016.
The government has the authority to direct the Public Utilities Board to review the sector every three years, but the former Progressive Conservative government declined the opportunity in 2019 and 2022.
The current NDP government decided a review is overdue.
"Our government shares the concerns regarding payday lending rates and government cheque cashing fees, which is why we empowered the Public Utilities Board to review the rates in Manitoba," Finance Minister Adrien Sala said in a statement.
Montebruno said the consumers' coalition, which represents the Manitoba branch of the Consumers' Association of Canada, Harvest Manitoba, Community Financial Counselling Services and the Aboriginal Council of Winnipeg, hopes the province will help support alternative ways for people to get out of debt, aside from high-cost options such as payday loans and instalment loans.
For example, the group is recommending provincially run credit unions make a modest amount of low-cost credit available to anyone who opens a bank account.
"Instead of borrowing a loan that may charge you 59 per cent interest, you might have one that has 15 per cent [interest,] which might sound like a high interest rate to some of us, but would be a game-changer for that person's ability to be able to pay that debt off and move on to the next part of their life."
Individuals could also build a relationship with credit unions, "which then provides them with access to other resources and services that they can use to strengthen their financial outlook as a whole."
Association asks for pause
The Canadian Consumer Finance Association, which represents payday lenders, said in its submission to the Public Utilities Board that Manitoba shouldn't alter any fees or charges until the impact of the federal government's changes to the industry, such as the new cap on fees, can be assessed.
The organization said existing regulations around payday lenders have already forced some stores to shut down, and more will likely follow due to the new federal restrictions.
It describes payday loans as a "much-needed credit solution for individuals underserved by traditional banking structures."
"Over the past 15 years provinces have reduced the maximum rate that can be charged for payday loans. The reductions have resulted in an environment of extremely thin margins, pushing many payday lenders out of the market," the CCFA said in its submission.
The association didn't respond to a request for comment.
Chris Klassen, a lawyer representing the consumers' coalition, told CBC Manitoba's Up to Speed he hopes the province strengthens its regulations and expands them to more types of loans.
Manitoba's regulations only cover payday loans that are for less than $1,500 and for a term of less than 62 days. Any loan for more money or a longer term doesn't benefit from Manitoba's payday loan protections, he said.
The PUB will report to the government with its recommendations in six months. Sala said the province will review them.