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Court victory for payday lenders
The Doer government has suffered a big setback in its attempt to regulate the payday loan industry in Manitoba.
A Manitoba Court of Appeal decision released today said payday lenders were unfairly treated by the province’s Public Utilities Board (PUB) when it set lending rates last spring for the payday companies. The PUB was acting on a move by the province to regulate the industry, which has been tarnished by high lending rates.
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The court decision opens the door for The Cash Store Financial Services to argue the PUB acted beyond its scope in setting rates. The April 4 decision by the PUB capped the maximum cost of credit at 17 per cent for loans up to $500; 15 per cent for $501 to $1,000; and six per cent for loans between $1,000 and $1,500.
Payday loan companies cried foul saying the lower rates would drive many of them out of business.
Justice Alan MacInnes agreed. He said in his written decision there is a possibility the PUB’s decision could force many in the quick- loan industry to close their doors.
MacInnes said a full appeal of the PUB’s ruling should be heard. A date for the hearing has not been set.
In the meantime, MacInnes said the PUB’s decision on the rates should be put on hold until the case is fully argued in court.
Manitoba is the battleground for the future of the payday loan industry in Canada as provincial governments coast-to-coast are watching what happens as they too want to bring in rules regulating the industry.
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7 Comments
Posted by: my2c3nts
January 7, 2009 at 10:41 PM
To accuse the industry of targeting the "poor" is incorrect! Many people from different social classes use these companies. Yes, they include doctors, nurses, lawyers, police officers and firefighters...are they classified as "poor"? We need to understand that they are providing a service. These payday loan companies are taking high risks when lending out money. For most, taking out a payday loan is their last resort...their bank denied them an increase on their overdraft/credit card(s) or personal loan. Yes, the rates are definitely high and they should be. These loans are issued without credit checks or collateral. This leaves the company with a 50/50 chance of receiving their money back.
Posted by: jcc
January 7, 2009 at 9:58 AM
I do think the rates should be capped, however, the rate cap announced by the Doer government is rather low considering the amount of risk these lenders have. Perhaps a 20% cap would be better. They do prey on the poor and have to remember that also. Giving loans with no questions asked is not a good practice. Sometimes people just need a hand getting back on track after having problems such as lay off from work, illness, etc.
Posted by: thebanana
January 7, 2009 at 8:56 AM
Well, the decision is hardly a "blow" to the Doer government. It ain't over till it's over.
Posted by: rosencrentz@hotmail.com
January 7, 2009 at 6:19 AM
So our government thinks 17% is the maximum interest rate for payday loans? Did they forget to check what The Bay, Sears, Canadian Tire, and all the Visa and mastercard's are charging??
Posted by: Titus
January 6, 2009 at 7:43 PM
Yeah once they are out of business the poor will get their payday loans where they used to...organized crime. I think organized crime's interest rates are slighly higher than PUB allows.
Posted by: macho
January 6, 2009 at 5:35 PM
It's hard to have a lot of sympathy for an industry that preys on poor people. If you can't find an ethical way to run your business, time to find a new business model.
Posted by: Kinguni
January 6, 2009 at 3:51 PM
"Payday loan companies cried foul saying the lower rates would drive many of them out of business. Justice Alan MacInnes agreed. He said in his written decision there is a possibility the PUB’s decision could force many in the quick- loan industry to close their doors." And what's wrong with that? They prey upon the poor and there are far, far too many out there.