By Dori Modney (@Dori_Modney on Twitter)

Alberta Officially has Lowest Payday Lending Rate in Canada

Aug 2, 2016 | 10:59 AM

EDMONTON:   As of Monday (August 1st), Alberta has the lowest maximum payday borrowing rate in the country, reduced from $23 for every $100 borrowed to $15 per $100. All fees related to a payday loan must be included in the cost, which puts an end to hidden fees and charges. Also, payday lenders will no longer be able to charge a fee to cash a payday loan cheque, solicit directly by email or phone, or offer a loan when another is outstanding.

Lethbridge City Council had backed the changes and Mayor Chris Spearman was glad to see the legislation.

“I applaud the provincial government for taking bold action to end predatory lending practices in Alberta. It’s a critical step that supports our local efforts to reduce poverty in Lethbridge and prevent citizens from falling into a crushing cycle of debt.”

According to Mayor Spearman, Council backed the legislation after noticing a proliferation of payday loan vendors in the city.

“Over the last five years they just seem to have mushroomed and when we looked at the fact that we have one of the highest rates of child poverty in our city, the last thing we wanted was our vulnerable populations having to deal with high costs of money and having the associated financial stress.”

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“For them (low income citizens) to resort to high-cost credit, they get involved in a cycle of poverty – the role of borrowing and having to re-borrow and pay back at high costs.  What that does is drain vulnerable people in our city of their opportunity to get ahead and the money that they pay, ultimately leaves the city,” said Spearman.

Service Alberta Minister, Stephanie McLean, said that the government is responding to Albertan’s request to increase consumer’s financial protection and well-being.

“The legislation will have more financial literacy around payday loans, similar to the way that groups working with the casinos have their educational programs around gambling.”

Before the act came into force, the government found that many customers relying on payday services would take upwards of eight loans out per-year and subsequently pay off each loan by requesting a new loan.

The changes are part of the first phase of An Act to End Predatory Lending legislation, which took effect Monday, and more changes will take effect later this year. Financial institutions and community groups will also be encouraged to offer alternative, short-term loans that are fair and accessible.

By reducing the cost of borrowing, it’s expected the new legislation will save low income Albertans hundreds of dollars in debt payments.

Among the elements of the legislation is the following:

— A payday loan is a loan of $1,500 or less that has a term of 62 days or less.

— More than 30 payday loan companies currently operate more than 220 branches in Alberta.

— Payday loans became regulated in Alberta on September 1, 2009.

More information on the new legislation can be found on the Government of Alberta website