A federal bill to curb payday lenders has a loophole that would allow them to charge up to 365% interest, according to the department of Finance. . Credit cards .This clause in the bill has been described as “inexplicable” by a senator, according to Blacklock’s Reporter..“That does target vulnerable Canadians mostly,” said Sen. Jim Quinn (NB). .“Why wouldn’t we consider having a consistent application of the criminal rate? I am at a loss as to why we are not better protecting those most vulnerable.”.Bill C-47 the Budget Implementation Act lowers the maximum interest rate charged on most loans from 60% a year to 42%. However, it allows payday lenders to charge up to $14 on $100 typically loaned monthly or biweekly, the equivalent annual interest rate of 365%..Quinn raised concerns about the exemption during a Senate Legal and Constitutional Affairs committee meeting..“The annual percentage rate on $14 per $100 is still a very high rate, 300% or more,” said Quinn. .“That’s a very high rate. I’m wondering why.”.Attorney General David Lametti defended the exemption. .“There is a sad necessity for a lot of the payday loan operations to make these kinds of monies available,” said Lametti. .“There is a higher risk involved.”.“Shouldn’t vulnerable Canadians be better protected?” asked Quinn. .“That’s a fair point,” replied Lametti..“The opposite is also true if they don’t have access to that money,” said Lametti. . MAID David Lametti .“There’s a balance there. If they don’t have immediate access to that money, they also don’t get food. It’s a lousy situation. It’s a true dilemma. Neither option is good.”.According to Sen. Kim Pate (ON), payday lenders are already finding ways to get around the new proposed interest laws, despite any regulations put in place..“These predatory companies are now switching to high-interest installment loans instead of conventional payday loans,” said Pate..“One of the challenges, of course, is we also need to address the fact our chartered banks don’t meet the needs of many of the folks who have to resort to these predatory companies. I’m very interested in where things are going with that.”.Mark Radley, acting director of consumer affairs in the department of Finance, said more legislation would be considered. .“We’ll be proceeding to consult on whether to lower the criminal rate of interest further as well as lowering the cap on payday lending,” said Radley..Parliament in 2007 assigned regulation of payday loans to provinces. Payday borrowers typically resort to high-interest, short-term loans due to inadequate access to mainstream financing, according to a 2010 study Payday Lending: In Search of a Local Alternative by the Wellesley Institute, an Ontario-based research group..“For borrowers with five, 10 or even 20 repeat loans per year, payday lending functions as chronic debt instead of helpful credit,” wrote researchers. .“These borrowers pay additional loan fees for no new money each time the loan is renewed.”.According to a 2009 study conducted by the Ontario government Capping Borrowing Costs: A Balanced Approach to Payday Loans in Ontario, the typical payday borrower in Ontario was 39 years old, a renter, and employed full-time.
