The Government asked for input, Albertans responded and now the Government plans to act.
During the Throne Speech last week, the Alberta Government announced An Act to End Predatory Lending. The goal of this act is to strengthen consumer protection around short-term loans in order to ensure that these loans do not lead to a vicious cycle of debt for the people who turn to this service when in a time of need.
The act will address elements of the payday loan industry based on the input of Albertans collected from October to December last year through one-on-one interviews with payday loan users and a public survey.
Over 1,400 Albertans participated. What did the survey tell us? The vast majority of respondents believe that:
- The current allowable borrowing costs—$23 for every $100 borrowed—are too high.
- The amount that can be borrowed—$1,500—is too high.
- Borrowers should have the option of paying back the loan in installments.
Momentum has been working to educate officials at both the municipal and provincial levels on the real cost of payday loans, especially for people living on low incomes. Jeff Loomis, Executive Director of Momentum is “encouraged by the Government’s commitment to take action to ensure Albertans, especially those living on lower-incomes, can avoid unaffordable consumer loans and have the opportunity to access fairer short-term credit options.”
Creating changes within the current payday lending industry is only one part of the solution. The payday lenders are filling a need that is not currently being met by traditional financial institutions. Banks and credit unions have an opportunity to create competitive short-term loans at reasonable rates and there is also opportunity for the payday lending industry to adapt as well. “Momentum would really like to see lenders supporting borrowers to move from the payday loan product into a term product, where they are able to break up the payments into installments.” says Carolyn Davis, Community Relations Director at Momentum.
Our hope at Momentum is to see financial products available for people going through short-term cash crises, but at a rate that doesn’t risk people’s long-term financial stability.
Want to know more? Check out the recent news coverage on the Payday Lending Act: