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Alberta’s high-cost credit rules are changing for the better

Recently, the Government of Alberta introduced legislation that will change the rules for high-cost lenders operating in our province. You can read the press release here. If you’ve followed any of Momentum’s work on this issue, you’ll know that high-cost credit has been at the top of our list of public policy priorities for the past several years. This is because many high-cost credit services—like instalment lending, rent-to-own financing, and pawn lending—are not only expensive and unsafe, but are also often the only option for borrowers who cannot access credit at a bank or credit union.
Through Bill 31: A Better Deal for Consumers and Businesses Act, the Alberta government has proposed changes to the province’s existing consumer protection legislation, which covers anything from buying or repairing a car, to getting medical care for pets, to accessing high-cost loans. We are thrilled that the government chose to include some of our high-cost credit recommendations in the bill. They are:
• Introducing a definition for high-cost credit (loans that charge 32 per cent interest and above);
• Establishing disclosure and advertising requirements;
• Requiring the use of standard contract formats or contract terms; and
• Mandating that all high-interest lenders obtain licenses.
The impact these changes could have on vulnerable Albertans is particularly encouraging. Audrey Cook and Nicole Ram are two mothers who, like too many Albertans, have resorted to high-cost credit to make ends meet, only to find themselves trapped in a cycle of debt. Though their situations and stories are different, their struggles both reveal the devastating impact of these products and services on borrowers.
For Audrey, high-cost credit services like rent-to-own financing, as well as pawn and payday lenders, are a way to provide for her family in times of need, especially when other forms of credit aren’t available. Audrey has pawned jewellery and electronics on several occasions to ensure her family’s basic needs, like food and transport, are covered in between assistance payments. She has also used rent-to-own stores to acquire basic household items, including a washer and dryer when hauling laundry for four people on public transit became unmanageable. Though the cost to purchase a second-hand washer and dryer at the rent-to-own store was more than twice that of buying a new set from another store, she could not afford the upfront cost of the new product, and resorted to the high-cost rent-to-own payment plan. Unfortunately, she couldn’t keep up with the payments in the end, and returned the washer and dryer after six months.
Audrey is open about the impact these products and services have had on her and her family. “I feel anxious and depressed when I think about all the bills from high-cost lenders. I wish more people understood what they are signing up for,” says Audrey. “It has affected our whole family. The kids see that I’m stressed out and tell me that they don’t need shoes, when I know that they do. They learn to go without, to offer sacrifices. Kids aren’t supposed to think that way.”
Nicole, an Edmonton mother, has also used high-cost credit products to get by during tough times. Like Audrey, Nicole went to a rent-to-own store for basic household items—in her case furniture—but ended up falling behind on payments. Faced with deciding between paying for heat in the middle of winter or keeping up with her rent-to-own payments, Nicole decided to give up the furniture. Nicole’s financial struggles did not end there, particularly given a poor credit score and limited options. Needing a car, Nicole was forced to take out both a high-cost auto loan to pay for it, as well as a high-cost maintenance loan to cover necessary repairs. The impact was significant.
“I ended up in so much debt that I went down a dark path and ended up in addiction,” says Nicole. “I had attached my self-worth to how much money I had, and I had none.” It took Nicole many years, a lot of hard work, and support from the community to finally dig her way out of debt. Today she is in a great place and wishes to warn others of the dangers of high-cost credit.
For Albertans like Audrey and Nicole, the measures proposed in Bill 31 are welcome changes, and a necessary step to ensuring fewer people fall victim to the cycle of debt caused by high-cost credit. Momentum commends the Government of Alberta for its continued work to make lending safer and fairer.
Interested in reading more? See the following news stories:
Province tables Bill 31, legislation to better protect consumers – CTV News
Alberta bans ticket bots under sweeping consumer protection bill – Edmonton Journal

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