Over the past two years, Momentum has partnered with individuals and groups to advocate for payday lending reform in our province. These efforts paid off yesterday, when Service Alberta Minister Stephanie McLean introduced Bill 15: An Act to End Predatory Lending in the Alberta legislature.
This act aims to reduce the cost of borrowing in Alberta to $15 per $100 borrowed – the lowest rate in Canada. In addition, the proposed legislation mandates that lenders allow borrowers to repay loans in installments, rather than all at once, and requires lenders to direct borrowers to financial literacy resources. The Act will also:
• Prohibit lenders from directly soliciting potential customers
• Prohibit lenders from charging a fee to cash a cheque for a payday loan
• Require lenders to include all fees in calculating the cost of borrowing
For more information, read the Government of Alberta press release.
Momentum is thrilled to see the government propose such reforms, which are particularly significant for many of our participants. According to Momentum’s Executive Director, Jeff Loomis, previous provincial regulations did not work well for most Alberta consumers. “These high-interest loans, which charged upwards of 600% annual interest, resulted in many Albertans getting stuck in a cycle of debt that could take months to exit,” said Loomis.
Pamela Beebe is a Momentum participant who understands first-hand the importance of these changes for many Albertans. Though she works full-time, Pamela has at times relied on payday loans to cover basic expenses for her family of four. This has often resulted in a vicious cycle of paying off one high-interest loan by borrowing additional high-interest loans, as she has been unable to borrow from a bank for more affordable credit. Currently, Pamela has a $400 loan from an online lender, which she received in December 2014. Since then, Pamela has had to pay $200 every two weeks to service the debt, adding up to over $4,000 in interest.
“These changes will be great,” said Pamela. “They’ll be really helpful to stop families from relying on those options.”
Momentum is also encouraged to see the government highlight the importance of developing safe and affordable alternatives to payday loans. Presently, payday loans satisfy a demand among many Albertans like Pamela who have limited access to mainstream financial institutions, but still require short-term small-dollar credit. First Calgary Financial, with its Cash Crunch Loan, is the first to offer such an alternative. More can be done to build on these efforts. Existing lenders, non-profits and community organizations, banks, and credit unions all have a role to play in ensuring all Albertans have access to affordable, small-dollar credit.
Want to know more? Check out recent media coverage on the Act to End Predatory Lending:
- Momentum’s press release
- CBC News – Proposed bill will give Alberta lowest payday loan costs in country
- Global News – Alberta slashing payday loan fees to lowest in Canada
- CBC News – Alberta payday loans bill gets mixed reviews
- Interview with Courtney Hare, Momentum’s Public Policy Manager, on CBC Radio’s The Homestretch