Court Rules For Payday Loans in Manitoba

Recent developments in the Canadian province of Manitoba bode well for the continued use of payday loans as a product for discerning consumers who appreciate financial freedom and convenience. People who need cash help from time to time during budget shortfalls will be the most deserving beneficiaries.

What happened?

The Manitoba Court of Appeal ruled that payday loan companies were treated unfairly by the province’s Public Utilities Board (PUB). The claim against the agency was that lending rates they set were unfair and not conducive to an operable business model.

A cap of 17 percent for payday loans up to $500 and six percent for loans approaching $1,500 was on the books. With such rates in place, it would be impossible to make expenses if a business depended upon making such loans. With the recent ruling by the court, payday loan companies can now argue against the feasibility of the previous cap and work toward getting legislation passed that will provide these small businesses and consumers with fair options. For consumers in particular, the competition payday loan businesses provide banks will help keep consumer options open.

A fair decision

Members of the Winnipeg legislature are reportedly disappointed with the ruling made by Justice Alan MacInnis, but they consider the ruling “fair.” Until it’s resolved, there will be no rate cap on payday loan companies. Businesses will continue to operate under Canada’s Criminal Code, which allows a maximum annual interest rate of 60 percent.

Individual provinces are generally responsible for taking action on behalf of their consumers, and this action by Justice MacInnis is a loud and clear signal that payday loans are a product whose time is now. Yet provincial officials like Finance Minister Greg Selinger, who oppose payday loans, still recognize that the PUB’s stance was off base:

The PUB decision cannot be implemented on the interest rate caps that they were proposing.

The battle isn’t over, however

Selinger went on to tell CBC News that “there are things we can do to protect people.” As if having access to a tool like payday loans were in itself a danger. He suggests a “cooling off period” that gives consumers 48 hours to consider whether they want the loan after all. If not, it can be returned at no charge. Some American payday loan companies extend a similar opt-out window, which closes at the end of the following business day. This is reasonable, but the eradication of payday loans via overregulation is most certainly not.