New payday lending limits in Canadian provinces

Every Canadian province has now instituted new limits on payday lending. Image: Flickr/futureatlas

Starting Oct. 18, there will be new limits on payday advance cash charges in Manitoba, Canada. After two years of debate over the regulations, the government has set a start date. This limit on payroll loans adds to the limits already in place in other provinces.

Manitoba’s new payday loan limit

The new limit set for quick payday cash in Manitoba is $17 per $100 loaned. This maximum rate is in line with the recommendations of the Public Utilities Board in Manitoba. Though the PUB originally tried to implement these rules, a Manitoba court of appeals required the government to enforce the rules. Payday loans in Manitoba are also limited to 30 percent of a person’s average paycheck amount. This $17 must include all fees and charges.

Questions of jurisdiction

There was lag between the federal government giving provinces the right to regulate lending and Manitoba’s new regulations. This two-year lag was in part because of The Cash Store. The company challenged the jurisdiction of the Public Utilities Board to create these limits. To settle the suit, the government instituted the limits, using the recommendations of the board.

Limits in other Canadian provinces

The federal government in Canada granted provinces the right to regulate payday loan products in 2006. Nova Scotia, British Columbia, Ontario, Alberta and Saskatchewan have already implemented maximum rate limits. These limits on charges range between $21 and $31 per $100 lent.

Reaction of the Canadian payday lending industry

The Canadian Payday Loan Association has already reacted to the new limits in Manitoba. Recent studies in Canada show that the average cost of offering a $100 payday loan in Canada is $26. The high rate of defaults combined with short terms of the loan mean that the lenders face difficulty in making a consistent profit.