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.

In Maple Creek, Canada, flood waters caused significant damage. Image from Flickr.

In Maple Creek, Saskatchewan, Canada, flood victims are already seeing cash advanced from the government to help with cleanup. The loan cash is being funded by the Provincial Disaster Assistance Program. Estimates of the amount of damage from the Maple Creek floods are just now being put together, but the residents are already cleaning up.

Maple Creek floods

The Saskatchewan floods of 2010 were extensive, closing down long sections of the Trans-Canada highway between Saskatchewan and Alberta. Peak levels of flood water have not yet been reached in some areas, such as Last Mountain Lake. Expectations of damages to just the crops in the area are about $300 million Canadaian dollars. Property damage will likely be that much or more.

PDAP pays out overnight loan to residents

Though the Provincial Disaster Assistance Program usually waits until insurance adjusters have made their estimates to pay out, organizers are forgoing that requirement in the case of Maple Creek. The program provides two separate types of cash to residents. First, the PDAP provides up to $3,000 as cash advances on expected insurance payments. These payments are available in as little as a few days and help fill the gap between a disaster and insurance payouts. Second, the PDAP provides up to $160,000 to help residents with “uninsurable losses.” The province has said that it hopes all claims are paid no later than this Sunday.

Debate over crop insurance

In Maple Creek and surrounding areas, discussions about crop insurance are bringing up controversy. Only about 70 percent of farmers in the area purchased crop insurance this year, but the government is planning on paying out benefits to most farmers. Those that did purchase insurance are worried that this is going to drain what they paid in and decreases incentive for everyone to buy insurance the next year. Meanwhile, government insurance adjusters are still in the area, determining the true extent of the flooding damage.

Image from Flickr.

In many countries, Dec. 26 is Boxing Day. However, in countries such as Canada, where Boxing Day is a bank holiday, Boxing Day will be observed Monday. That means banks and some other businesses will be closed. Boxing Day, in general, simply refers to the day after Christmas.

Boxing Day traditions began in mid-19th-century England under Queen Victoria. The web site Calendar Updates says:

It originated as a holiday for members of the merchant class to give boxes containing food and fruit, clothing, and/or money to trades people and servants. The gifts were an expression of gratitude similar to the bonuses many employers offer their employees today.

If you live in the United States, there’s no need to rush out and get instant payday loans with no faxing so you can buy more presents. Boxing Day isn’t recognized as an official holiday in the U.S. Furthermore, the tradition of giving boxes of goodies to “the help” on Boxing Day died off a long time ago.

Modern observations of Boxing Day

Besides closing banks, in most countries that celebrate Boxing Day, it has simply become an extension of Christmas festivities. “It is a time for family and friends to gather with lots of food and fun,” says Calendar Updates. Sounds a lot like Christmas to me.

While the spirit of Boxing Day — giving to the less fortunate — is generally observed in spirit in the U.S., Boxing Day is an official holiday in “commonwealth nations,” which include Australia, Britain, New Zealand, and Canada. Many retailers in these countries hold Boxing Day sales as U.S. retailers hold after-Christmas sales.

Clearing up urban legend

Because Boxing Day isn’t observed in the U.S., many Americans don’t understand the holiday. One common misconception is that the term “boxing day” refers to the need to rid the house of boxes after Christmas is over. While it’s true that cleaning up after present-opening is a lengthy ordeal in many American households, that’s not a Boxing Day tradition.

It also has nothing to do with the type of boxing that takes place in the ring with big gloves. However, if that sounds like a tradition you’d like to introduce to your family, you might want to read up on Festivus, particularly the part about Feats of Strength.

Payday loans have not put this woman on the street. This study indicates that there is in fact no clear correlation between using payday loans and facing financial calamity like bankruptcy. (Photo: flickr.com)

Human Ecology professors Ruth Berry and Karen Duncan of the University of Manitoba appear to have been ready to point the accusing finger at payday loans in Canada. Given supporting data, it appears they would have been happy to report that payday loans and bankruptcy were strongly connected in the Great White North. However, “The Importance of Payday Loans in Canadian Consumer Insolvency” does nothing of the sort because doing so would fly in the face of hard evidence. There is no clear correlation between bankruptcy and use of payday loans in Canada, according to the authors of this study. In fact, the overall financial well-being of payday loan customers appeared to be slightly more favorable than those surveyed who did not use payday loans.

Payday Loans in Urban Centers and Inner Cities

In much the same way that payday lending has grown across the American landscape, payday lenders have stepped in to serve people of the inner cities who have been abandoned by the traditional banking industry – all because there wasn’t enough money to be had. And yet the same banks are the ones who charge payday loan companies with exploiting the public. While it is true that interest rates (when annualized as APR) for payday loans are higher than some traditional bank loans, the ease and convenience of payday loans tends to trump the offerings of banks and credit unions who demand higher customer qualifications and force applicants through a maze of paperwork. Credit-constrained consumers who lack liquid assets continue to find payday loans infinitely useful.

Berry and Duncan Want to Find the Payday Loan-Insolvency Connection

In their quest for this grail, the authors obtain data from “the main industry players in the payday loan field in Canada,” namely National Money Mart Company, RentCash and Cash Money. They also reference the Canadian Payday Loan Association, which is the national industry association that represents at least 40 payday loan companies (including those mentioned above), and the Financial Consumer Agency of Canada through analysis of related studies.

Previous Studies Didn’t Find a Connection, Either

“Not much literature exists connecting the experience of payday loans with consumers filing for bankruptcy,” write the authors. Perhaps this is because there isn’t a real connection? One study they cite found that only one in 10 payday loan customers filed for bankruptcy following a payday loan. Other studies noted a similar percentage. Those respondents who were found to have multiple payday loans at the same time may have been more prone to bankruptcy, but this group was found to be a minority. Moderate usage – which represents the majority of payday loans – shows no clear correlation with bankruptcy filings. In fact, a study by Robert Mayer (“Payday Lending and Personal Bankruptcy,” 2004) showed that those who displayed such moderate use owed only 17 percent of net monthly income, which is hardly a bankruptcy-inducing situation.

More Findings that Break the Mold

• The authors’ data indicated that payday loan customers tended to hold less in the way of long-term loans that did those surveyed who did not use payday loans. Such loans were most often mortgage loans.
• Interestingly, those who filed for bankruptcy and had used payday loans carried “significantly less” short-term debt than those bankruptcy filers who had not filed for payday loans. Payday loan customers held a mean of $14,485 in debt for 2005 and $13,938 for 2006, while those who did not use payday loans showed a mean debt of $25,972 and $26,615 in those years.
• Insolvent consumers didn’t display any tendency toward being either male or female.
• Households surveyed who used payday loans tended to be smaller than those households who didn’t.

Data by City

Berry and Duncan analyzed data from a number of major Canadian cities. What they found tended to be consistent with what has been discussed thus far: that payday loans do not correlate directly to bankruptcy and that payday loan consumers tended to display greater financial well-being than those surveyed who had never used the short term loans. Here’s a sampling:

Vancouver: Bankruptcy households who used payday loans versus those who did not displayed a higher average income.

Calgary, Edmonton and Toronto: Payday loan users showed much less long-term debt.

Installment Loans: Yet Another Path to Avoiding Bankruptcy

Berry and Duncan freely admit that “bankrupts with payday loans are more likely to be employed and have higher incomes and lower debt-to-income ratios than other bankrupts.” This brings them to their burning question: “Do payday loans contribute to bankruptcy?” Numerous studies paint very different pictures regarding the average amount for payday loans. Since more of them point to relatively small figures, it seems unlikely that such amounts would contribute heavily to bankruptcy. And since many lenders offer installment loans as an option in the event that a consumer is unable to pay their payday loan on the maturity date, there is a built-in path leading away from default and bankruptcy.

There’s an Indictment in Here Somewhere

Despite the fact that they found that payday loan customers tended to be more financially healthy than those respondents who never used the product, Berry and Duncan continue to operate from the position that payday loans are some evil product that should be avoided at all costs. Such is not the case, truly. They fulfill a need that traditional banking has largely ignored. Oh, but if only “mainstream lenders provided more accessible services, and educational institutions and non-profit or government agencies gave more objective information about payday lenders in public service advertisements, perhaps these borrowers might attempt to access other lending options,” write the authors. They follow that statement with the false claim that payday lenders do not make their interest rates known to consumers. In America, payday loan companies are required by the Truth in Lending Act to make this information readily available to consumers.

Prescience and Payday Loan Law

If there were only a database in place that could record payday loan usage, then perhaps there would be fewer abuses. That’s what the authors suggest in their 2007 study, and it has come to pass in numerous U.S. states. “A model that might be considered for regulating the number of payday loans held by one individual is the Drug Program Information Database (DPIN) which connects Manitoba Health and all pharmacies in Manitoba to a central database,” they write in reference to a 2006 Manitoba Centre for Health Policy study. “This prevents duplication and double-doctoring by providing the dispensing pharmacy with real time information to show the patient’s drug profile and allows the pharmacist to deny filling a prescription, which is the same or similar to another recently prescribed.” This is quite similar to what we see with payday loan databases. Such inventions do tend to lean toward the nanny state frame of mind, but many lawmakers have insisted upon pushing it through.

Correlation Does Not Imply Causation

And in this case, the authors can’t even draw a correlation between payday loans and bankruptcy filings in Canada. Certainly, those who have filed for bankruptcy would be burdened by any additional debt (including payday loans), but that implies no correlation (let alone causation). “It is not possible to determine whether the loan is hastening the insolvent’s decision to file for bankruptcy,” write Berry and Duncan. I’d go further than that, based upon their findings. I’ll say what they appear unwilling to admit: that payday loans help more than they hurt when used moderately (as most are). Bankruptcy is frequently the result of a complex mixture of financial and social issues. Payday loans are no scapegoat.

Payday loans are heavily regulated in the Canadian province of Manitoba. This flies in the face of reason, as 310-LOAN's executive study indicates. (Photo: picasaweb.google.com)

Governments both large and small often take it upon themselves to decide what consumers should or shouldn’t be able to do with their own money. Call this the “nanny state” mentality if you will. Regardless, it seems that a population is somewhat less than empowered if the ability to make financial choices is taken away, replaced by rules (explicit or otherwise). Through the eyes of capitalism, if consumers are not afforded self-determination, the market flounders and the people become increasingly dependent upon their government for financial protection.

The payday loans industry has taken its lumps when it comes to regulation-happy governments. Despite well-reasoned arguments that reflect the trends, tendencies and – dare I say it – general will of the people, numerous governments have managed to push through legislation that effectively kills consumer choice and destroys the payday lending industry within the affected region. In addition to the obvious unemployment that results from such careless legislation, the consumers who demanded the payday loan product are driven to less desirable (more expensive) alternatives. There’s a reason they weren’t depending upon the traditional banking system in the first place. Just because payday lending is regulated out of states and provinces doesn’t mean all of the consumers who depending upon payday loans are acceptable risks by traditional banking industry standards.

Manitoba Allows 17 Percent APR

This rate cannot sustain a payday lending business that relies upon payday loans alone for operating profits. It’s been proven many times over. Canada’s provinces (See: http://www.google.com/hostednews/canadianpress/article/ALeqM5h3DfHGfgaUgIrJMxJEAUzZ1K5CbA) have made life difficult for businesses that offer payday loans. British Columbia has a 23 percent APR rate cap, Quebec caps rates at 35 percent and Nova Scotia allows 60 percent. Compared with Nova Scotia, it seems that Manitoba payday lending lobbyists forgot to show up for the party. I jest, of course. One 2007 study by Andrew Smyth and Nathan Slee of 310-LOAN (considered to be Canada’s largest direct payday lender) makes such a clear case that one wonders if Manitoba’s government even read it. If they had read it and still voted to go with a 17 percent APR cap, you’d wonder either what axe they have to grind or who was fronting their retreat to Aruba.

“Evidence pertaining to public hearings before the Manitoba Public Utility Board to determine maximum allowable charges and fees for payday loans“

To preface the study, the authors cite a comment by Manitoba’s Minister of Finance at the time, Greg Selinger. Selinger said that “The intention is not to drive the companies out of business, because people are showing an interest in having this service, but to make sure that when they offer the service they do it in a way that’s just and reasonable.”

What is “Just and Reasonable?”

310-LOAN, according to the authors, clearly explains their fee structure to customers before any agreements are signed. They also verify that customers are actively employed as opposed to depending upon pensions or social assistance. That is a reasonable way to treat one’s payday loan customers, it would seem. Furthermore, 310-LOAN will not accept applicants who already have more than two NSF transactions in their recent banking history or more than one outstanding payday loan with another lender. They accept applicants who can reasonably repay their payday loans. Such is a protection for both the consumer and the payday loan company. Just and reasonable care is taken that neither party is exploited.

Who Uses Payday Loans?

The study authors utilize payday loan studies from Statistics Canada (StatsCan), IpsosReid, Environics, The Public Interest Advocacy Centre (PIAC) and StratCom. When available, these findings are compared against the general Manitoban population. The data for Manitoba indicates that payday loans are used by consumers who earn a slightly below average income for the province, but these consumers are far from being the “victimized poor.”

Average Age: Neither Too Young nor Too Old

According to Environics, the average Manitoba payday loans customer is 39 years old. StatsCan puts the number at 39.5, while PIAC found the average to be 42. With these and all the following results, it should be noted (and perhaps goes without saying) that the survey audiences are not identical.

Gender Split

It’s nearly a 50/50 split according to most studies. The 2006 Census for Manitoba gave a three to four percent bump up for female payday loan customers, however.

Marital Status: Most are From Married Households

The 2006 Census found that 48 percent of payday loan customers in Manitoba were married. Environics recorded 49 percent while PIAC was significantly higher at 59 percent. For single payday loan customers, the numbers were almost identical across the board: 35 percent by the Census, 35 by Environics and 31 percent according to PIAC. Only a small sample listed themselves as separated, divorced or widowed: 17 percent in the Census, 15 percent by Environics’ count and 10 percent according to PIAC.

They Will Have Residency

Partakers of payday loans in Manitoba tend to weight more heavily toward being renters, but the RBC Home Ownership Survey used for a portion of the data indicates that a majority (61 percent) do indeed own homes. In total, renters totaled 39 (RBC), 76 (Environics) and 41 percent of the respondents. Home ownership was 61 percent according to RBC, 21 percent for Environics and 59 percent for PIAC. The variations in the Environics study are curious, but not discussed by the study authors.

Household Income: Below Average, But Not Poor

Manitoba’s payday loan portrait is decidedly middle-class according to data the study authors present. Using 2001 Census data for the province, the average income for all Manitobans was $58,360. Looking at payday loan customers, PIAC found that the average income level was $51,400 and StratCom (using stats for Toronto in the Ontario province) marked it at $53,480. Environics was considerably lower at $41,376, while StratCom (using Vancouver, British Columbia data) was $42,026.

Education Level: Educated Payday Loan Customers

Using the same sources as the previous indicator, the 2001 Census found that 23 percent of Manitobans had graduated from university, 31 percent had gone to college or vocational school and 24 percent had at least a high school diploma (leaving 23 percent under that education level). StratCom (again for Vancouver) puts those numbers at 16, 28, 44 and 12 percent, respectively. StratCom Toronto clocks in at 26, 36, 34 and a miniscule three percent (more highly educated in urban Ontario, it seems). Environics’ distribution is 21, 43, 20 and 14 percent and PIAC’s is 18, 23 52 and six percent.

Employment: Payday Loan Customers Have Steady Jobs

As stated earlier, 310-LOAN requires that their customers be gainfully employed. While this standard is not exclusive in the payday lending industry as a whole, it is a dominant requirement to which most lenders adhere. Looking first at the general population of Manitoba as surveyed by Environics, we see the following breakdown, supporting the notion that payday loans in Manitoba and beyond are taken by consumers with the ability to repay:

• Employed: 62 percent
• Unemployed: Four percent (very low by today’s standards)
• Student: Six percent
• Retired: 21 percent
• Homemaker: Four percent

The total sample of payday loan customers taken by StratCom (Vancouver and Toronto) is as follows:

• Employed: 89 percent
• Unemployed: Four percent
• Student: One percent
• Retired: Four percent
• Homemaker: One percent

For Environics in Manitoba:

• Employed: 78 percent
• Unemployed: Seven percent
• Student: Two percent
• Retired: Five percent
• Homemaker: Two percent

And finally PIAC:

• Employed: 70 percent
• Unemployed: 10 percent
• Student: Eight percent
• Retired: Seven percent
• Homemaker: Five percent

Why Does Manitoba Use Payday Loans?

Emergency cash and money to cover unexpected expenses are the main reasons given in the PIAC and Environics studies, report the 310-LOAN study authors. Environics also found that consumers use payday loans to avoid bouncing a check. For Environics:

• Necessary Emergency Cash: 36 percent
• Covering Surprise Expenses: 24 percent
• To Cover a Potential Bounced Check: 21 percent
• Short-term Income Shortage: 11 percent
• For Discretionary Purchases: Four percent
• Other: Three percent

PIAC showed similar results, but notice the differences, which are not excluded to the categories PIAC respondents didn’t even cite that did rank in the Environics study:

• Necessary Emergency Cash: 31 percent
• Covering Surprise Expenses: 34 percent
• Bounced Check: Seven percent (why it’s so much lower is unclear)
• For a Major Purchase: Five percent
• Discretionary Purchases: 16 percent (why so much higher?)

When Banks Simply Won’t Do

Speed, convenience, privacy and the ability to handle emergency financial situations were all significant indicators for payday loan customers across multiple study sources. In addition, there is some evidence that suggests some dissatisfaction with traditional banking sources. See the authors’ study for specific numbers. It should also be noted that the studies referenced lean significantly toward “very satisfied” or “somewhat satisfied” for consumer approval level with payday loans and alternative financial services.

What Does a Harsh Rate Cap Do to Payday Loans in Manitoba?

310-LOAN’s study authors attempt to illustrate this is terms of where their own business is in the product life cycle. They claim payday lending is reaching the maturity stage, where saturation in society is relatively high. “In the case of payday loans, as more lenders appear, consumers are more exposed to the product and more inclined to use it,” write the authors. The saturation tends to intensify competition, leading the market toward greater self-regulation of pricing. This competition ultimately benefits the consumer, but the competition must be allowed to reach its apex if they are to fully reap the benefits. That’s the nature of a free-market economy.

Canadian Government Thinks Competition Should Already Be Maxed

Thus, they think rates should have already reached the lowest “consumer-friendly” point. Since they consider rates to be too high (a notion that the average consumer surveyed disputes), governments impose rate caps. It kills payday lenders, but does not kill demand for payday loans.

310-LOAN finds that while payday lending has grown quickly, supply is only now starting to catch up with demand. Their support for this notion is that payday loan industry advertising spending in Manitoba has begun to exceed revenue increases only in this most recent stage in payday lending’s life cycle. Earlier findings (where the supply was lower) wouldn’t need excessive advertising in order to gain customers. Demand provided fuel for growth.

Section 347 of the Criminal Code Has Delayed Saturation

Legal woes for the payday loan industry have slowed growth. This is not to say that the product is illegal; it certainly is not. But enough roadblocks were set up by the Canadian legal system to slow payday loan industry growth. In many cases, it was even a barrier to entry for potential payday lenders. This kept many potential investors away as well.

Competition and Lower Rates: the U.S. Model

The authors cite a Federal Reserve study by Donald Morgan (“Defining and Detecting Predatory Lending“) in which the connection between more payday loan stores per capita and lower rates is made quite clear. This does not mean, as the authors comment on a 60 percent APR cap that some Manitoba lawmakers had proposed before going off the deep end at 17 percent, that such a rate would be sustainable. That’s far from the truth in their estimation. In fact, it had been widely acknowledged that 60 percent is not financially viable for payday loan companies.

“Without an agreed upon method of calculating an unconscionable rate,” write the study authors, “we suggest that the board consider the costs involved in issuing short-term, small sum loans in the market today in order to effectively set the limit on the cost of borrowing.” Using a well-known Ernst & Young study, they note the profit margins for what are considered to be Canada’s “big five” banks:

• CIBC: 23.61 percent
• BMO Bank of Montreal: 27.43 percent
• RBC Royal Bank: 23.26 percent
• Scotiabank: 32.81 percent
• TD Canada Trust: 35.51 percent
  Average: 28.52 percent

Also based upon Ernst & Young findings, the authors note that the rate for issuing a $279 payday loan is $74.08. That’s 26.55 percent for the loan issued, which compares quite favorably with the average banking profit margin above. Based upon the authors’ interpretation of data on 11 payday lenders, such a rate would allow 10 of them to “remain in the market and stimulate and immediate increase in supply and investment in the payday loan industry.”

The Risks of an Excessively Low Rate Ceiling

Allow the industry to evolve in a natural free-market setting, argue the study authors. That will enhance both product and pricing according to consumer need. Set the rates too low and lenders must slash costs wherever possible and abandon efforts to meet consumer need. For instance, allowing for installment loans has proven to be popular with consumers in many locations, but the cost associated would be impossible to swallow for lenders if rates are cut to the proverbial quick. For consumers, there is anecdotal evidence that the convenience of installment loans would outweigh having the least expensive loan possible under law.

Life Dictates Debt, Not Payday Lenders

Situations like job loss, illness and family or other personal difficulties tend to have the greatest impact upon a consumer’s ability to repay short term credit such as payday loans. Yet the Manitoba government (or any government) wants the public to believe that it is the rates of supposedly predatory lenders that cause the problem. Thus, they see rate caps as the only answer. Consumers and even economists do not tend to share such views. Interest rate caps to not solve personal and societal issues; they merely restrict the free market and tend to add trouble rather than subtract it.

It's all well and good when you're a baby, but Ontario wants to nanny its payday loan customers so they don't have to be responsible. (Photo: flickr.com)

When it comes to short-term consumer lending, few products are as quick and convenient as a payday loan. The bulk of payday loan companies in Canada operate within the bounds of established governmental guidelines into order to provide consumers with a safe, affordable product while businesses collect profits that offset operating costs. Yet there are an unfortunate few who attempt to operate “beneath the radar,” charging overly inflated rates and enforcing abusive loan terms. Section 347 of the Canadian criminal code attempts to regulate this with a limit of 60 percent interest that can be charged per annum, but further intervention has been necessary in order to protect consumers.

The Payday Loans Act of 2008

Here’s a prime example of an attempt to make things right. In June of 2008, the Ontario Legislature devised the Payday Loans Act in order to require that all payday lenders and pawnbrokers:

• Become licensed
• Clearly spell out all costs of borrowing
• Prohibit loan rollover by instituting a database
• Allow borrowers to cancel their payday loan contract during an initial cooling-off period (within the first two days)

Furthermore, the Payday Loans Act was to make it easier for offending payday loan companies to have their licenses suspended and establish the Ontario Payday Lending Education Fund to promote consumer understanding of and confidence in the product.

Capping the Numbers

By the time additional provisions were in place by April 1, 2009, the Payday Loan Act was also altered by Ontario’s Maximum Total Cost of Borrowing Advisory Board so the most money that could be charged per $100 borrowed is $21. For a standard two-week payday loan, that’s 21 percent, which is not out of the realm of feasibility.

However, there was little or no penalty in place for consumers who defaulted on their loans. It seems unconscionable for there not to be consequences when a consumer makes a promise to repay a debt and doesn’t follow through. Such a lack of safeguarding damages payday lenders severely, just as it would any business that exposed itself to financial risk but didn’t have the tools to protect itself in the event of default. This is definitely an example of the nanny state at work, absolving others of taking responsibility for themselves.

Now Ontario has an Order Dealing with “Criminal Interest Rates”

Specifically, “Order Designating Ontario for the Purposes of the Criminal Interest Rate Provisions of the Criminal Code P.C. 2009-1628 October 1, 2009” has taken a big step toward expunging out-of-control interest rates. Payday loan companies that fail to toe the line will no longer be able to escape notice. This is an order “DESIGNATING ONTARIO FOR THE PURPOSES OF THE CRIMINAL INTEREST RATE PROVISIONS OF THE CRIMINAL CODE.” It appears in large, capital letters because Ontario wants it known that from this point forward, all payday loan stores in the province are required by section 347.1 of the Criminal Code. Once the following two provisions are in effect:

1. The Payday Loans Act, 2008, S.O. 2008, c. 9, except for sections 52 and 66 to 74; and
2. Ontario Regulation 98/09, except for sections 37 and 38.

The $21 per $100 loaned will definitely be in effect, without exemption. But what will happen to the lack of protection afforded payday loan companies for customers who don’t pay? What does Nanny Ontario plan to do about that? This isn’t a game of jacks among five-year-olds; these are adults who should have learned to take responsibility for their actions a decade or more before. It would be in the best interests of its citizens if Ontario (and Canada as a whole) reconsidered this ridiculous lack of penalty for default.

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