by Morinville News Staff
Alberta now has the lowest payday lending rate in Canada; the government announced Tuesday.
A payday loan is a loan of $1,500 or less with a term of 62 days or less. There are more than 30 payday loan companies with some 220 branches in Alberta.
As of August 1, the province mandated the first phase of Act to End Predatory Lending legislation that reduced the borrowing rate from $23 per $100 borrowed to $15 per $100 borrowed. Additionally, all fees related to a payday loan must be included in the new cost, which the government says puts an end to hidden fees and charges.
“Last fall, Albertans told us they want lower interest rates and stronger consumer protections. Today, it’s the law,” Stephanie McLean, Minister, Service Alberta, said in a release Tuesday. “We have put an end to 600 per cent predatory interest rates and vicious cycles of debt, with fair rules that protect Albertans.”
Under the legislation, payday lenders will no longer be able to charge a fee to cash a payday loan cheque, solicit clients directly by email or phone, or offer a loan when another is outstanding.
The Act also requires the government to encourage financial institutions and community groups to offer an alternative, short-term loans that are fair and accessible.
Two institutions – First Calgary Financial and Chinook Financial – have already launched micro-loan programs in Alberta. The programs have an annual interest rate of 19 per cent with a payback period of six to 18 months. At that rate, the cost to the borrower at the 19 per cent annual interest is 73 cents per $100 borrowed over a two-week period.
“I am so pleased First Calgary Financial will launch its Cash Crunch loan on August 22,” McLean said of the program. “It’s credit with reasonable rates, longer payback terms, and financial literacy supports that set Albertans up for financial health, not ruin.”
More changes in the new legislation will take effect later this year.