Between provincial surveys, local City council and independent groups there is much discussion on the topic of payday lending regulations in Alberta.
The province’s payday lending regulations expires in June of 2016. In response, the government has put a survey on Service Alberta to gather input on current practices and potentially new regulations. Red Deer City council addressed this issue earlier this year and the issue is arising again as November is Financial Literacy Month.
On Nov. 5th at 7 p.m., the Central Alberta Poverty Reduction Alliance (CAPRA) will screen the film SPENT at the Welikoklad Event Centre, followed by a panel discussion. The event aims to educate the public on payday lending, current regulations and to encourage discussion around the issue.
“It’s a really timely issue in the City. There’s a lot happening, not just municipally but provincially as well, looking at payday loans and regulations,” said Dianna Souveny of CAPRA.
“With the downturn in the economy, more people might be accessing these kinds of lenders and not realizing the kinds of traps they can get into with that. There are things happening across Canada with payday lending and loans and trying to regulate them in a more positive way that impacts our more vulnerable people in municipalities that access these funding sources.”
Payday loans are classified as a loan below $1,500 that are taken out for a maximum of 62 days. People can qualify for these loans online or in store.
A survey has been posted to the Service Alberta web site to gain input on current and proposed regulation changes. This information is designed to help the Alberta government better regulate the issue of payday lending.
Souveny said a major issue with the current regulations is the ability for provinces to essentially overrule the Criminal Code, and charge up to 600% interest on loans. This translates to lenders being allowed to, in Alberta, charge $23 on each $100 of the loan.
“The maximum annual interest rate allowed by the Criminal Code is 60 per cent, but in Alberta lenders can charge up to 600 per cent,” Souveny explained.
“If you look at the annual percentage rate – which is how they calculate payday loans – and a person were to borrow $300 for two weeks, they could pay 600 per cent interest on that money over two weeks.”
Souveny offered a few statistics on the types of people who are most often using payday loans.
“People using these types of loans tend to be males, aged 18-34, people who make less than $30,000 a year and often it’s the working poor. Those are the people who are working full-time jobs, sometimes more than one, who are earning less than $15 an hour,” she said.
Additionally, she said there is a higher use of payday loans in prairie provinces. She said often times people who are using payday loan services are using them on a monthly basis.
“The statistics also say that only 28 per cent of people getting payday loans are using them for unexpected reasons, whereas a lot of people tend to use them to cover necessities or routine bills. Fifty-five per cent of people are using these loans to cover necessities or routine bills, so there is the uncertainty of how do I know I won’t need another loan next month,” she explained.
Part of the reason for the screening of SPENT and holding the panel discussion is to open people’s eyes to how payday lending can in turn hurt local economy.
“Part of our advocacy is around how if people are spending their money on payday lending then they aren’t putting their money into the local economy. If I’m busy trying to pay off that loan, I can’t spend it on anything local that would support the economy,” Souveny said.
“It’s a very timely issue. We want to encourage people to be aware.”
The Nov. 5th screening of the movie and panel discussion is a free event with experts and representatives on site for public questions.