Ottawa has moved ahead on its plan to crackdown on the pay-day lenders, proposing that Canada's provinces and territories be given the power to regulate the industry.
On Friday, Justice Minister Vic Toews and Industry Minister Maxime Bernier introduced amendments to the Criminal Code that they say give Canada's provinces and territories the ability to keep tabs on the industry.
“The amendments to the Criminal Code will give provinces and territories the flexibility they need to deal with any concerns they may have with payday lending,” Mr. Bernier said.
Right now, Sec. 347 of the Code – designed to target loan-sharking – makes it an offence to enter into an agreement or arrangement to receive interest at a criminal rate, defined as 60 per cent annually.
The proposed amendments would exempt payday lenders operating in provinces or territories that have measures in place to protect borrowers.
“This means the provinces and territories can set limits on the cost of borrowing and regulate the business practices of payday lenders within their jurisdiction,” a government statement said.
“Provincial and territorial consumer ministers, as well as consumer advocacy groups, have raised concerns over the questionable practices within the payday lending industry – such as the high cost of borrowing, insufficient disclosure of contractual terms, unfair collection practices, and the spiralling debt loads resulting from rolling over loans.”
Manitoba has already drafted legislation aimed at dealing with the industry and has been pushing hard for the federal government to step out of the way.
That province will set its interest rates through the same panel that sets utility rates. Practices such as rolling fees and interest into unpaid loans would be banned, and explanations of charges would have to be posted.
Other provinces have also said they support drafting their own rules, including British Columbia, Nova Scotia and New Brunswick.
With reports from Canadian Press
