Options for Regulating Payday Loan Businesses

At the 2015 UBCM Convention, members endorsed a resolution calling on the provincial government to amend the Payday Loans Regulation section of the Business Practices and Consumer Protection Act, to include lowering of the maximum fee percentage and interest rates as well as requiring payday lenders to offer installment-based repayment options. The resolution also requested that legislation be amended to prohibit any payday lender from issuing more than one loan in the same week to the same applicant.

Payday lenders are institutions offering alternative financial services typically not found in traditional financial institutions, such as banks, credit unions and trust and loan companies. Payday lenders primarily offer short-term personal loans, but are also known to offer cheque cashing, money transfer and other financial services. Current provincial legislation includes the following pertinent payday loan regulations:

  • Maximum loan amount is $1,500;
  • Maximum fee percentage is $23 for every $100 borrowed (including administrative fees and interest rates);
  • Maximum percentage for outstanding loans is 30%;
  • Maximum time to pay back a payday loan is 62 days;
  • Payday lenders may not roll over loans (e.g. extending or renewing a loan at an additional cost to the borrower).

In response to the resolution, UBCM’s Executive endorsed a motion from the Community Safety Committee to provide information to members, outlining options for local governments to regulate payday lenders. While the Province has shown interest in regulatory reform, there are options that local governments can pursue on their own. These options are exercised primarily by land use control, and may include the following:

  • Outright Prohibition: Several municipalities have taken this route, which can involve a zoning bylaw clause that specifically prohibits payday loan uses (and oftentimes cheque cashing centres as well) in all zones.
  • Density Restrictions: Rather than outright prohibition, several municipalities have chosen to reduce the prevalence of payday lenders by adding distance requirements to a zoning bylaw. In some cases this has involved payday lenders being no more than 400 metres or 1 kilometre apart or a certain distance away from specific institutions (e.g. schools).
  • Restricting Location: Another option is the prohibition of payday lenders in certain zones (e.g. a historic zone or specific zoning district). This can be used to limit the number of payday lenders, as there is less area in which they may legally operate. In some cases a potential payday lender will need to request a rezoning process, giving council an opportunity to conduct a review as well as residents through a public hearing process.
  • No Regulations: Many municipalities have chosen not to enact any regulations, permitting payday lenders in commercial zones and showing little distinction in how they are treated compared to other businesses.

It is also important to differentiate between payday loan services and cheque cashing centres, as while some organizations may offer both services, the latter involves providing instant cash for cheques, money orders, and bank drafts for a fee. Several municipalities have even gone so far as to regulate cheque cashing centres, as opposed to payday lenders.

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