According to a radio news report on March 10, 2016, a proposal in Edmonton that promises to end lending fast payday loans came as a surprise to members of the Canadian Payday Loan Association. The legislation, which was announced initially during Canada’s Throne Speech, on March 8, 2016, was elaborated on further by officials in the province. Lawmakers in Edmonton said they hope to change things so short-term financing does not have to lead, as it does now, to a continued cycle of debt.
Tony Erling, who serves as a chair of the Canadian Payday Loan Association, commented on the recent news. He said, “. . . [We] are already a licensed industry in Alberta. We’ve been working with the Government of Alberta for a few months . . . in connection with . . . payday loan regulations [that] expire . . . June .” He said that his association has anticipated that any industry changes would happen within the current framework. This latest news then was unexpected.
Erling elaborated. He said, “. . . [I]f the law makes payday loan companies no longer viable, users will . . . be forced to go online to companies . . . [unregulated] by the province. Borrowers that require credit will still need . . . [the loan]. If [a borrower] can’t come to the licensed regulated industry, [he] will be forced to go [elsewhere].”
Payday loans, which have been the source of an ongoing debate in Canada, can reap exorbitant interest rates, some as high as 600%. The idea of the short-term financing is to secure a loan that will take care of an emergency expense, such as a plumbing repair, medical bills, or car maintenance.
If the borrower pays back the loan by his next payday, then he is usually in good standing. However, many borrowers find that they are unable to pay the financing back by the due date, thereby causing them to spiral down into a debt trap – one from which they find is hard to escape.
The loans, which are not collateralized, come with higher fees and interest because they are very easy to take out and only require the applicant’s signature in order to get approved. Usually, lenders ask that borrowers supply them with their bank account information, their age (applicants must be at least 18 years old), and work history. People who have filed bankruptcy or who have poor credit can apply for the lending if the aforementioned criteria are met.