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Payday loan licenses have been reduced by more than a quarter since the NDP government enacted stricter rules for lenders in 2016 and more physical stores could close during the next 12 months, warns the president of the industry association.
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Before Bill 15, also known as the Law to End Predatory Lending, payday loan companies had about 230 licensed stores in Alberta.
But as of two weeks ago, that number had dropped to 165, said the president and CEO of the Canadian Consumer Finance Association, Tony Irwin.
Cash Money, Canada’s second-largest lender, has completely pulled out of payday loans and no longer offers products as they exist under the new legislation because “it just wasn’t viable for them,” Irwin said.
“That is not insignificant,” he said. “And they would not be the only ones, but they are the most important suppliers.”
A payday loan of $ 1,500 or less must be repaid within two months. In 2016, the government estimated that Alberta has about 240,000 payday loan holders who borrow about $ 500 million a year.
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The legislation, which came into force in May 2016, saw the loan rate for every $ 100 drop to $ 15 from $ 23. It prohibits lenders from charging a fee for cashing a payday loan check, prohibits soliciting clients directly by email or phone, and prevents companies offer a loan when clients already have one pending with the company.
Lenders can no longer penalize clients for repaying loans early, are required to provide all loans with installment plans, and must restrict the number of times a lender can make pre-authorized withdrawals.
Irwin said the store closings were not a surprise, but that the number was “disappointing.”
Although larger companies like Cash Money and Money Mart are transitioning to offering installment loan products, they are not replacement products for payday loans, he said.
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And while it is good that other products are being developed for consumers, he would rather see that happen “because the industry is creating them in response to consumer demand, not because the government has essentially shut down a needed product and it was working pretty well. “
“The Alberta government declared its intention to extinguish the industry, they were pretty clear about it. If that was their intention, then the results that we are seeing and the impact are consistent with that, ”he said.
Alberta Service Minister Stephanie McLean said she is happy with the pace of change taking place in the industry.
McLean noted the success of a partnership between Cashco and ATB Financial that enables new and old customers to access lower cost credit products in the short and medium term. Servus Credit Union and Connect First Credit Union also offer mini loan products.
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To date, Servus Credit Union has issued 185 loans totaling more than $ 290,000 and more than 5,000 Albertans have applied for accounts under the Cashco / ATB agreement, McLean said.
The government is required to report annually the total value of payday loans provided in Alberta, the number of payday loan agreements entered into, the number of payday loan agreements entered into, the average size and duration of the loan. term of payday loans and the total value of payday loans that have become delinquent and have been paid off.
The first report is expected in the spring.
McLean said the argument that brick-and-mortar closures are indicative of the state of the industry does not “paint the whole picture.” She argues that companies now offer more products online that do not require shop windows.
“Closing a store doesn’t paint the picture of people who get loans and where they get them from,” he said.
“It is not so simple.”
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