Alberta brings tougher regulations against PayDay Loans
Under this practice, a relatively small amount of money is lent at a high rate of interest on the agreement that it will be repaid when the borrower receives their next wages.
This short-term unsecured loan is "regardless of whether repayment of loans is linked to a borrower's payday". It is also called cash advance.
The number of stores in Alberta has reduced to 195 from 220 at this time last year, as per report of Service Alberta.
Alberta regulations stipulate that no more than $15 can be charged for every $100 of borrowing with a minimum term of at least 42 days.
Through the newly imposed regulations Government of Alberta has been trying to regulate an industry as a part of nationwide crackdown, that gave nearly 4.5 million short term high interest loans totaling $2.2 billion across Canada in 2014 as reported by the media.
In the beginning of 2017, Ontario & British Columbia implemented lower borrowing rates and have been trying to explore alternative source of lending.
New Foundland and Labrador is on their way to introduce first regulatory act for the industry by the end of this year.
However compared to regulatory steps of other provinces, Alberta has taken a drastic step wherein coupled with the combined effect of lower rate of borrowings with longer time for repayment it has brought down annual percentage rate from 600 percent to 202 percent for weekly payments over the 42-day period.
Alberta's act has been designed to end predatory lending, thereby saving vulnerable borrowers from getting trapped into debt cycles.
Government of Alberta is currently emphasizing on the need for developing alternative and credible source of lending through the system of developing credit unions and different non-banking financial companies.
However this transition will take time, Stephanie McLean, minister of Service Alberta said that "Instead of popping a balloon, we're slowly letting the air out of it".
(Reporting by Chandan Som)
Photo:Facebook Payday Loan
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