New proposed payday loan restrictions in N.B. could force closures

Time is running out for input on New Brunswick’s proposed regulations surrounding payday loan businesses in the province.

July 29 is the deadline to comment on draft legislation that would give New Brunswick some of the toughest payday loan restrictions in the country.

READ MORE: ‘They like having people in debt’: Your payday loan stories

At Credit Counselling Services of Atlantic Canada, some New Brunswick clients are on the hook and owing money to as many as six payday loan companies.

“They go to one company, then they go to another company and to another company and then they do internet payday loans,” said client program specialist Gordon Arsenault.

“They’re into a circle of payday loans where they’re borrowing from one to pay the other and it just goes on and on and on.”

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Randy Hatfield is with the Saint John Human Development Council, which has called for tougher regulations. He’s in favour of the rates being proposed, but says the issue of repeat lending is a principal one not being dealt with.

“The entire business model is built upon getting people in and keeping them there,” Hatfield said.

“So British Columbia has dealt with that by having a regulation that says if you take out three payday loans within a 62 day period, that triggers a repayment option which allows you to repay the outstanding indebtedness over two or three of your own pay periods.”

The regulations proposed for New Brunswick could include a maximum $15 payback per $100 borrowed, and the total amount that can be borrowed by any one lender at 30 per cent of net income.

The Canadian Payday Loan Association says those restrictions are tough enough to impact some operators.

“I certainly think there will be some businesses that will find it very difficult to operate and in fact may have to close,” said association president Tony Irwin.

Tweet This Click to share quote on Twitter: "I certainly think there will be some businesses that will find it very difficult to operate and in fact may have to close," said association president Tony Irwin.

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That reality is leading Irwin to question how the consumer is being protected if some agencies are forced to close.

“Where will borrowers go?” Irwin said. “What they’ll end up doing is they’ll go online and more often than not, they’ll find themselves going to an illegal unlicensed lender.”

Suzanne Bonnell-Burley of the Financial and Consumer Services Commission of New Brunswick says “the regulatory framework cannot be implemented until the Province has received designation under the Criminal Code Subsection 347.1(3). The request for designation has been made by the Province. Once designation is received, there will be a six-month implementation period.”

Newfoundland and Labrador is the only Atlantic Canadian province without any payday loan regulations in place.