The Manitoba Public Utilities Board has set limits on interest rates payday loan companies can charge customers.
The maximum cost of credit will be 17 per cent for loans up to $500; plus 15 per cent for $501 to $1,000; and six per cent for loans between $1,000 and $1,500.
With the decision released today, Manitoba becomes one of the first province’s in the country to establish consumer legislation to protect payday loan customers by setting caps on the amounts payday lenders can charge.
“The maximum rates that will be allowed constitute a significant decrease from the averages now charged by the industry,” the PUB said in a release.
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“The board anticipates that some lenders will close, leaving the more efficient to continue to operate in Manitoba.”
The rates have yet to be passed into law, something that will happen in a matter of weeks.
The industry has battled for years an image that it takes advantage of customers often too desperate to look for loans at mainstream financial institutions. A typical loan of $300, carrying a fee of $20 per $100, would cost a customer $60 over a two-week term, amounting to more 500 per cent as an annual percentage return.
Another estimate, presented to the PUB late last year during public hearings, was just as sobering.
The Public Interest Law Centre calculated a person taking out a $250, 12-day loan from a payday loan company expected to pay between $44 and $109 in fees, or between 535 and 1,321 per cent, when the amounts are translated into an annual rate.
The payday loans industry has grown rapidly in the last two decades, but it is the only segment of Canada’s financial services sector that until now has been unregulated.
About 1.5 million people across Canada take out loans from payday loan companies annually, according to the Canadian Payday Loan Association, which represents major industry players.
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