Pressure increases on province to rein in payday loans: (JOHN CHILIBECK LEGISLATURE BUREAU – April 10, 2015)

Critics say working poor become trapped in debt cycle because of high interest rates

When times were tough, Andrew Mc-Namara had to resort to using a payday loan company to make ends meet.

The Fredericton man has a better job now and no longer uses the loan-of-last-resort, but the memory of borrowing $200 and having to pay back more than $300 within a month still stings.

“You have to come right back to them over and over because you can’t keep up,” he said outside the Money Mart on the north side of Fredericton,where his father was doing some business. “Once that debt starts building, you can’t get out. You can’t get out. A lot of the time, you have to spend no money for an entire month just to get out of that payday racket. You put yourself behind. And there are a lot of people who use these places who really can’t afford them”

   It’s stories like these,and pressure from social groups and Green party Leader ‍David ‍Coon, that prompted the justice minister Thursday to reiterate his Liberal government will introduce tougher regulations for payday loan companies – even if Stephen Horsman won’t commit to a timeline.

“We’re going to make sure we do it right,”said Horsman, who is also deputy premier.“It can’t be rushed. We have to look at the Criminal Code and we have to put in new legislation.That’s not going to be tomorrow or next week. It’s going to take months,but we are going to do it.”

Seven years ago, the Liberal government of the day passed third reading of a bill to put restraints on the amount payday loan companies charge clients, who are typically the working poor looking for an advance on their meagre pay-cheques. That bill was never proclaimed into law and died on the order paper.

A similar bill went nowhere under the next Progressive Conservative government.

“We just got in six months ago, and I’m surprised governments in the past, both Liberal and Conservative, have done nothing about it,” Horsman said. “Our government is very concerned for the people who are trying to make ends meet and just getting by. That’s why we raised the minimum wage and job creation is our No. 1 priority.”

He said that he hoped one day,“these kind of businesses would filter out.”

   Still, his words weren’t good enough for ‍Coon, who criticized the minister during question period and afterwards to reporters.
   ‍Coon has raised the issue twice in the house in as many months. The working poor don’t have as easy access to credit cards or lines of credit from banks, leaving them vulnerable to payday loan companies, whose interest rates are much higher.

   “We’ve been waiting in New Brunswick for these regulations for over eight years to protect people finding themselves using payday loan companies because they have no other way to get credit,” ‍Coon said.“We were one of the first provinces to come up with an act to help the situation, but now we’re one of the last to come up with necessary regulations. We’re the eighth to do this out of 10 provinces, which almost puts us last.”

   The Green party leader had particularly harsh words for the deputy premier.

   “We’re not addressing this with the sense of urgency the minister responsible should be bringing to it. This has been a long time, and most other provinces have protection for the working poor,and that’s who’s using payday loans, people who are living cheque to cheque and are finding they can’t even do that. They go to a payday loan company because they can’t get credit any other way.”

Randy Hatfield, the executive director of the Human Development Council in Saint John,has recommended New Brunswick copy the best practices of other provinces.

Manitoba forces payday loan companies to charge the lowest interest rates – $17 for every $100 loan. British Columbia helps people get out of debt by allowing borrowers to pay back their payday loans over three months. And Nova Scotia keeps careful track of the loans going out – $89 million in Nova Scotia last fiscal year alone, with the average loan just over $433, giving some perspective on what’s going on.

In New Brunswick, by contrast, no one has an accurate count of how many payday loan companies have set up shop. Officials estimated there were up to 30, mostly in poorer neighbourhoods, but no one’s really sure.

The Liberal government is waiting to hear recommendations from the Financial and Consumer Services Commission before drafting a new law.

It made a series of proposals and asked the public to comment on them between January and the end of March Alaina Nicholson, a senior compliance officer with the commission,has been reviewing the eight submissions that were received. In an interview, she said she could not provide a timeline on when the review will be finished. She said it’s possible after looking at the material,she will come up with new proposals, which would be subject to another 30-day public consultation period.

The final proposals would then be submitted to the commission’s board of directors for approval. After that, they would be forwarded to Ottawa and the province.

The provincial cabinet would ultimately decide whether to impose any new rules.

She said she didn’t know if the regulations would be ready by the end of the year.“I can’t give an estimate,and if there are changes required, it will take even longer,” she said.“I’m really uncomfortable giving a timeline because there are several levels of approval that have to take place.”