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Payday loan control needs more bite to cut the fat
27 April 2008 - Independent Free Press
Early this month, the provincial government tabled legislation to curb abusive
payday lending practices. The way it works is payday loan operators lend cash to people who in turn pay a fee and interest on whatever amount they take.
The interest on a loan can be massive, often exceeding the 60 per cent usury rates set out in the criminal code. Worse still, loans can often be made back-to-back, or one loan on top of another.
New legislation would clamp down on the payday industry, frequently accused of targeting the poor. A new law would prevent payday lenders from making back-to-back loans and stop lenders from imposing ridiculous default charges or cancellation fees.
We applaud the government for taking the initiative but Queen's Park should have been more decisive on the issue of interest rate caps.
It is a criminal offence in Canada to charge in excess of 60 per cent interest per year, but the law was never intended to apply to commercial loans.
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