The BC government wants to create new rules for lenders who offer installment loans, under a law introduced Tuesday.
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VICTORIA – The BC government wants to create new rules for installment loan lenders, under a law introduced on Tuesday.
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Solicitor General Mike Farnworth said the proposed changes to the Consumer Protection Act would create an authorization and enforcement system for businesses that offer installment loans, and ban certain practices the government considers unfair.
“This bill aims to better protect consumers from potentially harmful and predatory business practices,” he said.
The current system allows low-income British Columbians to be trapped in a never-ending cycle of debt payments that exacerbates their poverty, Farnworth said.
“Until now, there has been little to protect consumers from high cost credit products,” he said. “The changes… will help people get out of unsustainable debt cycles and lead to better affordability for the people of British Columbia.
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British Columbians are among the largest users of payday loans in Canada, according to surveys, racking up nearly $ 400 million a year.
The changes would build on the 2018 measures that tightened the rules on payday loans and lowered the maximum fees lenders can charge to $ 15 per $ 100 borrowed. Payday loans are high cost loans for people who are looking for $ 1,500 or less for a term of 62 days or less.
Tuesday’s legislation also strengthened the original payroll legislation, clarifying that the maximum fee includes all third-party fees and that the definition of lender includes loan brokers. Selling payday loan insurance is now also banned because it “was really of little value and accomplished very little other than adding additional costs,” Farnworth said.
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Most importantly, the new legislation has focused on installment loans, which are for larger amounts up to $ 10,000 and, unlike payday loans, offer repayment in installments. As the government cracked down on payday loans, loan companies began to focus on these installment products because they fell outside the law, Farnworth said.
“These are the things that are really starting to worry us as a government in terms of the lack of relegation and people falling into this debt trap,” he said. “This is what this legislation is trying to address.
Farnworth said the legislation, if approved, will ban penalties for people who want to prepay their loan, ban incentives such as prizes or free offers to get a loan, and prevent businesses from foreclosing on payroll. ‘a person in connection with the repayment of the loan. Contract.
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The government can also set caps on interest rates and make the terms and conditions of agreements clearer to understand, he said.
Scott Hannah, president of the Credit Counseling Society, said the new rules were welcome given the vulnerability of many clients.
“Unfortunately, a lot of people in our province don’t understand the real implications of taking out a high cost loan to find out later on how much and how long it can take to pay off,” he said.
A portion of the proceeds from the new high-cost loan licenses will be used to create a consumer financial education fund.
rshaw@postmedia.com
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