The most financially vulnerable people in B.C. will see new protections put in place to improve affordability in the province, the Minister of Public Safety and Solicitor General announced Tuesday.
Living paycheque to paycheque is a reality for many British Columbians, with high-cost loans from alternative lenders often the only choice when faced with a financial emergency.
In 2016, more than 160,000 British Columbians borrowed more than $369 million in payday loans, or approximately $460 per day on average. A Financial Consumer Agency of Canada report found that the number of Canadians using payday loans more than doubled from 2009 to 2014 – from 1.9 per cent to 4.3 per cent.
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Turning to high-cost loans or other products – with terms and conditions that may be more than borrowers can afford – can leave them trapped in an endless cycle of debt payments, moving them further into poverty.
Stronger protections and safeguards to make high-cost credit products more affordable and to better inform people about borrowing money were announced Tuesday by Mike Farnworth, minister of public safety and solicitor general, as part of B.C.’s Consumer Financial Protection Action Plan.
Proposed amendments to the Business Practices and Consumer Protection Act include setting limits on the total cost of borrowing; prohibiting certain fees and charges; and protecting people from terms and conditions that are unfair.
It will also require businesses that provide high-cost credit products to be licensed by Consumer Protection BC and enables Consumer Protection BC to enforce the amendments and future regulations. Consumer Protection BC will also administer a new consumer financial education fund to enhance consumer financial education throughout the province.
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Consumers will get added protection through the creation of borrowers’ rights and remedies, and protection against potentially harmful and expensive “hard sell” options and enticements to enter into high-cost credit product agreements.
The changes will also restrict the use of borrowers’ personal information.
The proposed changes to the act, if passed, build on previous changes, which introduced tougher rules on payday loans and cheque-cashing fees.
Before 2009, borrowers paid whatever the lender charged – as much as $30 per $100. In 2009, the province implemented regulations that capped the fee at $23 for every $100 borrowed. That number dropped to $17 in 2017 – making it the second-lowest rate in Canada – and further to $15 in 2018.
The new changes aim to assist people out of the debt cycle and make life more affordable for people in B.C., according to the announcement.
RELATED: New B.C. regulations on payday loans don’t address real issues: advocates
Resources:
Borrowing Money website: gov.bc.ca/borrowing-money
Consumer Protection BC: consumerprotectionbc.ca
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