Thank you, Mr. Speaker. Today I want to talk about Payday Loans and the need for territorial regulations. Mr. Speaker, it is in the middle of the month. What does a person have to do if they are short of cash? Well, in Canada, there is a $2 billion industry out there to help. They are eager, Mr. Speaker. This conventional short-term lending isn’t available by the big banks so a person has to go to one of those short-term lending agencies often referred to Payday Loans. Now remember this, Mr. Speaker, convenience does come at a price. It is a short-term loan and you have to promise to pay it back by your next pay cheque.
According to the Canadian Payday Loan Association, the average loan is about $280 on a 10-day borrowing cycle. But how does the loan work? Well, you have to have a job. You have to have an active bank account, permanent residence, and in some cases you need a current phone bill and a blank cheque of some form so they can make sure they can go get the money. Remember, there is no credit check for this type of service. So you sign the loan agreement and you leave your information and in the short term, you are ready to go.
Now, the loan agreement will ensure that you understand all the terms and conditions. The terms and conditions usually include things like the fees and it also includes the issue of built-in fees. So, Mr. Speaker, some of the things you need to pay are up front prices, the first time charge, service fees, service charges, repayment options and, of course, they stress what happens if you are late.
Mr. Speaker, the law says you can’t be charged more than 60 percent. In Yellowknife, I called around. Apparently their interest fee is 29 percent. But, Mr. Speaker, we can’t forget about those fees because they are built into the price. There is administration, processing, convenience, verification, brokers, collectors, early repayment, late repayment, initial, one-time rollover fees. The fees go on and on.
In Yellowknife if you go to one of the lending agencies to borrow $200 you have to pay $180 back within two weeks. That’s an interest rate of over 2,000 percent. If you went to another lending agency and borrowed $500 you have to pay $136 on top of that. In other words, your final payout is $636, which is roughly 711 percent.
With time running out I’ll say this: something needs to be done. This government needs to make sure its citizens are protected before something goes off the rail. Why wait for a problem and then act? We can act now.
Thank you, Mr. Hawkins. The honourable Member for Nahendeh, Mr. Menicoche.
