Consumers using payday loans in New Brunswick will be better protected by new rules, says the provincial government.
Provincial Finance Minister Cathy Rogers introduced the new rules at a press conference in Moncton on Friday morning.
Anyone offering payday loans will need a license from the Financial Services and Consumer Services Commission.
The new rules establish requirements for the holders of these licenses and authorize the Commission to crack down on unauthorized or illegal activities.
In addition, payday loan companies will have to disclose the cost of borrowing, the maximum rates and fees they may charge will be fixed, and consumers will have the right to retract.
The new rules will come into effect in January 2018.
Minister Rogers says her government is there to protect consumers with a regulatory framework in which businesses can operate. She says she believes New Brunswickers are happy. She emphasizes that their reactions so far are very positive.
A payday loan is the short-term borrowing of a relatively small amount at a very high rate that usually needs to be repaid on the next payday, says the Financial Services and Consumer Services Commission. The maximum loan amount is $ 1500. The maximum amount that can be billed to clients is $15 for every $100 of the loan.
People who often use this type of service are in danger of falling into a vicious circle, according to Louis Bourque, Credit Advisor at Service Credit Conseil.
“That’s when when [asking] a payday loan, lenders do not do any credit check. So if the person already has two, three or four payday loans, it is almost impossible for them to be able to repay that debt. At that point, they enter a vicious circle and they end up playing the game of borrowing from Peter to pay Paul, but the debt is not repaid, “says Louis Bourque.