The provincial government announced it is reducing the allowable interest rate for payday loans but critics say it’s not enough.
Beginning Jan. 1, 2017 the maximum will drop from $23 to $17 for every $100 borrowed.
The change comes after 30-day consultation with credit counsellors, advocacy groups, loan providers and other stakeholders.
“We made a commitment to reducing the maximum charges payable on payday loans and we are doing that,” said Minister of Public Safety Mike Morris. “We strive to keep as much money in people’s pockets as possible.”
Acorn Canada said the increase is welcomed, but not aggressive enough.
“This is a step in the right direction but not enough to protect people who use these services,” said BC Acorn member and Surrey resident Anna Kowaleski, who has been caught up in the “roll over” of payday loans.
“I was definitely stuck in the cycle,” she added. “Taking out one loan, going to another lender, taking out another one to pay off the first. It’s a trap that’s so hard to get out of.”
The reduction will make B.C. the third lowest among Canada’a provinces. Alberta’s maximum lending interest charge on $100 is $15 and Ontario plans to reduce it to $15 as well by 2018.
“The government could and should do better,” said Kowaleski.
Acorn calls on the government to create a database to track loans so people can’t lend from one cheque cashing company to settle a debt with another.
In 2014, the City of Surrey cracked down on the clustering of cheque cashing centres and payday loan stores.
Surrey now requires a 400-metre separation between such operations, similar to the approach the city has taken to regular small-scale pharmacies.
The majority of such businesses in the city, according to a report at the time, were in the City Centre, Newton and Guildford area. There were 37 separate storefronts in the city in 2014, with 31 licensed as “financial agents” and 26 as “cheque cashing centres.” That overlap exists, a corporate report revealed, because some businesses have both licenses simultaneously.
In 2015, nearly 160,000 people too out a payday loan in B.C., according to information provided to Consumer Protection BC by the industry.