Rising fuel costs could push some Yukoners into financial ruin this winter if they seek a quick fix.
With large heating bills, those in precarious financial positions might seek fast cash from payday-loan stores.
Those stores prey on the vulnerable and should be regulated, said NDP Leader Todd Hardy.
Consumer protection legislation should be passed this fall before winter’s high fuel costs whack residents, he said.
“There are a lot of people that don’t have the resources to cover the costs and winter could hit some people hard,” said Hardy.
A person’s paycheque is used as security for the loan.
The high-risk loans are usually for a few hundred dollars, a sum that banks are normally unwilling to provide.
Payday lenders are regularly accused of taking advantage of people in difficult situations by charging exorbitant interest rates.
Ottawa sets a maximum annual interest rate of 60 per cent under the Criminal Code of Canada.
Manitoba recently passed legislation on the back of a federal law allowing provinces and territories to regulate payday loans.
Ottawa lets provinces and territories limit interest rates and payment schedules.
Manitoba capped the interest rate at $17 per $100 on the first $500 of a loan.
A loan can be cancelled without penalty within 48 hours.
Payday loans serve a purpose, but the industry needs regulation, said Hardy.
“There’s a fine line between profit and greed,” he said.
“What’s fair? What’s a fair profit and what’s outright exploitation?”
Payday lenders prey on the vulnerable parts of our society, said Hardy.
They attract people living paycheque to paycheque, people with substance abuse problems, or families that can be financially crippled by an unforeseen expense like a furnace replacement.
“Then you have these businesses unethically charging rates that makes it impossible to pay off loans,” said Hardy.
Legislation passed in Manitoba and Ontario provides good models to emulate, said Hardy.
“The easiest thing to do is to limit how much can be charged on a loan,” he said.
Ontario introduced legislation to regulate abusive payday lending, but hasn’t set an interest-rate cap.
The province would outlaw back-to-back loans.
The “rollover loans” happen when a person takes out a loan with a payday lender to cover the costs of a previous loan.
On April 29, then-Community Services minister Glenn Hart said the government was scrutinizing payday loan regulation.
“We have reviewed, or are in the process of reviewing, payday loans similar to situations in Manitoba and other jurisdictions,” said Hart during question period.
“We are reviewing that, but we are also in discussions with other jurisdictions that don’t have regulations with regard to payday loans.”
Calls to Hart and Community Services Minister Archie Lang were not returned.
Hart probably won’t clarify his comments because he’s no longer the department minister, said cabinet spokesperson Matthew Grant.
“(Hart) might have been talking through his hat,” said Hardy.
“We haven’t seen any movement from this government to look at payday loan outfits.”
The Canadian payday loan industry hauls in almost $1 billion, according to some estimates.
A previous Yukon News investigation found an average loan from the Whitehorse Cash Store has an interest rate of 16 cents per day for every $100 borrowed.
For a 10-day $280 loan, one pays $4.48, plus a 20 per cent brokerage fee, totalling $60.68.
That’s an interest rate of close to 78 per cent.
Payday loan companies in the Yukon are regulated by federal legislation, said Fiona Charbonneau, director of consumer services.
There are no plans to create new laws for the payday loan industry, she said.
“We have, on a regular basis stayed in touch with and monitored the progress of other jurisdictions,” she said.
Hart’s comments didn’t sound like a review was underway, she added.
“There is no review being done,” said Charbonneau.
“We’re not in the process of setting up our own legislation.
“The Yukon is always interested in nationalized regulatory framework, so that’s why we’re monitoring other jurisdictions.”
If somebody had a complaint about payday loans, the territory wouldn’t be involved.
“I’m not sure it would be an RCMP issue, but it certainly is a Criminal Code activity,” said Charbonneau.
The territory to date has not received complaints, she added.
“There are measures in place that provide some level of consumer confidence,” said Charbonneau.
A two-page pamphlet with tips about payday loans is available from the territory’s Community Services website.
“A payday loan is a very expensive way to borrow money,” says the pamphlet.
It suggests several ways to avoid using payday loans and several questions to ask lenders to avoid large costs.
“The best way to avoid being trapped by debt is not to borrow, if you can possibly avoid it,” it says.
Contact Jeremy Warren at: email@example.com