News - Poor Credit Payday Loans

P.E.I. Extends Review Of Short Term Loan Companies

With only two submissions in hand on its review of short-term loan companies, the P.E.I. government has extended the deadline for submissions on changes to how these companies are allowed to operate.

Some provinces already have regulations regarding companies that supply short-term loans, which are usually to be repaid at the borrower's next payday. On P.E.I., those companies only have to obey the Criminal Code, which stipulates no interest rates higher than 60 per cent annually.
While that law is obeyed, with interest rates that usually fall just under that level, the companies will add on fees that can bring the total cost of a two-week $300 loan to $100.

Jocelyn Brown of Credit Counselling Services of Canada told CBC News Tuesday the companies are taking advantage of people who are desperate for cash.

"Payday lenders themselves do carry the bulk of the responsibility in that they're not always being very transparent with consumers," said Brown.

"They're not laying out the cost of borrowing to the consumers themselves."

Attorney General Gerard Greenan said his office has received complaints on the issue, and so the provincial government set in motion of a review of how the companies operate.

"We're wondering if we want to move in the direction of putting in legislation which would put a cap on the amount of interest," said Greenan.

Other provinces have also established rules requiring companies to inform consumers of the full cost of loans.

Charlottetown resident Elizabeth Frothingham has found herself short on cash in the past, and she would like to see the government move in to better protect people like herself.

"The reason we're in our present financial situation in this world is that we've gone in and tried to figure out how we can take advantage of people who are in the lower level of the society," said Frothingham.

"They're the people who need the loans. I'm one of them. I need a loan. And it's destroying our world."

Credit counsellors predict that in this slumping economy more people will be turning to payday loans for a quick fix, but they warn quick fixes often lead to long-term pain.

The original deadline for submissions regarding short-term loan companies was Wednesday, but the government extended that on Tuesday to Jan. 16.