A Red Deer city councillor is calling a provincial review of the payday lending industry a step in the right direction.
Coun. Ken Johnston said payday regulations need a complete overhaul from the fee and reporting and self-regulatory perspectives.
The government announced that it wants to strengthen consumer protection for payday loan users earlier this week. It has launched a survey for Albertans to share their experiences and opinions on payday loans.
The survey is part of the Payday Loans Regulation review. The regulations expire on June 30, 2016.
Johnston said he is really encouraged around the dialogues with users and industry.
“It is an exciting start if we keep our eyes on the prize of a community-based solution, where people can borrow and people can do some basic banking at a fair price with some dignity,” said Johnston. “It’s a two-prong act. Reform the act and bring some lending and banking services that service that growing market.”
A payday loan is a loan of $1,500 or less that has a term of 62 days or less. The interest rates on the loans are notoriously high.
Along with Coun. Paul Harris, Johnston, a former banker, introduced a motion on the payday loan industry that called for change on a number of fronts to the council table in July.
Johnston said research has shown that payday loan services are a proxy for self-harm including premature death.
“There is too large a gap between the conventional banking system and the payday system,” said Johnston. “There is no middle industry that is able to say, ‘here’s a cheaper rate of interest. Here is better insurance for lower income people.’ There is just too big of a gap.”
After the overhaul of the industry, Johnston would like to see the emergence of micro-lending in the community.
“Let’s get something off the ground that enables somebody on an income of $15,000 a year to be able to borrow for things like replace a car engine or a damage deposit,” he said. “I think what we need right now is someone to champion that particular cause and really drive it forward.”
Council agreed to add the issue on its advocacy list to the provincial government and Alberta Urban Municipalities Association.
Over the last few months Johnston has met with Red Deer-North MLA Kim Schreiner. Johnston said she has been instrumental in advocating for change not only in Red Deer.
Currently, there are more than 30 payday loan companies operating more than 220 branches in Alberta.