The Nova Scotia Utility and Review Board has ordered a slight reduction in the cost of payday loans from $25 per $100 borrowed to $22. The new rate takes effect on May 1.
In a decision released last week, the board asked the provincial government to consider ways of placing restrictions on repeat and multiple loans. It also requested that the government require payday lenders to post clear displays showing how much it would cost to borrow money using alternative financial services such as a credit card loan or a bank line of credit.
As I reported in a feature article published last August in The Coast, payday loans are the most expensive way to borrow money with interest rates akin to legalized loan sharking.
At the new rate of $22 per $100 borrowed, for example, a 14-day, $500 loan would cost $110, a rate that works out to just over 573% on an annual basis.
The Board heard evidence that $500 borrowed for 14 days on a credit card with an annual 20% interest rate would cost $8.33, while $500 borrowed on a bank line of credit at 8% interest would cost $3.33.
When I interviewed Mark Furey, the minister in charge of payday lending regulations for the Coast article, I asked whether the Liberal government would consider requiring credit unions to offer small loans at lower interest rates.
“My mind’s not closed, I don’t wear blinkers,” Furey said. “It’s certainly an option and an opportunity we could explore as government.”
Now that the Utility and Review Board has cut rates by such a tiny amount, it may be worth asking the minister that question again.