According to a recent report, Albertans are among the largest users of payday loans in Canada, with 5.4% of adults being payday loan borrowers.
A Vancity report issued Thursday examining the short-term gain and long-term pain of payday loans found that over 5.4% of people in Alberta use the loans, only second in size to B.C. (5.5%). Comparably, Saskatchewan has 5.4%, Manitoba has 3.9%, and Ontario has 4%.
“A payday loan is a small dollar, short-term loan that borrowers commit to paying back when they receive their next paycheque, usually within 14 days,” says Vancity. “Since many borrowers are unable to pay back the full amount of the loan in such a short period of time, many individuals resort to taking out additional loans to pay back the initial loan. Payday loans therefore often lead borrowers into a cycle of debt, from which it can be difficult to escape.”
153,000 people in Alberta claim to be payday loan borrowers with the average loan size being $472, the largest out of B.C., Ontario, and Nova Scotia.
The top three reasons why Albertans use payday loans are to access emergency money to pay for necessities, to cover unexpected expenses, and to avoid late charges on bills.
According to payday loan regulation in Alberta, borrowers can take out a loan as large as $1,500 no matter their net pay. But the loans come with high fees and interest rates. For example, borrowing $100 for two weeks incurs a $23 fee, which is equivalent to about a 600% annual interest rate.
“The provincial government of Alberta has been conducting a survey to assess the province’s payday lending industry to strengthen consumer protection laws for payday loan borrowers,” says Vancity. “Alberta launched this survey in response to concerns about the high interest rates being charged by payday lenders. Provincial authorities say they hope to announce new payday loan regulations in March 2016.”
Just recently in Calgary, city council voted to restrict the number of payday loan operators per region so that lenders cannot cluster in poor areas. The new rule restricts payday loan operators from residing within 400 metres of each other, similar to to the current liquor store legislation.