Saying the measures are meant to “strengthen consumer protections and improve affordability are on the way for the most financially vulnerable,” the BC government announced today that it is amending consumer protection law in an effort to better protect people who use payday loan lending services.
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“Many British Columbians are not immune to financial hardships and have to live paycheque to paycheque,” the BC government said in a release. “With no other choice but to seek high-cost loans from alternative lenders, they are often faced with terms and conditions that may be more than they can afford.”
For example, payday lenders in the province are legally allowed to charge a rate of $15 for every $100 borrowed.
Turning to these high-cost loans or other similar products “could potentially leave the borrower trapped in an endless cycle of debt payments, plunging them further into poverty.”
In response, the province said it has created a new regulatory framework meant to help British Columbians who use high-cost credit products “to afford these types of products more readily and be better informed about borrowing money.”
The government said this new framework builds on previous changes, which introduced tougher rules on payday loans and cheque-cashing fees.
To strengthen protections for consumers, the proposed amendments to the Business Practices and Consumer Protection Act include rules to:
- Create borrowers’ rights and remedies;
- Set limits on the total cost of borrowing;
- Prohibit certain fees and charges;
- Restrict the use of borrowers’ personal information;
- Protect people from wage assignment, terms and conditions that are unfair, potentially harmful and expensive “hard sell” options, as well as enticements to enter into high-cost credit product agreements;
- Require businesses that provide high-cost credit products to be licensed by Consumer Protection BC;
- Enable Consumer Protection BC to enforce the act’s amendments and future regulations.
In addition, changes to the act, if passed, will further build on changes from 2018 to strengthen payday lending laws, with new changes that include prohibiting the sale of insurance on payday loans.
A new consumer financial education fund will be established under the act to enhance consumer financial education throughout the province. The fund will be administered by Consumer Protection BC.