The B.C. government wants to create new rules for lenders who offer instalment loans, under legislation introduced Tuesday.
VICTORIA – The B.C. government wants to create new rules for lenders who offer instalment loans, under legislation introduced Tuesday.
Solicitor General Mike Farnworth said proposed changes to consumer protection law will create a licensing and regulatory system for businesses that offer instalment loans, as well as ban some practices the government considers unfair.
“This bill aims to better protect consumers from potentially harmful and predatory business practices,” he said. His ministry said in a news release that the current system allows for low-income British Columbians to be trapped in an endless cycle of debt payments that furthers their poverty due to high-cost and high-risk lending practices by some businesses.
British Columbians are among the largest users of payday loans in Canada, according to past surveys.
The changes would build upon measures from 2018 that tightened rules on payday-lending and reduced the maximum fee lenders can charge to $15 per $100 borrowed. Payday loans are high-cost loans for people seeking $1,500 or less for a term of 62 days or less.
Tuesday’s legislation focused on instalment loans, which are for greater amounts up to $10,000 and, unlike payday loans, offer repayment over several instalments.
The legislation proposes new limits on the total cost of borrowing, as well as a ban on some types of fees, charges and incentives (such as prizes or rewards) for taking out a loan. There are also proposed restrictions on the use of personal information from borrowers, and changes that would protect consumers from what government calls “hard sell” options and enticements that lure people into high-cost and potentially unfair agreements.
Farnworth and the association representing alternative lenders have planned a 2 p.m. news conference Tuesday to further detail the changes.