Canadian payday lenders pay penalties

The Federal Trade Commission (FTC) in the United States has been coming down on the payday lenders. Our neighbors to the north in Canada have also recently launched a campaign to crack down on fraudulent practices of payday loan lenders. A recent crackdown required payday loan companies to pay tens of thousands of dollars in penalties and to reimburse customers whose rights were violated by the companies.

Two of the payday lenders that were part of the crackdown include the Cash Store Financial Services Inc., which operates under the name the Cash Store, and Instaloan. Both of these companies were charged with paying $25,000 each. Part of the fees was restitution paid to customers that were wronged. The rest of the fees went to reimbursing the costs that the Consumer Protection BC incurred in investigating the consumer complaints against the companies. The Consumer Protection BC is the government agency in charge of enforcing consumer protection laws—similar to the FTC in the U.S.

According to the vice president of corporate relations for the Consumer Protection BC, Manjit Bains, “In this particular situation, we received a number of complaints from consumers, which we investigated and followed up with the business, and have been working with them using our progressive enforcement options to try to get voluntary compliance. To date, we were unsuccessful.”

Canadian Payday Lenders Laws

Canada recently passed new laws and regulations for lenders of payday loans to follow. First, these companies are required to be licensed. Second, payday loan lenders are not permitted to charge more than 23 percent of the loan amount as fees for providing the loan. Third, payday lenders are not allowed to charge consumers that request a cash card and must give consumers different options on the ways they can receive the money from the payday loan. In response to the rulings, the payday loan lenders have 30 days to appeal the agency’s decision. According to Manjit Bains, “There is a process to be followed and we’ll wait to hear back from the company, which has 30 days to appeal this decision.”

This is the first time that the government agency has levied penalties against a payday loan company. The agency representatives, however, do not expect it to be the last. With 29 other complaints against other companies offering payday loans in the region, more companies are expected to feel the effects of violating consumer rights. In the meantime, payday lenders are thriving. The Cash Store Financial had annual revenues of $61.7 million, which is an increase over the $54.6 million reported in 2009. Net income increased from $14.6 million to $18.8 million in the same period.

Read more at the news source: creditloan.com

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