Payday Loan CEO says: Free market is best

The lower rates charged for payday loans in jurisdictions outside Nova Scotia are possible because the rates are subsidized by other financial services, says the chairman and CEO of Cash Store Financial.

"There’s a large percentage of revenues that are generated from other services not related to payday advances that actually subsidize the product," Gordon Reykdal said Monday in an interview.

"That is taking place in those lower-capped areas. There’s definitely cross-subsidization."

Reykdal made the comments during a break in a provincial Utility and Review Board hearing in Halifax.

The board is reviewing provincial payday loan regulations that allow lenders such as The Cash Store and Money Mart to charge as much as $31 per $100 borrowed. Those two companies own most of the payday loan outlets in Nova Scotia.

Other jurisdictions have much lower payment caps. Payday loan charges are capped at $17 per $100 in Manitoba, at $21 per $100 in Ontario and at $23 per $100 in Saskatchewan, Alberta and British Columbia.

Reykdal, who earlier testified at Monday’s hearing, said Nova Scotia’s $31 cap, the highest in the country, reflects free-market conditions.

"We’ve always supported and recommended a market-based approach in all the jurisdictions across Canada and, quite frankly, we think that Nova Scotia has got it right and provides the best protection for consumers by allowing a free market to operate."

During the hearing, Cash Store officials said a lower cap would hurt competition by driving lenders out of the market.

Company officials said a lower cap would also force lenders to cut services and turn away high-risk borrowers.

Consumer advocate David Roberts rejected the argument that a lower cap would have to be subsidized by other financial services.

News source: thechronicleherald.ca

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