Court stomps on Manitoba's attempt to regulate payday loans

79 posts / 0 new
Last post
Agent 204 Agent 204's picture
Court stomps on Manitoba's attempt to regulate payday loans

Damn it:

Quote:
The Doer government has suffered a big setback in its attempt to regulate the payday loan industry in Manitoba.

A Manitoba Court of Appeal decision released today said payday lenders were unfairly treated by the province’s Public Utilities Board (PUB) when it set lending rates last spring for the payday companies. The PUB was acting on a move by the province to regulate the industry, which has been tarnished by high lending rates.

The court decision opens the door for The Cash Store Financial Services to argue the PUB
acted beyond its scope in setting rates. The April 4 decision by the PUB capped the maximum cost of credit at 17 per cent for loans up to $500; 15 per cent for $501 to $1,000; and six per cent for loans between $1,000 and $1,500.

Payday loan companies cried foul saying the lower rates would drive many of them out of business.

Winnipeg Free Press

Sven Sven's picture

I think one of two solutions might be good:

(1) prohibit payday loans entirely or

(2) concerned citizens should go into the business of offering payday loans themselves at rockbottom interest rates.
_______________________________________

Eleutherophobics of the World...Unite!!!

Coyote

They ought to do business with a balaklava on.

Tommy_Paine

I think one of two solutions might be good:

 

Here's a third: 

Hang them from lamp posts.

farnival

Coyote wrote:

They ought to do business with a balaklava on.

 

better yet, make them do business wearing baklava. it's as sticky as their fingers!

 

Fidel

Sven wrote:

I think one of two solutions might be good:

(1) prohibit payday loans entirely or

(2) concerned citizens should go into the business of offering payday loans themselves at rockbottom interest rates.

I remember reading about one Canadian who did something similar. He began making micro loans to people in his community, I think it was one of the prairie provinces. His interest rates were very competitive with the big banks. Not only was he undercutting big bank rates, he was making lots of money with car loans to young and old people, mortgage helpers, reno money, anything. And most of the locals he loaned to paid him back.  The feds shut him down.

 

carousel99

edited by moderator to remove commercial spam

nussy

Did you pay for the add? 

abnormal

Sven wrote:

I think one of two solutions might be good:

(1) prohibit payday loans entirely or

(2) concerned citizens should go into the business of offering payday loans themselves at rockbottom interest rates.

Agreed - I'd lean towards option (2).  That way you'll prove that payday loan companies really are ripoff artists (or not). 

You should be able to clean up - after all, if your fees and interest rates are so much lower than anyone else's you'll literally pick up all the business.  All the existing firms will have to cut their rates to match or go out of business.

 

 

Unionist

Wpg Free Press wrote:
The Doer government has suffered a big setback in its attempt to regulate the payday loan industry in Manitoba.

If the Doer government wants to regulate the industry, all they have to do is enact some legislation. They haven't bothered to do that. So it's hard to see how they could have suffered a "big setback" if they haven't even gone to the trouble of drafting a bill yet. A majority government should be able to do that in about five minutes flat.

 

Coyote

It's Manitoba's 2006 legislation that was challenged in court, unionist. so yeah, i guess that qualifies as a "setback".

Unionist

You may well be right, but the article doesn't describe a challenge to any legislation - it describes a challenge to a ruling by the Public Utilities Board. Do you have a link explaining how some legislation was challenged, what the legislation says, what the challenge was?

Coyote

[url=http://www.cbc.ca/consumer/story/2006/11/28/payday-loan.html]Story[/url] from 2006.

 

The act established the PUB as the rate-setter for payday loans. As noted in the story from the OP, the ruling opens up room to challenge the ability of the PUB to set rates (as exemplified by a court overturning the PUB's decision).

 

IANAL, nor an expert on financial matters, but my understanding is that the main conflict is the ability of a provincial body to regulate a "financial institution" (not sure that these pariahs should qualify as such, but anyway) - which is under federal jurisdiction.

Fidel

[url=http://americas.irc-online.org/am/6190]NAFTA'S Serfs: From Wage Slavery to Debt Slavery[/url]

 

Quote:

A Model Made in the USA

The modern credit-based economy taking shape in Mexico was perfected long ago in the United States. As unions declined, inflation rose, and wages soured after the 1970s, North American workers compensated for their loss of wage income by relying on varied credit instruments offered by the burgeoning financial sector. Home and equity loans, cash advances, payday loans, credit cards, auto and student loans, and later subprime mortgages all became the defining parameters of an individual North American's lifestyle. In contrast to the collectively bargained raises and benefits of previous decades, workers' standards of living were more and more determined via individual negotiations with a host of lenders. And the cost of the new economic relationship was not cheap.

A key turning point came in 1978, when the Supreme Court decision, Marquette National Bank vs. First of Omaha Service Corp, struck down the ability of states to cap interest rates on credit cards issued by out-of-state banks. Deregulation of financial institutions by successive Democratic and Republican administrations followed.

At the state level, the predatory lending industry thrived amid weak regulatory structures and friendly, cash-seeking politicians. In some instances, interest rates on payday loans hit an unheard-of level of 1,100%.

"The law against usury has existed from the time of the Babylonian Empire, and we have now dismantled it," wrote author Thomas Geoghegan recently in Harper's magazine...

 

It's a good read. And I still loathe the Mulroney sellouts and Chretien Liebrals for foisting the neoliberal voodoo on Canadians like they did.

Unionist

Coyote wrote:

IANAL, nor an expert on financial matters, but my understanding is that the main conflict is the ability of a provincial body to regulate a "financial institution" (not sure that these pariahs should qualify as such, but anyway) - which is under federal jurisdiction.

Thanks, Coyote.

Meanwhile, I've located the [url=Manitoba">http://www.canlii.org/en/mb/mbca/doc/2009/2009mbca1/2009mbca1.html][colo... Court of Appeal decision[/url]. It appears you were mistaken. There is no challenge to the legislation itself, nor to the province's jurisdiction. The challenge essentially claims that the Public Utilities Board exceeded its jurisdiction under the existing provincial legislation (the Consumer Protection Act) when it imposed certain interest rates on loan companies.

Furthermore, the Court didn't decide the matter. All it did was grant a stay of the PUB order while the full appeal could be heard. Who knows when that will happen.

The government could bypass this process in 5 minutes (as I indicated earlier) by curing any jurisdictional issue the PUB may have, because it's all with respect to a Manitoba law. Instead, for some incomprehensible reason, the government announced one year ago that it would await the outcome of this appeal process before taking any further measures:

[url=http://news.gov.mb.ca/news/index,print.html?item=3996]Manitoba govt. press release, July 8, 2008[/url]

Quote:

"The PUB order and the federal designation are now in place, so the final step is for the balance of the legislation to come into force," said the minister. "Government announced in May this could happen in the fall and that continues to be our goal. It has been a long journey but we have now progressed to the point where borrowers can expect to be protected against exorbitant fees and potential abusive industry practices."

The minister noted that a Manitoba payday lender is attempting to appeal the PUB order to the court of appeal.

"The court of appeal has moved quickly to get itself in a position to decide whether there is any basis for an appeal," said Selinger. "Our current intention is to wait until after the court makes that initial decision before making any further comments about dates when we can begin to regulate payday loans."

[emphasis added]

Well, the Court made "that initial decision" last January. What has the government done since then to protect Manitobans against the loan sharks?

 

 

Fidel

[url=http://americas.irc-online.org/am/6190]NAFTA'S Serfs: From Wage Slavery to Debt Slavery[/url]

Quote:

In 1996, as part of its push to liberalize all manner of goods and services, the Mexican government opened up the pawn shop market. By 2008, an estimated 4,500 branches of privately-owned pawnshops were up and running, including businesses affiliated with the U.S.-owned First Cash Financial Services and EZCorp. Citing news accounts, Texas State Senator Eliot Shapleigh, a prominent predatory lending critic, noted in a statement that EZCorp-now a transnational company-netted a net income of $52 million from $457 million in revenues earned during 2008.

Blaring dance music into the streets, running Valentine's Day "specials," and sometimes even stationing costumed, dancing promoters outside their doors, pawnshops are now a gaudy addition to the Mexican business scene. One company has even created a comic book-like character, "Super-Billete," or "Super Buck" to rescue consumers "in this time of crisis." More than two million Mexicans are officially without work, and cash-hungry Mexicans can wander down to the local branch of Prendamex or Prendalana to hock granny's wedding ring at interest rates ranging from 130% to 156%.

With limited personnel and resources, the Mexican government is hard-pressed to regulate the plethora of new pawnshops and payday lenders.

 

DAY-O!

Coyote

I know probably as much about all this as you do, and I think we are googling at about the same rate :)

[url=http://www.gov.mb.ca/chc/press/top/2009/04/2009-04-08-141200-5650.html]T... is from April of this year.

 

Quote:
The bill would:

· Rescind the Public Utilities Board order that set maximum rates on payday loans.

 ·  Allow maximum loan rates to be set out in a regulation.

 ·  Change the role of the Public Utilities Board from its current mandate as a rate-setting body to one of an advisory body in relation to payday loans. In the future, the board would continue to conduct public consultations and would make recommendations to government respecting the maximum rates that could be charged for payday loans.

·  Allow the board to make recommendations on other matters respecting the regulation of the payday loan industry such as provisions relating to business practices and enforcement.

 ·  Create a financial literacy fund to help ensure that borrowers have information to help them make sound financial decisions.

·   Allow for the licensing and regulation of Internet payday lenders.

It appears to be an attempt to get around the potential jurisdictional issue. and there is a jurisdictional issue. Permissible interest rates are set out in the federal criminal code; the province is attempting to do this as a matter of consumer protection. Most news stories I'm reading seem to indicate the other provinces are playing close attention because Manitoba is the first province to attempt this kind of legislation; it's kinda uncharted territory.

 

Coyote

I understand there was no challenge to legislation itself; but the ability of the PUB to set rates is set out in legislation and as such it is that provision of the legislation which is in question.

the Judge has instructed the government not to carry out the PUB's order until the matter is decided in court.

Fidel

Viva Manitoba! Viva Gary Doer! Go NDP! Laughing

Unionist

Ok Coyote, I found the relevant passage about federal-provincial jurisdiction (see above-linked full text of decision). There were originally six (6) grounds of appeal. Here was ground 4 - the only one which challenged, not the provincial law, but rather the PUB's order, with intruding on federal jurisdiction:

Quote:
(4)        The PUB erred in law and exceeded its jurisdiction by purporting to regulate interest and fees with respect to debit cards and credit cards owned by banks which are federally regulated.

And here was the Court's decision on that ground:

Quote:

26                 In the circumstances here, I am not prepared to grant leave with respect to grounds 2 or 4 as advanced by the applicant.  While the findings attacked under ground 2 may be offensive to the applicant, and perhaps others in the industry, ground 2 is not of sufficient importance as that term is understood to warrant the attention of the court.  As regards ground 4, I reach a similar conclusion and, as well, find that in the circumstances here present, an arguable point has not been raised.

Sorry it's a bit tortuous, but all the remaining four (4) grounds relate to matters that the province could unilaterally cure.

 

Fidel

So why didnt they cure it in sunny Maico? Or even the USSA, that model country south of us to which we've tied our neoliberalized  wagon and economic fortunes to and now enduring unprecedented debt-driven crisis after crisis? It's like 1985 Chile all over again except that it's working the magic for us here in richest countries.

And don't be afraid to step in here and place blame where it lies, Unionist. We know how much you hate federal Liberals and Tories past and present for selling us down the Mississippi.

Coyote

It appears we're both right. You, that it is provincial in scope. And me, that the legislation proposed above is Manitoba's response. If I'm reading this right, that's exactly what they did. I also think that legislation passed this past session. Let me check that.

 

Coyote

What the? Fidel, unionist and I are both trying to sort through this. Please contribute to the substantive discussion or take your feuds elsewhere.

 

Unionist

Yeah, Coyote, I see what you're saying. The news release appears to remove the rate-setting power completely from the PUB (which is what formed the basis of appeal) and put it in the hands of Cabinet (via direct regulation). Great move, if I'm reading it right.

 

Coyote

[url=http://www.winnipegsun.com/news/manitoba/2009/01/07/7949406.html]Story from the day after the OP[/url].

 

Quote:

Manitoba's provincial government made a move today that will allow it to carry on with planned regulation of the payday loan industry and may render a court challenge by a payday lender essentially moot.

Manitoba's Court of Appeal recently agreed to allow The Cash Store to challenge the authority of the provincial Public Utilities Board to cap the rates payday lenders could charge their customers. But now that the company has the right to formally challenge that authority, the government has said it will change the rules and regulate the rates itself, rather than having the PUB do it.

Finance Minister Greg Selinger said The Cash Store has the right to challenge that authority too, but suggested they wouldn't be successful.

"I don't think there's any doubt the government has the right to protect consumers," Selinger said.

 

If I am not mistaken that is the legislation I linked to earlier.

Unionist

We're crossposting, Coyote, and we've come to the same conclusion. Congrats to the Manitoba government. Now we need an update as to where that new legislation is at...

Fidel

I'll be looking for something more straightforward on this than Unionist's usual anti-NDP rhetoric. It's not that I dont trust Unionist's expertise on banking in Canada. I dont trust the Liberal and Tory weasels who privatised the remainder of money creation and credit in this frozen Puerto Rico over the last 20 years.

Unionist

Coyote, you can't win here. The only thing he hates more than someone responding to him is no one responding to him. So just keep posting as if he doesn't exist. Trust me, it gets easier with practice.

 

Coyote

It has passed. Scroll down to Bill 14 (warning: PDF). Proclaimed June 11, 2009.

[url=http://www.gov.mb.ca/legislature/bills/billstatus.pdf]Hansard[/url]

 

Maysie Maysie's picture

Fidel please comment on the topic being discussed. And stop attributing things to Unionist that are clearly attempts to provoke a response. 

Thank you.

madmax

Crush the Payday Loan Parasites.

jas

If you're going to crush the payday loan companies (and I'm guessing regulating the interest could send many of them packing), you'll have to legislate banks back into poorer neighbourhoods, or people in those neighbourhoods will have no money or banking services whatsoever.

bagkitty bagkitty's picture

Jas - or reinvigorate the credit union/caisse populaire systems, or borrow a page from Alberta's Social Credit days and create an equivalent of ATB (Alberta Treasury Branch - a government agency that is a bank in all but name, a wonderful tool for provincial governments to use in something that is under federal jurisdiction... of course it helps to have a provincial government that is actually willing to USE the tool...)

Snert Snert's picture

Quote:
If you're going to crush the payday loan companies (and I'm guessing regulating the interest could send many of them packing), you'll have to legislate banks back into poorer neighbourhoods

 

If, for the sake of argument, we take it as a given that the high rates and extra fees at payday loan outfits are nothing more than usurious greed and exploitation, wouldn't banks and credit unions be delighted to move into these neighbourhoods and get all that business?

Fidel

Ya, who would the poor borrow money from to finance their new sports cars and jewelry every year? Without loan sharks preying on Canada's $10 and $20 thousand dollar a year capitalists, they'll just have to save up to be rich I guess. I think the most important thing to remember is that there is no alternative. And don't even think about it. Because, as we know by now, resistance is futile, said the evol borg queen.

abnormal

madmax wrote:

Crush the Payday Loan Parasites.

I know I posted it previously but the easy way to do that is to set up your own company and charge much lower fees.  Not only will that force the existing payday loan companies to cut their rates but you'll be providing what seems to be a necessary service.

The mercenary in me says you'll clean up but that's not the important thing.  You'll be demonstrating that there is no need to charge the sort of rates that the existing entities charge.  Otherwise I have to ask why nobody else (the big banks?) want to participate in this market.

Politics101

"I know I posted it previously but the easy way to do that is to set up your own company and charge much lower fees"

A Walmart of the payday loan business - sounds intriguing.

Unionist

How far would you cut fees and still be able to finance bricks, mortar, labour, and risk, abnormal, given the short-term nature of the loans?

 

abnormal

Unionist wrote:

How far would you cut fees and still be able to finance bricks, mortar, labour, and risk, abnormal, given the short-term nature of the loans?

 

I'm not sure what your point is.  Are you saying those rates are necessary for the business to operate?

Common sense says that, if the rates they're charging are unreasonable somebody should be able to set up shop, charge reduced rates and drive the existing competitors out of business - as previously noted essentially be the WalMart of loans.

If, on the other hand, those rates are necessary to "finance bricks, mortar, labour, and risk", then the existing companies are doing nothing wrong.

Or is the unethical thing loaning money to the payday loan companies' customer base in the first place? 

So which is it?

Unionist

Do you always answer a question with a question?

You suggested these firms could be driven out of business by charging lower rates. I asked - how much?

Fidel

abnormal wrote:

If, on the other hand, those rates are necessary to "finance bricks, mortar, labour, and risk", then the existing companies are doing nothing wrong.

Financing bricks, mortar and labour? Payday loan sharks ? Are you out of your mind? These jackals are doing nothing but draining money from poor people and what is the second or third-largest lowly paid, non-unionized workforce in the developed world here in Canada.

abnormal

Unionist wrote:
Do you always answer a question with a question? You suggested these firms could be driven out of business by charging lower rates. I asked - how much?

I have no idea - all I can say is that, unless you want to simply legislate pay day loan companies out of business (i.e., thou shalt not make this sort of loan) common sense says that someone else can do the same thing for less and still make a "fair" profit (whatever that may mean).

And Fidel - the "finance bricks, mortar and labour" comment was actually unionists, not mine. I was simply responding to his post.

But back to our regularly scheduled programming - if payday loans are such a lucrative business, why aren't the banks and credit unions in there pitching?

Fidel

Oh? Sorry. So this is to add to Sven's either-or democratic option in post#1:

Option 1.5)  Use our still nationalised Bank of Canada for its intended purpose, and finance all manner of public works and national affordable housing across the country and paying workers a living wage.  A little public enterprise and introducing competition for the big six private banking monopoly and credit sharks would be a good thing.

abnormal

And Fidel, as usual, what does your post have to do with the subject under discussion?

Fidel

abnormal wrote:

And Fidel, as usual, what does your post have to do with the subject under discussion?

Well my comment is sequitur to Sven's in post number something or other above. You'd have to be following along for these ideas to make sense. But the general idea is to solve the real issue as to why the working poor in Canada are taking out payday loans in the first place ie. their lack of money for spending on basic necessities, negative savings rates among the working poor and those barely scraping by in Bananada. And if you have anymore questions that are genuinely inquisitive, combative or otherwise, then, please, feel free to ask.

 

Snert Snert's picture

Quote:
You suggested these firms could be driven out of business by charging lower rates. I asked - how much?

 

Enough to attract customers to your new loan outfit, one would assume. Are you hoping for some kind of exact figure, like "1.244% less"?

 

I think abnormal is asking an excellent question. If the rates are just pure highway robbery, why isn't anyone undercutting them and getting a piece of the revenues?

Unionist

Snert wrote:

I think abnormal is asking an excellent question. If the rates are just pure highway robbery, why isn't anyone undercutting them and getting a piece of the revenues?

Frankly, it's an "excellent question" that presupposes that wild unregulated capitalism is a perfect system which delivers perfectly utilitarian results to a community of free individuals.

It's as "excellent" a question as: What's wrong with usury anyway!? If people don't like the 950% interest rates, they can take their business elsewhere!

One wonders why Jesus had to bother using violence against the moneylenders, when the Invisible Hand would have done the trick just as well.

By the way, Snert, your reluctance to even hazard a guess as to what a fair rate of interest might be (give it to me plus or minus 5 percent, if you don't want to be tied down) illustrates the need to ban usury by legislative coercion, and force banks, credit unions etc. to provide replacement short-term loans at extremely reasonable rates as part of their right to do business in our communities.

HeywoodFloyd

bagkitty wrote:
... of ATB (Alberta Treasury Branch - a government agency that is a bank in all but name...

Technically it is the other way around. ATB is a bank with one shareholder (the AB Gov't). So it is a branch of the gov't in all but name.

Snert Snert's picture

Quote:
Frankly, it's an "excellent question" that presupposes that wild unregulated capitalism is a perfect system which delivers perfectly utilitarian results to a community of free individuals.

Um, no. It asks why, if the rates charged by payday loan outfits are primarily driven by obscene profits for the operators of those outfits, someone doesn't take a slightly less obscene profit margin in order to undercut the existing outfits. Evidently you either have no answer, or have one but would prefer not to say it out loud.

Quote:
By the way, Snert, your reluctance to even hazard a guess as to what a fair rate of interest might be (give it to me plus or minus 5 percent, if you don't want to be tied down) illustrates the need to ban usury by legislative coercion, and force banks, credit unions etc. to provide replacement short-term loans at extremely reasonable rates as part of their right to do business in our communities.

Um, no.  It illustrates the fact that I'm not a business analyst and cannot tell you, off the top of my head, exactly how much of a reduction in rates would be sufficient to woo customers away from the existing lenders.  Nor are we there yet.  Nor is the exact amount really important.

Fidel

Michael Hudson referred to these payday loan parasites as merchants of misery. They should be lined up against a cement wall at dawn and charged way too much money for the blindfolds and last cigarettes.

Snert Snert's picture

Can I assume that Michael Hudson regularly lends money at more reasonable rates, and therefore knows what is or is not reasonable?  Or does he just sit on the sidelines and pronounce?

Pages