2009-2011 Political Action Committee chairperson Garry Smith made a presentation about the dangers of payday loans to the Nova Scotia Utility and Review Board in November 2010.

NSGEU Political Action Committee Helps Bring Consumer Protection To 'Payday Loans' Industry

NSGEU has a long-standing interest in poverty reduction and political action. In this context, the regulation of payday loans has been of particular interest to our members and a focus of our last Biennial Convention in May 2009. In fact, there was a resolution passed at that Convention urging the union to lobby for the reduction in the maximum interest rates that can be charged.

To follow up on that resolution, the 2009-2011 Political Action Committee engaged in research on this topic and solicited comments from our members. One of the more troubling comments the committee received was from a member who is employed as an income-assistance caseworker at the Department of Community Services. This member reported to us that at least some payday loan arrangements have resulted in unauthorized access to individual bank accounts. This has apparently led in repeated attempts to remove monies from these accounts and NSF charges of over $20 to the individuals affected. This in turn meant the bank accounts of those individuals had to be closed.

In November 2010, the Political Action Committee made a presentation to the Nova Scotia Utility and Review Board as it looked into the issue of payday loans. As per the Convention resolution, the committee asked the review board to cap payday loan rates at $17 per $100 for loans up to $500; $15 per $100 for loans between $500 and $1,000; and $6 per $100 for loans between $1,000 and $1,500.”

Click here to see a copy of the committee's full submission.

In February 2011, the Utility Review Board ordered that interest rates charged on payday loans be dropped, but not as far as the NSGEU Political Action Committee asked for, from $31 per $100 loan to $25 per $100 loan.

You can read the board's decisions, which includes several other recommendations, at the UARB web site.

Do You Have A Story To Tell About Payday Loans?

The NSGEU Political Action Committee wants to hear from members and non-members about their experiences with payday loans. Were your surprised by the cost? Did you encounter hidden fees? Were you asked to hand over private banking information?

What the Nova Scotia Government Says About Payday Loans

If you are squeezed for cash you may be tempted to apply for a payday loan — but make sure you know your facts before you do. Payday loans are high-cost loans. The maximum allowable cost of borrowing is $25/$100 in Nova Scotia.

Payday loans are usually due to be repaid with the next pay cheque you receive. Lenders may charge different rates if you’re able to pay the loan back sooner. If you cannot afford to make the full repayment wth your next cheque, you may be faced with more fees and interest.

The provincial government regulates the lenders who make these loans. They are licensed and must follow several other rules.

• The maximum cost of taking out a payday loan is $25 for every $100 borrowed
• The maximum charge for missing a payment is $40. You can also be charged up to 60% interest (annual interest rate) if you pay late.
• Look for a sign at the lender’s place of business that shows the cost of borrowing.
• This is calculated on a $300 loan due after 14 days.
• The calculations must show the total that must be paid and the annual interest rate.

The cost of borrowing was reduced by the Nova Scotia Utility and Review Board, effective April 1, 2011. You can read the board's decisions, which includes several other recommendations, at the UARB web site.