310-LOAN Responds to Manitoba PUB Decision

The Manitoba Public Utility Board decision on April 4th was the big news in the Canadian payday loan industry recently. The next big news will likely come when the Nova Scotia Utility and Review Board rules on the maximum allowable cost of credit in that Province.

In response to the Manitoba ruling, the Nova Scotia Board invited interveners to offer their input on the Manitoba decision. 310-LOAN, along with the rest of the interveners, submitted their response today. 310-LOAN's full response is available here. This is what they concluded:

The PUB’s order will reduce the number of lenders in the Manitoba market and limit the number of people who will qualify for a payday loan. Because the rates stipulated by the PUB are drastically lower than the cost of issuing those loans for many lenders, the magnitude of the aforementioned reductions is likely to be severe.

With their order, the PUB set out to reduce the financial impact of payday loan use on Manitoba borrowers. They acknowledged that their order will force some borrowers to “do without,” but were satisfied that those who do obtain payday loans in the future will enjoy a dramatically lower rate.

The PUB has erred in its failure to accurately account for the impact its order will have on those who will no longer have access to the product. Barring a dramatic change in economic conditions that affords every Manitoban abundant savings and a good credit rating, the number of people who find themselves in need of short-term, small-sum credit will not change in the near future. While those who still qualify for a payday loan will save 20% to 50% on their future loan, those who cannot access the product will see their costs rise, some quite dramatically.

As the Policis study illustrates, some newly excluded borrowers may pay up to ten times the amount that they currently pay in order to borrow $100 from an illegal source of credit. Some will temporarily relinquish their personal assets in order to obtain a pawn loan and others will do without. Of the borrowers who do without, those who knew how to weigh the difference between the cost of a payday loan and the cost of bouncing a cheque will be worse off.

The net benefit to Manitoba customers is difficult to measure. Some borrowers will enjoy much cheaper payday loans and others will be forced to deal with less pleasant and far more expensive sources of credit. While well intended, it is our position that the Manitoba PUB order has needlessly abandoned an entire class of borrowers and in doing so contradicted its consumer protection objective.