Nova Scotia Backs the Market

I teased yesterday that there would be big news coming down the wire this morning. After months of deliberation and after allowing input from interveners on the decision of the Manitoba Public Utility Board, the Nova Scotia Utility and Review Board issued its order this morning on the maximum allowable rates for a payday loan in that province.

At the crux of the issue around setting a maximum allowable rate for payday loans in any Canadian province is the debate around competition and how it can impact consumers. In Manitoba, the PUB decided that the market is not competitive enough to provide sufficient benefit to consumers. While 310-LOAN and The Cash Store argued hard for an order that would move to improve the level of competition, yielding increased benefits to consumers, the PUB decided to give up on the market by setting a maximum rate that was much lower than the rate that many lenders required in order to remain viable - ultimately reducing competition. In Nova Scotia, the Utility and Review Board saw it differently and has elected to encourage a competitive market. Today they ordered that the maximum allowable rate for a payday loan in Nova Scotia will be $31 per $100.

Here are some snippets from their decision:

The Board concludes that it should adopt a Market Approach to determine the maximum cost of borrowing.

Increased competition, accompanied by improved disclosure to borrowers, will afford proper protection to consumers. Fostering an environment which requires better disclosure, and which provides more regulatory certainty, should allow existing payday lenders to continue to operate in the Province and should encourage new payday lenders to enter the marketplace. The Board received, and accepts, expert evidence given at the hearing which outlined the benefits of increased competition in the marketplace. The Board considers it should set a rate that will foster a healthy and competitive marketplace.

I will follow-up with industry and media reaction as it becomes available throughout the day.

The full board order is available here.