Manitoba Amends PUB Role

For the better part of six months, spanning the second half of 2007 and into 2008, payday loan stakeholders spent a great deal of time participating in a public hearing process held in front of the Manitoba Public Utilities Board (PUB) to determine the maximum allowable rate that lenders could charge.

If you follow this blog then you will be well-versed in the PUB process and its outcomes. If you are new to this blog then the Coles Notes version is as follows: The PUB ruled that lenders could charge a maximum of 17% of the loan amount up to $500 and even less for larger loans (the current average rate in Manitoba is around 25%). Based on the balance of the evidence presented at the hearings, this was a rate that would almost certainly create a monopoly in Manitoba because there is only one company at present who can afford to offer payday loans at a rate that low and still remain financially viable. In response to the PUB decision to cap rates at 17%, The Cash Store (formerly Rentcash) took the PUB to court, challenging their decision on the grounds that the PUB overstepped their jurisdiction by issuing an order that was sure to put the majority of the industry in Manitoba out of business. The Manitoba Court of Appeal granted The Cash Store leave to appeal and now the case is waiting to be heard.

In January, we learned that the Manitoba government had decided to bypass the PUB decision and make their own decision on a rate cap for payday loans in Manitoba. Today, they tabled legislative amendments to do just that. In a press release that went out this afternoon, the government has proposed amendments to their legislation that will remove rate setting powers from the PUB and allow the government to set rates themselves though regulations. Here are the details:

A bill which proposes amending the Consumer Protection Act to revise the role of the Public Utilities Board in establishing the maximum cost of credit for payday loans was introduced today by Finance Minister Greg Selinger.

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.

Full Release: Manitoba Proposes Changes to Payday Loan Legislation