N.B. to set limits on payday loan fees

New Brunswick Justice Minister T.J. Burke has introduced legislative amendments that will set limits on the cost of borrowing from short-term lenders.

The changes to the Cost of Credit Disclosure Act will set limits on fees used by payday loan companies, while interest rates will be set by the province's Energy and Utilities Board.

"We've seen a historical trend throughout Canada, and in particular in New Brunswick, where interest rates have been so exorbitant that it exceeds the Criminal Code in terms of criminal interest rates," Burke said.

The current legal limit is a 60 per cent interest rate.

John Eisner, president of Credit Counselling Services for Atlantic Canada, is applauding the changes, but said it is coming too late.

People often get in over their heads when they continue to take out payday loans, because of the interest rates, Eisner said.

"We're starting to see trends of where they owe three and four different payday loans money. In other words you're in the robbing Peter to pay Paul effect, and you just keep going until everyone says no," Eisner said.

The province should also look at educating people about what they're getting into when they seek out fast cash, Eisner said.

"I think they need to put more information and material together and that should be part of the regulation," he said.

The amendments will also mean anyone seeking a loan will have to show proof of employment and will have to wait 60 days between loans.

"If they enforce it, I think we'll be seeing less payday operations, because the ones exceeding 60 per cent are just giving it to the consumer, and if it's regulated, they won't be generating some of the profits they've been generating," Eisner said.

The province is not out to get the cheque-cashing companies, but it does want to protect New Brunswickers who rely on them, Burke said.