Federal government cracked down on credit card transfer fees and payday loans
Federal Liberals plan to put in place the country’s first credit card swipe fee laws, said The Blacklock reporter.
And the cabinet plans to rewrite a usury law of 1978 that regulates “ungodly” interest rates on payday loans.
âMany low- and moderate-income Canadians rely on short-term, high-interest loans to make ends meet, like paying for daily living expenses or for unforeseen emergencies,â Finance Minister Chrystia Freeland wrote in his Monday budget.
âThis leaves some Canadians living in a cycle of debt.
âTo help fight predatory lending, the Government of Canada will launch a consultation on lowering the criminal interest rate in the Criminal Code applicable, among other things, to installment loans offered by payday lenders.
The Criminal Code caps interest at 60% per year. In 2007, Parliament handed over the regulation of payday loans to the provinces. The courts have documented interest rates of 200 to 300% or more.
The Ontario Small Claims Court in a 2018 case set aside a payday loan from Cash 4 You Corp. of Brantford, Ontario. who charged $ 1,064 for a two-week loan worth $ 800, equivalent to 547.5% annual interest.
âIt’s usury,â Liberal MP Wayne Easter (Malpeque, PEI), chair of the House of Commons Finance Committee, said in a July 7 hearing. .
âIt is ungodly. I know they’re legal but, man, we’ve got to do something about it.
Ruth Stephen, research director at the Financial Consumer Agency of Canada, told the committee that about 2% of Canadians are payday borrowers.
âBut then you see that percentage increase for specific vulnerable subgroups,â Stephen said.
âFor example, 4% of low-income households use payday loans. These are 8% Aboriginal and 3% less educated individuals, and 8% lone parents.
Freeland said the firm is also proposing to regulate merchant transaction fees of an average of 1.5% charged by Visa, MasterCard and other credit card companies.
âThe pandemic has led to a rapid and significant increase in electronic payments and online transactions,â Freeland wrote.
âSmall and medium-sized businesses that have been hit hard by COVID-19 incur fees for these transactions, also known as interchange fees, which are among the highest in the world. “
Changes to the Payment Card Networks Act will be described this fall “to regulate interchange fees if necessary,” she said.
Visa and MasterCard, Canada’s largest credit card issuers, collect $ 5 billion a year in transaction fees, according to an official estimate.