Payday Loans in New Brunswick

- by Sarah Connelly

Payday Loans around the World – Chapter 7

Basic Information about Payday Loans in New Brunswick

Payday loan services are declared legal under section 347.1 of the Canadian Criminal Code. In 2006, Parliament amended the Criminal code to allow the provinces of Canada to regulate the payday loan industry. In 2008, the province of New Brunswick laid out a regulatory framework for licensing payday lenders but has not yet determined the maximum interest rates. Until this occurs, the federal government is unable to issue an exemption to the province under Criminal Code section 347.1 – making payday loans in New Brunswick effectively illegal at any rate over 60% per annum.

Payday Loans in New Brunswick

  • According to the current legislation, the charges for a $100 loan are between $24 to $25.
  • The expected change from the draft law of 2016 is the maximum cost of credit a person can be charged will be $15 per $100 advanced under a payday loan.
  • The maximum amount of credit a payday loan lender would be allowed to extend to a borrower is 30% of their net pay or other net income that the borrower will receive during the term of the payday loan.
  • If the borrower defaults on a payday loan, the lender may charge a penalty not exceeding 2.5% per month on the amount of the loan in default. A maximum penalty of $20 could be charged for dishonored cheques or preauthorized debit payments.

Market and Industry research of Payday Loans in New Brunswick

The Consumer Council of Canada have introduced the rates and limits on payday loans for this province which are laid out in the table below. New Brunswick’s regulation have not been legislatively approved, so as we can see from the table, most lenders charge $24 or $25 for every $100 borrowed. Also, the borrowing limit and APR are not available. There is a cancellation period of 48 hours, excluding Sundays and holidays.

Maximum fee per $100 borrowed

APR disclosure

Borrowing limit

Cancellation Period

Maximum NSF Fee

Post default interest rate

$24/$25

N/A

N/A

48 hrs., excluding Sundays and holidays

$40

The payday loan situation is about to change with the new upcoming legislations. In July 2016, a trial regulation was circulated by the New Brunswick Department of Finance for public comment. Tony Irwin, President of the Canadian Payday Loan Association, which represents some payday lenders, including the industry leader Money Mart, compares the charges in Nova Scotia with $22 and Prince Edwards Island with $25, which suggests that the $15 charge in New Brunswick will soon be different. Members were asked how the changes in regulations would affect lenders’ abilities to offer payday loans in New Brunswick. The 15% rate would make it difficult for some companies to operate, especially in light of the proposal to limit loans to 30% of a borrowers’ income.

In addition to Tony Irwin, there are many other people that agree to the new regulative. The Executive Director of the Saint John Human Development Council – Randy Hartfield, says that these regulations will show a lot of respect to borrowers and are very favorable. Although he is pleased with the draft regulations, he doesn’t address the issue of borrowers entering a cycle of repeat loans that they find hard to stop. In Development Councils’ 2015 report in March, it is pointed that a 14 day loan must be paid off on the next payday – leaving many borrowers unable to cover their rent and other bills, unless they take out another loan that also must then be paid off on the next payday along with the hefty borrowing fees. Hatfield suggest that New Brunswick should consider adopting regulations from British Columbia that allow borrowers who have taken out three payday loans in a 62-day period to repay the money over two or three pay periods instead of just one.

New Brunswick’s Green Party leader, David Coon, also favors adoption of longer repayment periods for repeat borrowers. He is concerned that the proposed regulations would allow lenders to charge a fee of five dollars to cash a government cheque worth up to $2,500 and $10 for cashing a cheque above that amount.

Competition with Payday Loans in New Brunswick

While doing the research into the best payday loans in New Brunswick, we found a few sources about companies that operate in this province. One of the sources is the Yellow Pages of Canada, which says that there are 75 payday stores in New Brunswick. Out of them, 59 have a higher rating and the highest rated company is the Parlour Pawn Shop, based in Moncton.

In addition to the physical location, there are several online payday lenders that operate in this state. According to a research by the Consumer Council, there are 6 online payday loan sites:

Here’s what you need to know…
  • https://www.310loan.com/new-brunswick-loans
    • $25 per $100
    • Borrowers can get their cash within 30 minutes of approval
    • First time borrowing up to $600, then up to $1,500
  • http://www.mynextpay.ca/
    • Services loans up to $1,500
    • Payday advance loan up to 15 days
  • http://eloancanada.com/
    • Up to $1500, online request
    • Instant decision
  • https://paydayking.ca/
    • Up to $1,000
  • http://www.paydayloansnewbrunswick.ca/
    • Up to $1,500
  • https://cashone.ca/
    • Up to $1,500 with no credit checks

The third source is ‘Online Payday Loans’, according to which there is one licensed payday lender, Money Mart. Money Marts’ finance charges are not specified, the maximum penalty for a default they can charge is $40. They have a cooling-off period between two payday loans, at 48 hours excluding Sundays and holidays. Payday lenders are not permitted to rollover a loan while charging customers additional fees. Also, they cannot ask customers to sign a form that transfers the wages directly to them.

Customer Characteristics

The statistics of the “Vancity” report in 2016 says that majority of the payday loan borrowers are middle aged around 39-40 years. Those are people with low income, more than half of them, or 59% are educated. 76% of the borrowers are full-time employees and the average debt they are in is $23,149.

Average age (years)

39

Income > $50,000

49%

Completed post-secondary education

59%

Employed full-time

76%

Average debt

$23,149

“Vancity” also conducted research into the reasons why people choose to borrow payday loans in New Brunswick. More than half of them, or 55%, say that it is an easy and quick process to borrow money. 18% it is because of the convenient location. One reason was because there is no alternative source for borrowing, that’s why 15% decide to opt for payday loans in New Brunswick. 8% of them say that the structure of the payday lending in New Brunswick are forcing them to pay back more quickly. And last, 4% of them say that borrowing a payday loan is less expensive than any other form of credit.

Quick and easy process

55%

Convenient location

18%

No alternative source for borrowing

15%

Structure forces to be paid back more quickly

8%

Less expensive than other forms of credit

4%

New Brunswick Payday Laws

As noted in the beginning, New Brunswick doesn’t have their own laws and regulations. Payday business are declared legal by the Canadian Criminal Code, under section 347.1 . The state has proposed legislation. A lot of speculation and news are upcoming about the payday lending in New Brunswick, but nothing is really being set in place. For example, different sources have different information on how much a person should be charged for $100. The charge varies from $15 to $25.

Maximum cost of credit

In July 2016, CBC News wrote an article saying that the New Brunswick Department of Finance circulated some limits on how much credit can be extended and how much lenders can charge. A still-draft regulation from the department suggests that the maximum cost of credit a person can be charged is $15 per $100 advanced under a payday loan. The maximum amount of credit a payday lender would be allowed to extend 30% of a borrower’s net pay or other net income that the borrower will receive during the term of the payday loan.

Cost for cashing cheques

The doubtful regulation is also weighing out the maximum fees a payday lender may charge for cashing cheques. The suggested maximum is $5 for a government cheque not exceeding $2,500 and $10 for a government cheque in excess of $2,500.

Default fees

The possible legislation says that if the borrower defaults on a payday loan, the lender may charge a penalty not exceeding 2.5% per month on the amount of the loan in default. A maximum penalty of $20 could be charged for dishonored cheques or preauthorized debit payments. Penalties are not to be combined and may occur only once in a 30-day period. In November 2007, New Brunswick first introduced legislation to set limits for short term lenders, but legislation was never proclaimed.

Cost framework for a license to lend

No person shall offer, arrange or provide a payday loan from a location except under the authority of a license issued to the person or the person’s employer for that location. A person who wishes to offer, arrange or provide payday loans at more than one location shall apply for a separate license for each location. When applying for a license or a renewal of a license, the applicant shall provide the information or documents required by the regulations or the application form and any other information or documents that the Minister may require.

Sources

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About The Author
Sarah Connelly
Sarah is an enthusiastic writer, blogger and an eager agent of change. Although she has never been one to voice her opinion publicly, Sarah has dedicated herself to helping Cashfloat spread awareness about common financial issues and the importance of money management. Through her writing, Sarah hopes to empower a positive and lasting change in people. Sarah believes strongly in ethical business management and consumer protection. After completing her degree in Computer Science in one of London’s esteemed universities, Sarah has come to adore the buzzing hub of London city. Still, in her free time, Sarah enjoys reading, researching, watching movies and eating out. After all, #YOLO!
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Payday Loans in New Brunswick

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