Manitobans to pay less for payday loans

There will be less of a price to pay for payday loans when provincial legislation to put a cap on interest rate loans takes effect this fall. The province as approved the move upheld by the federal Criminal Code, to set maximum interest rates for short-term loans.

Manitoba's Public Utilities Board has ruled that interest rates will be capped at 17 per cent for loans under $500.

Finance minister, Greg Selinger, notes the limits on interest rates charged by payday loan companies will be determined by the size of the loan.

"It's not an absolute cap. It says you can charge a certain amount for certain sizes of loans," said Selinger. A "payday" loan is anything up to $1,500 dollars on a short-term basis.

However, the Public Utilities Board has said you can charge up to 17 per cent until you hit one-third of net pay of the loan ($500) then the interest rate drops to 6 per cent off the total loan. Selinger points out that 6 per cent on an annualized rate is still 144 per cent interest that consumers must pay. The interest rate on at 6 per cent on a two-week loan equals about 144 per cent a year. "I believe we've struck the balance between protecting consumers and having the short-term credit market available to them," said Selinger.

Source: http://www.portagedailygraphic.com