The rules governing payday loan operations in Nova Scotia are being reviewed by the province’s Utility and Review Board.
Hearings are now underway, weighing arguments for and against the lenders, who can charge as much as $25 for every $100 borrowed.
It’s a practice that may guarantee people will never get out of debt, according to consumer advocates.
“It's an avalanche,” said Gordon Arsenault of Credit Counselling Services.
“They start with one, and they figure ‘Well, if I had just one more, I could take care of the other one, then I could take care of this,’” Arsenault said.
The social toll the practice takes was one of the aspects under the microscope during Tuesday’s hearings.
“There's a problem with the working poor in this country, not having incomes that are sufficient to meet their needs,” said consumer advocate David Roberts.
The proposals being considered include putting a cap on the number of loans each consumer can carry, and lowering the interest rate in Nova Scotia to bring it in-line with the rest of the country.
Consumer advocates argue that current interest-rate limits were set anticipating that competition would bring them down — but now there’s less competition.
“Right now, Nova Scotia has the highest maximum allowable cost for payday loans in the country. I don't think there's any justification for that,” Roberts said.
Those representing the payday loan industry don’t want the rules to change, saying their operations fulfill a need.
“It's very hard to legislate behaviour, and it's been tried in other jurisdictions and it doesn't work well,” said Norm Bishop of the Canadian Payday Loan Association.
One thing consumer advocates and the payday-loan industry representatives agree on is extending payment terms.
Final arguments on the issues are scheduled to take place in about two weeks, with a decision from the Nova Scotia UARB expected within three months from then.
With files from CTV Atlantic’s Ron Shaw
