Payday loan companies offer short term financing to individuals that need a loan between paydays – when people find they have more month left than money. Short-term or interim financing can be necessary when people have unexpected expenses crop up that they haven't saved for and don’t have access to another form of credit.
The new payday laws that came into effect August 1, 2016 have done a good job of balancing the need for short term lending while protecting those same consumers from high administrative fees – Alberta now has the lowest administrative fees across the nation – and active solicitation and advertisements.
Previously individuals using payday loans could find themselves stuck in a perpetual cycle of needing a new payday loan each payday because the administrative fees were so high the loan plus fees could never be paid off in full. So what was supposed to be interim or temporary financing ended up being a long-term problem. These new laws protect vulnerable Albertans from the excessive cost of borrowing that we have seen previously and aims to make payday loans a short-term reality.
This new law is good news for Albertans during these tough economic times and will help people continue to access short-term lending but prevent them from getting caught in the perpetual payday loan cycle that is hard to break and more harmful than helpful.
For more information please review the Government of Alberta website: http://www.alberta.ca/payday-loans.aspx
If you are struggling with your debts and need some advice don't hesitate to give us a call. We would be happy to chat.
Rebecca Frederick, Licensed Insolvency Trustee
Frederick & Company Ltd.