Payday loan "scammers" need to be reined in, says Liberal Leader David Swann

Payday loan companies are gouging the province's most vulnerable people and need to be reined in, according to Liberal Leader David Swann.

Noting the NDP was critical of payday loans when the party was in opposition, Swann called for the government to impose tighter regulations on the industry.

He said Alberta's working poor, the mentally ill and students are in particular being taken advantage of by payday loan "scammers" who charge as much as $23 for each $100 they lend on a short-term basis.

"It's a question of the free market going amok with our most vulnerable population," he said.

If a loan company charged the maximum amount on a $300 loan in Alberta, it would be equivalent to 700 per cent annually, according to University of Manitoba professor Jerry Buckland.

Government promises changes

In 2009 the Tories set new limits on payday loans. But Swann said that doesn't go far enough to protect consumers.

"These people are getting into real financial trouble as a result of this," he said. "We want to see rates that are much more affordable."

Swann said he would like to see the NDP cut the maximum interest rate nearly in half.

He plans to push for more stringent regulations that include the ability for people to pay back their loans in installments.

"That would go a long way, and very quickly resolve some of the difficulties we're seeing," he said.

Premier Rachel Notley said the government will make an announcement about changes to payday loan regulations next week.

While the fees and interest rates are significantly higher than most mainstream loans, Buckland said many people rely on payday loan companies.

"Clearly there's a gap here," he said. "People are using these short-term, small-sum loans."

In his research, Buckland said some people argue the province should not regulate the companies out of business, as Quebec as done. He said regulated short-term loans are considered better than the alternative, which could include online lending or illegal loan sharks.

He said there isn't enough data collected to be able to verify the truth of those claims.

Swann said he hopes credit unions and banks will help the province by creating competition for short term loans.