Yesterday, the Nova Scotia Utility and Review Board began hearing evidence surrounding the short-term, high-interest loans offered at places such as Money Mart and The Cash Store.

Some time after wrapping up this week, the URB will determine such terms as the maximum allowable fees on the cost of borrowing.

Payday loans, so named because they're normally due to be repaid around payday, sprung up around 1995, mainly in British Columbia. Today, there are believed to be between 1,250 and 1,300 payday outlets in Canada.

A federal bill allows provincial governments and independent regulatory bodies such as the URB to set maximum rates on the cost of borrowing for the payday loan industry. With this week's hearing, Nova Scotia may become the first in Canada to establish maximum rates for payday lenders.

The issue is under review in other provinces, such as Manitoba.

Currently, the interest rate on payday loans is capped at 60 per cent.

The Canadian Payday Loans Association, which represents 21 lenders that operate 519 outlets across the country, estimates two million Canadians have used such loans. In his opening remarks yesterday, CPLA president Stan Keyes said the association's mandate is to protect customers from excessive fees while ensuring fair rates in a competitive marketplace.

Its members represent about 40 per cent of the market.

Asked under cross-examination whether customers are currently getting gouged, Keyes replied, "I'd stand by that." But he said they're in the minority.

CPLA already has 18 measures in place to protect consumers, he noted.

The association believes in a maximum fee of $20 to $23 per $100 of a payday loan, plus licensing and regulation costs. URB consultant and former bank executive David Martin recommends $23 to $27.

Keyes was questioned about CPLA's close relationship with Money Mart (several board members help run Money Mart outlets and CPLA secretary Norm Bishop has acted as legal counsel for the company), while consumer advocate David Cameron expressed concerns to reporters over an apparent contradiction in the regulations applying to loan renewals.

The most significant flaw so far, he said, was a lack of data for Nova Scotia.

"Sometimes people who have to routinely return to this source of financing to get themselves through a week or a month have a difficulty perhaps over time, getting out of that cycle."

Representatives from The Cash Store are expected to testify this week. The hearing is scheduled to run four days.

Source:- hfxnews.ca