Manitobans looking for payday loans online are more likely to find unlicensed lenders than approved lenders, according to a national study released Friday by a nonprofit consumer group.
“You are not safer in provinces with more regulation,” said Ken Whitehurst, executive director of the Consumers Council of Canada.
Twelve online lenders in Manitoba were investigated as part of the study and only two were found to be licensed by the province.
According to the study, Manitoba has some of the strictest payday loan rules in Canada. The province sets the lowest borrowing rate in the country at $ 17 per $ 100 borrowed.
Approved lenders must also limit their borrowing to 30 percent of take home pay. In addition, they must provide a notice to the consumer at the time of borrowing, indicating the high cost of the loan, the right to cancel, and information on credit counseling.
Newfoundland has the least regulation and Whitehurst said consumers are clearly exposed to unlicensed businesses there. Quebec caps interest rates at 35 percent, which limits payday lending activity in that province.
Whitehurst added that the study found that almost all licensed lenders were complying with the regulations, but unlicensed players were virtually non-compliant with provincial regulations.
“Licensing hasn’t made illegal lending go away,” he said, adding that unlicensed lenders can also endanger consumers’ information and privacy.
“Unauthorized lenders seem to ask for very specific banking information,” he said. “It is very difficult to know who you are dealing with online.”
“Payday loan is very problematic”
The study found that a number of unlicensed lenders have requested passwords, account numbers and other information that links them directly to borrowers’ bank accounts.
“There is a fair amount of phishing going on with banking information now,” he said. “It is difficult to know if this is the main objective.”
The study examined 134 payday loan websites from the perspective of consumers across the country, to test compliance with regional regulations and collect data. Six provinces have laws to protect consumers and two are pending.
“Payday loans are very problematic,” Whitehurst said.
He advised Manitoba consumers to check with the provincial government’s Consumer Protection Division for a list of approved lenders, but said consumers should carefully consider their options before signing up.
“If someone feels they need a payday loan, it might be a good idea to check credit first,” he said.