WINNIPEG - Canada's short-term credit industry must be improved so cash-strapped consumers don't end up drowning under exorbitant interest rates, Ottawa and the provinces agreed Friday. Federal and provincial ministers responsible for consumer protection concluded a one-day meeting with an agreement to study the burgeoning industry and come up with ways to better protect the public. "All the ministers recognize we're having a problem here and that we have to address it," Industry Minister Lucienne Robillard told a news conference. The industry includes so-called payday loan companies, pawn shops and cheque-cashing stores. One company, for example, will give an advance to most customers equal to about 30 per cent of their net pay until their next paycheque. The interest rate is 89 cents per $100, per week. In some cases, interest rates can reach more than 1,000 per cent when all fees are taken into account, said Manitoba Finance Minister Greg Selinger. "We're in a situation now where we have to look at what legislative alternatives are available, what mechanisms there are to get the banks better involved and make sure the consumers have the information they need not to be taken advantage of when they use those services," said Selinger. Robillard said the ministers will look at what other countries have done to deal with the alternative banking industry. In France, for example, lenders can't charge interest rates greater than a government-posted rate. One proposed solution is a fixed interest rate. Selinger said a provision in the Criminal Code prohibits annual interest rates in excess of 60 per cent, but the law is not always enforced. The ministers' initiatives have the support of some players in the industry because they've faced class-action lawsuits, added Selinger. Quebec's citizenship minister said financial alternatives need to be identified for people who find themselves in trouble and unable to get a small loan from a chartered bank. "It has to be a wider responsibility," said Michelle Courchesne. "It addresses mostly the most vulnerable people who will go and ask for those loans. There's a social aspect where we have to go and make sure we go through each component and aspect of this complex file." Winnipeg NDP MP Pat Martin said he is happy to see the provincial and federal governments take the issue seriously. But too many people are being turned away from chartered banks and forced to turn to short-term lenders. In his riding of Winnipeg Centre, Martin said 14 chartered banks have closed in the last five years while 20 or 30 short-term credit businesses have sprung up. "It's just an epidemic of the seediest and cheesiest form of financing, that used to be called loansharking," said Martin, who attended the news conference as an observer. The ministers also agreed to better inform consumers about identity theft. They released an information kit, which is available on the Internet, that tells Canadians how to reduce the risk of being victimized.
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