Cash Store Financial Services Inc., Re, is an important case for payday loans providers. The outcome of this case on appeal may determine the sustainability of the payday loans industry in Manitoba. Indeed, should the order of the Manitoba Public Utilities Board (PUB) be upheld, other Canadian provinces may implement similar legislation that could impact the viability of payday loan businesses in those provinces. Of further interest is the PUB’s apparent condemnation of the morality of payday loans. The appeal may also serve as jurisprudence concerning whether it is within the power of administrative boards to make orders as an instrument of social policy.
In April 2008, the PUB made an order regarding maximum charges for payday loans pursuant to the Manitoba Consumer Protection Act (CPA). The order set various different maximum costs of credit that could be charged for a payday loan. The Manitoba Court of Appeal was asked to consider six grounds upon which leave to appeal was sought by the applicant.
In its decision, the court granted leave to appeal on three of the grounds submitted by the applicant. The applicant requested a stay of the PUB’s order pending final determination of the appeal. The court found that there was, indeed, a serious question to be tried and found that the fact that the order would put some (if not may) payday lenders out of business meant that the applicant would suffer irreparable harm if the stay was refused. When comparing the impact a stay would have on the interested parties, the court held that the prospect of putting several payday lenders out of business and thus putting the viability of the industry at risk would have a more serious long-term effect than the order’s impact of providing lower cost payday loans to the community. As such, the court granted a stay of the order pending completion of the appeal.
The first ground of appeal alleged that the PUB erred in law and exceeded its jurisdiction by failing to properly consider the scheme, objects and intentions of the relevant sections of the CPA and the PUB Act. The applicant argued that while the PUB’s express mandate was to set maximums in respect of payday loans, it was implicit that access to payday loans was not to be eliminated. The applicant referred to several governmental comments asserting that a balance needed to be struck between protecting consumers while not stifling an industry that served a legitimate need in the community.
The court found that the PUB set maximum rates for payday loans that were generally lower than any expert appearing before it had recommended and which it anticipated would put some (if not many) payday lenders out of business in Manitoba. The court noted numerous expressions in the PUB’s decision of its opinions against the morality of payday loans. The court held that the applicant thus established a case that the PUB had exceeded its jurisdiction under the CPA. The court granted leave for the first ground of the appeal.
The applicant also argued that the PUB erred in law and exceeded its jurisdiction by purporting to change the definition of “cost of credit,” which is a defined term under the CPA, and by purporting to set maximums for borrowing cash through a credit card when, by definition, such transactions are not considered to be payday loans.
The court found that the applicant demonstrated that the PUB’s “cost of credit” definition would effectively result in a monetary difference compared with the statutory language and, as such, resulted in a statutory amendment which was beyond the jurisdiction of the PUB. The court also agreed that a credit card cash advance was not a payday loan pursuant to the legislation. Thus, the court found it appropriate to grant leave with respect to both complaints on this ground.
The final successful ground of appeal argued before the court related to whether the PUB exceeded its jurisdiction by purporting to fix four separate maximum amounts depending on the circumstances of the payday loan in question. The applicant argued that the PUB exceeded its mandate by establishing maximums for payday loans to persons on employment insurance or social assistance, for loans in excess of 30% of a borrower’s expected net pay and for loans repaid early.
It was held that the PUB was within its mandate to set the first of the four different maximums for the cost of credit for payday loans. However, the court found that there was an arguable case as to whether the PUB exceeded its jurisdiction by imposing the remaining maximum rates which depended on the circumstances of the loan and granted leave to appeal for such maximums.
For more information on Manitoba’s payday loans legislation, please click here.