Servus launches new lower interest payday loan alternative

A new, lower-interest alternative to payday loans was introduced by Servus Credit Union Thursday at an event where Service Alberta Minister Stephanie McLean announced the next phase of the payday loan law is now in effect.

As of Thursday, Servus is offering the Fast Forward Small Loan which has an annual interest rate of 19 per cent.

People can get cash in less than an hour, and pay it back over a period of two months to two years. They just need to join the Servus Credit Union at a cost of one dollar.

• Proposed bill will give Alberta lowest payday loan costs in country
• Alberta payday loans bill gets mixed reviews
• Payday loan lending rates in Alberta lowest in Canada under new law

Servus has branches across Alberta. It now joins First Calgary Financial and Chinook Financial which started offeringthese payday loan alternatives to customers in southern Alberta last summer.

In August, the Act to End Predatory Lending, limited payday loan companies to charging no more than $15 per $100 borrowed. Before the act came into effect, payday lenders could charge $23 per $100 borrowed, which translated into an annualized percentage rate of 600 per cent.

Service Alberta Minister Stephanie McLean announced Thursday that the second part of the act is now in effect. It means borrowers can now pay back their loans in equal installments over at least three pay periods.

The law also limits the times a lender can try to get money from a borrower through a pre-authorized debit.

"This is significant," McLean said. "Folks often don't realize is that the way that it is paid back causes the annualized percentage rate to skyrocket.

"So addressing that particular issue, we were able to bring down the amount of interest Albertans were paying even lower."

Payday loans are taken out in amounts of $1,500 or less for a maximum term of 62 days.

McLean has been told First Calgary Financial has had good response to its Cash Crunch Loan.

She has heard other financial institutions are coming up with small loan programs of their own but she declined to offer additional details.