Wednesday, January 24, 2007

Payday loans, private colleges and the case for red tape

VICTORIA - Red tape is generally portrayed as this snarled, sticky tangle that chokes and traps you.
And often, it is.
But sometimes it's more like a helpful line strung along a path to warn of real dangers, to the individual or the community. Stay on the path and you never get tangled. After all, laws are red tape and they discourage people from breaking into our homes.
The B.C. Liberals came into office with an anti-regulation bias, which is a good thing. Government's starting point should be that anything that infringes on people's freedom to make choices is bad and needs to be justified based on a greater good.
So we make people were seatbelts - even though that infringes on their right to make choices - because we all pay the costs of putting them back together after a car crash.
But on a couple of current issues we're seeing evidence that ideology, inertia or inefficiency has blinded the government to the need for regulation.
Take private colleges and language schools. The Liberals eliminated a board that regulated the colleges in 2003 and turned the task over to the industry. In 2004, it deregulated the language schools.
Private colleges would regulate themselves out of self-interest, the government reasoned. And it accepted the language schools' argument that regulation made it hard for them to compete with schools in neighbouring states and provinces.
Deregulation was, in this case, a mistake. Students - especially overseas students - were left with no effective way to assess the quality and reliability of private B.C. colleges and language schools. Complaints quickly followed.
Last year a private college owned by one of the people the government named to the industry board was ordered to close after students said they had spent thousands of dollars for worthless degrees.
And the industry's self-regulating agency, the Private Career-Training Institutes Agency, said it had penalized private colleges 86 times over the previous 18 months without any warning to the public. That's hardly in the interests of students.
Similar concerns were raised about the language schools.
It's not just a problem for students who might be ripped off.
The B.C. Progress Board warned that the lack of standards threatens B.C.'s effort to become an international destination. When a college or language school fails students, the entire province is seen as a risky place to go for an education, the board warned.
And that is what has happened. China, in part because of problems in B.C., has warned students not to enroll in Canadian private colleges until they are properly regulated.
Advanced Education Minister Murray Coell, who had maintained regulation was unnecessary, now promises action.
The government is also looking sluggardly when it comes to regulating payday loan companies.
Almost a year ago, Solicitor General John Les promised the government would act "quickly" once the federal government gave provinces the power to deal with the high-interest lenders.
But now Parliament has passed the needed legislation, Les says he might not be ready to respond until 2008.
Les has acknowledged that consumers needed protection from loans that involved effective interest rates of up to 1,000 per cent.
He even indicated general support for an approach taken in Manitoba, where the law requires companies to warn customers in clear language about the high cost of loans and allows them 48 hours to change their minds. The Public Utilities Board regulates fees and interest rates are to be capped once the federal law takes effect.
It's not that payday lenders are a bad thing. They are the only available source of short-term credit for many people. Their clients are often bad credit risks and rates need to reflect that.
But the $2-billion industry is huge, deals with unsophisticated borrowers and is almost entirely unregulated.
Yet the government, despite time to prepare and so little legislation that it cancelled the fall session, can't bring in consumer-protection rules.
Footnote: Les is at the centre of another regulatory dispute. The UBCM, consumers and home inspectors have all been calling for regulation of the industry. Anyone can claim to be a home inspector in B.C., they complain, and prospective homeowners can male a $500,000 commitment based on bad advice. Les has refused to act.


Anonymous said...

The origination of the phrase “there’s a sucker born every minute” is most often attributed to circus owner P. T. Barnum. Actually it was first utterred by Chicago gangster "King" Michael Cassius McDonald, a saloon and gambling house keeper, an insider and friend to many emminent polticians of the day. McDonald obtained the cooperation of the police force, politicians, and an army of skilled confidence men to run his rigged games. The situation here and now in "The Best Place On Earth" looks to outsiders (and to me) like "deja vue all over again".

Anonymous said...

So the Liberals spent a lot of time and ink telling us that businesses should self regulate. Sort of like leaving the fox in charge of the chicken coop. The itmes Paul mentions were allowed to do just about what they want, and the results show it. Now Les has to stop dragging his heels and sort these messes out. Of course there are a few others we could mention as well.

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