The government tabled legislation Thursday to put an end to “exploitive” payday loan interest rates by slashing the borrowing fee and allowing people to pay it back in instalments.

If Bill 15, an Act to End Predatory Lending, passes, it will see the borrowing rate on every $100 drop to $15 from $23, making it the lowest rate in the country. Borrowers will also be able to pay it back in instalments over two months, lowering the individual payments owed and the annual interest rates.

Under the proposed rules, a customer who takes out a $500 loan would only owe $575 with all fees included — instead of $615 plus fees.

Service Alberta Minister Stephanie McLean said the aim of the new rules is to help Albertans escape a cycle of debt.

“Six hundred per cent interest that prevents Alberta families from making ends meet are predatory. Loans that require you to take out loans to pay back loans are predatory. We’re ending it and we’re protecting Albertans,” she said at a news conference.

“It protects Albertans by tightening the regulatory framework around predatory lenders. Albertans told us they want us to reduce the cost of lending. We have.”

Government officials estimate Alberta has about 240,000 payday loan users borrowing about $500 million a year.

Payday loan lenders make emergency loans to people to tide them over between paycheques. The loans can be no more than $1,500 and must be repaid within two months.

Given that the loans are deemed to be for short periods and extraordinary situations, the Criminal Code allows them to exceed the maximum 60 per cent annual interest rate.

However, the payday loan lenders have long been criticized for being too predatory, charging fees that — over the course of a year — amount to more than 600 per cent interest.

Most payday loans demand repayment of the principal plus interest and the fees on the next paycheque.

Gary Moostoos knows that “vicious spiral” well. After he was robbed several years ago, he took out an $800 loan to pay his rent.

When he couldn’t pay it back right away and the interest started accruing, he became anxious and desperate. He turned to other loans and gambling, hoping for a lucky draw.

“I started to gamble, thinking if I could win maybe I could clear all this up,” he said. “When it was payday, I dreaded waking up.”

“They create so many social issues and the people they target the most are people on fixed or low income,” he said.

Tony Irwin, president of the Canadian Payday Loan Association, said the proposed legislation will result in the reduction of the industry in Alberta.

“That will mean door closures and significant job losses and it will mean a reduction in the availability of credit for many people who need payday loans today,” Irwin said.

The government said it is working with credit unions to offer borrowers more options with similar short-term loan options. It will also monitor the industry and can levy a maximum fine of $300,000, or three times the amount made on the venture, or up two years in jail.

There are more than 30 payday loan companies in Alberta, operating in more than 220 branches.

With files from The Canadian Press

oellwand@postmedia.com

twitter.com/otiena