The Manitoba Public Utilities Board has set strict limits on the interest rates that payday loan companies can charge customers. Manitoba has become the first province in Canada to slap payday loan companies with caps on the interest rates they can charge customers, a move the industry says will throw lenders out of business and drive people to loan sharks and pawnshops. The industry has battled for years an image that it takes advantage of customers often too desperate to look for loans at mainstream financial institutions. A typical loan of $300, carrying a fee of $20 per $100, would cost a customer $60 over a two-week term, amounting to more 500 per cent as an annual percentage return. The payday loans industry has grown rapidly in the last two decades, but it is the only segment of Canada's financial services sector that until now has been unregulated.

The CPLA was suggesting a maximum charge between 20% and 23% of the loan, but the provincial Public Utilities Board -- which referred to the lenders as "loan sharks" in its decision -- announced yesterday the maximum will be 17% on the first $500, 15% on the next $500 and 6% on loans over $1,000. The board held public hearings last year during which one lender admitted his interest rates worked out to more than 700 per cent a year. But he said while that sounded like a lot of money, it only worked out to a few dozen dollars for a small, short-term loan - barely enough, he said, to cover costs.