Doctor Lawrence I. Gould

Posted by on Nov 25, 2007 in Proponent, Quotes

“I recommend that the Board set the maximum fee for payday lending in the range of $20 to $23 per $100 of payday loan. A fee of $23 would allow smaller companies to operate in Manitoba, allowing the forces of competition to operate more fully.”

Doctor Lawrence I. Gould, Professor of Finance at the University of Manitoba, believes that the maximum fee for payday loans should be $23 per $100 borrowed…

Dr. Gould made this recommendation in a report entitled Determining the Maximum Allowable Fee for Payday Loans (Gould Report) submitted to the Manitoba Public Utility Board (Board).

According to the Gould Report, a maximum fee of $23 per $100 borrowed would:

  • allow smaller companies to operate in Manitoba
  • allow entry of new companies into the market

Dr. Gould believes that a maxiumum fee below $20 per $100 borrowed could:

  • limit the number of companies able to operate in Manitoba
  • restrict the entry of new companies
  • have an adverse effect on innovation
  • lower the quality of services

Dr. Gould wasn’t the only one to make a recommendation to the Board. According to an article by Clare Mellor, payday lender Rentcash submitted a preliminary proposal for a rate of $37.50 per $100 borrowed plus optional card costs.

According to the Payday Loan Calculator (External Link), Dr. Gould’s recommendation works out to almost 600% APR (Annual Percentage Rate) on a 14-day loan. The Rentcash proposal works out to over 977% APR for the same two-week loan.

Online Payday Loans (https://www.online-payday-loans.org/) believes that expressing payday loans in terms of APR makes it easier for borrowers to compare lenders and loan options.

Dr. Gould’s report, however, believes that APR calculations are an incorrect application of financial theory:

“The annual percentage return… measures are very useful for adjusting the different ways that interest rates are quoted and their compounding methods for loans of similar term. There is no meaning to annualizing the cost of a one or two week loan, or compounding it to an annual figure as an effective annual return… Payday loans are high cost because of their design as short-term, small loans.”

Doctor Lawrence I. Gould is a Professor of Finance and the Director of the Centre for International Business Studies at the University of Manitoba. He completed a Doctor of Philosophy Degree in Finance from the University of Toronto.

Sources:
Determining the Maximum Allowable Fee for Payday Loans (Gould Report) by Lawrence I. Gould (The Canadian Payday Loan Association)
Paying the Piper – Group Pushes Premiums on Payday Loans Ahead of Hearings by Clare Mellor (The Chronicle Herald)

Note: The Canadian Payday Loan Association (CPLA) asked Doctor Gould to provide this report to assist the Manitoba Public Utility Board in setting a maximum fee for payday loans in the province.

On our Compare Payday Lenders page, there are 23 lenders who we believe to be Actual Lenders (not affiliates, publishers or indentity thieves). Of these, 14 lenders set their fee below Dr. Gould’s recommendation and 9 lenders exceed it. Even the most expensive lenders in our comparison table ($30 per $100 borrowed) do not come close to the Rentcash proposal of $37.50. The lowest fee in our table is $10 per $100 borrowed, far below Dr. Gould’s recommendation.

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