Payday Loans In Ontario
The Government of Canada's Bill C-26, An Act to Amend the Criminal Code
Ministry of Consumer Services
The Government of Canada's Bill C-26, An Act to Amend the Criminal Code, provides provinces across Canada with the opportunity to set the maximum total cost of borrowing for payday loan agreements in their own jurisdictions if they meet specific requirements and request designation.
Ontario's Payday Loans Act, 2008 (the "Act"), which received Royal Assent on June 18, 2008, provides for setting an upper limit to the total cost of borrowing for payday loan agreements in Ontario. Ontario has been working in cooperation with other provinces for several years to address the issue of payday loans.
The Maximum Total Cost of Borrowing Advisory Board
In April 2008, Ontario established a Maximum Total Cost of Borrowing Advisory Board to recommend an upper limit to the maximum total cost of borrowing for payday loan agreements in Ontario. The Board consulted and heard from over 20 community advocacy groups, industry representatives, along with experts from both the financial and academic communities.
The Board recommended Ontario set a maximum total cost of borrowing cap for payday loan agreements at $21 per $100 borrowed. This approach balances the need to ensure the competitiveness of the payday lending industry while making sure consumers who need access to this type of credit enjoy strong protections. The Board's report is available on the Ministry of Consumer Services website at http://www.sse.gov.on.ca/mcs/Documents/264305.pdf
Now that Ontario has received designation from the federal government, its maximum total cost of borrowing cap for payday loan agreements can come into force upon proclamation of section 32 of the Act.
Maximum total cost of borrowing for payday loan agreements
The Payday Loans Act, 2008
Most of the provisions under the Payday Loans Act, 2008 came into force this year.
- Creates a licensing regime for payday lenders and payday loan brokers
- Requires lenders to include in the total cost of borrowing all amounts the borrower is required to pay as a condition of entering into a payday loan agreement
- Prohibits certain industry practices, including "rollover" loans. "Rollover" loans occur when a consumer already has one payday loan, and before that loan is paid off in full, the consumer receives another payday loan from the same lender
- Provides for enforcement through prosecutions and the ability, subject to appeal, to revoke the licenses of payday lenders and loan brokers
- Will increase public confidence in the payday lending market
- Provides a cooling-off period so that borrowers can cancel their payday loan agreement without penalty within two business days.