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Payday Lending in Ontario

Archived Backgrounder

Payday Lending in Ontario


Ministry of Consumer Services

Ontario's Approach

The payday lending industry has grown rapidly since coming to Canada in the early 1990s.  

A payday loan is a short-term, small principal loan made to the borrower in exchange for a post-dated cheque or pre-authorized debit.

Payday lenders typically require the borrower to prove three months continuous employment, produce a recent utility bill in their name to establish address, and have an active chequing account. There are approximately 750 payday lending storefronts currently operating in Ontario .

Ontario's Existing Regulation

Ontario amended its regulation under the Consumer Protection Act, 2002, (CPA) to create protections tailored to users of payday loans. The amended regulation made under the CPA came into force on August 1, 2007. It requires lenders to post information that enables borrowers to compare lending costs; requires specific information to be clearly set out on the first page of the payday credit agreement; and requires the payday credit agreement to be delivered to the borrower upon entering into the agreement.

The Payday Loans Act, 2008

In June, 2008, the Ontario Legislature enacted new legislation to:

  • Create a licensing regime for payday lenders and payday loan brokers
  • Require 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 
  • Prohibit certain industry practices, including 'rollover' loans 
  • Provide for enforcement through prosecutions and the ability to revoke the licenses of payday lenders and loan brokers
  •  Establish the Ontario Payday Lending Education Fund, made up of mandatory financial contributions from the industry, to promote understanding of the Payday Loans Act, 2008 and general financial planning 
  • Increase public confidence in the payday lending market 
  • Allow borrowers to cancel agreements during a cooling-off period

Federal Bill C-26 amended the Criminal Code to provide provinces with the opportunity to set the maximum total cost of borrowing for payday loan agreements. The Payday Loans Act, 2008 provided for the setting of limits on the total cost of borrowing for payday loan agreements.

Ontario has been working in close cooperation with other provinces for several years to ensure a harmonized approach to credit agreements and the protection of borrowers.

The Maximum Total Cost of Borrowing Advisory Board

Ontario established a Maximum Total Cost of Borrowing Advisory Board in April 2008 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 recommendations found in their report are those of the Advisory Board members, and represent independent conclusions and advice for consideration by the government of Ontario .




February 6, 2009

  Manitoba  Ontario   Nova Scotia
 $17 per $100 for Loans up to $500  Expert Advisory Board's Recommendation
$21 per $100 Loan
 $31 per $100 Loan

  • Almost half of all payday lending locations in Ontario are currently lending near or below the maximum recommended by the Maximum Total Cost of Borrowing Advisory Board. 
  • Payday loan businesses representing more than 325 storefronts in Ontario are currently lending near or below the maximum recommended by the Board. 
  • Lenders currently lending near or below the maximum recommended by the Board have broad geographic distribution across Ontario.



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