Cost of Payday Loans Capped
McGuinty Government Enhances Protections For Borrowers
Ontario is capping the cost of payday loans. Starting today, individuals getting payday loans may not be charged more than $21 for each $100 borrowed.
This move will help further protect consumers who need access to this type of credit.
New provincial legislation protecting borrowers came into effect in the summer of 2009. However, provinces first need to meet specific federal requirements before setting caps on the cost of borrowing for payday loans. The federal government gave Ontario the green light to move ahead with new protections on October 1.
Ontario's Payday Loans Act, 2008 includes:
- A licensing system for payday lenders and loan brokers
- Authority for Ontario to set, in the regulations, a ceiling on the total cost of borrowing for payday loan agreements
- Prohibition of certain industry practices, such as concurrent and rollover loans
- A cooling-off period so borrowers can cancel payday loan agreements, without penalty, within two business days
- Enforcement through prosecutions and, subject to appeal, the suspension and revocation of licences.
- A payday loan is a short-term loan for a small sum of money in exchange for a post-dated cheque, pre-authorized debit or future payment of a similar nature.
- The average payday loan in Canada is for about $300 over two weeks.
- According to a nation-wide survey, most payday loan users are not aware of the true cost of their loan.
- Fifty three per cent of payday loan users are women and 47 per cent are men.
- Read about the Payday Loans Act, 2008 and its regulations.
- Read about the Maximum Total Cost of Borrowing Advisory Board's report on an upper limit to the total cost of borrowing for payday loan agreements in Ontario.
- Learn about your rights as a consumer when it comes to payday loans.
“This cap is part of a package of key consumer protection measures we have introduced in this province - including requiring lenders and loan brokers to be licensed and prohibiting certain practices in the industry. The bottom line is if you need a payday loan in Ontario, you can count on some of the best consumer protection features available - and that's a good thing.”
“Credit Canada believes this is a step in the right direction to ensure transparency and proper legislation so consumers can be protected and provided with a high quality of service. We applaud the Ministry of Consumer Services for acting diligently and thoroughly on this important issue.”