Payday Loans Act, 2008
Ontario's approach to payday lending is balanced, taking into consideration the needs of borrowers and of the industry. It is also consistent with the current government's direction to invest in Ontario's capacity for growth and economic prosperity through a competitive regulatory framework that protects consumers and investors.
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 upon the guarantee of a post-dated cheque or pre-authorized debit. 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.
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 to enable 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.
Payday Loans Act, 2008
On June 9, 2008 the Ontario Legislature passed this significant legislation to:
- Create a licensing regime for payday lenders and payday loan brokers
- Prohibit certain industry practices and require that all payday lenders and payday loan brokers in Ontario operate with a license and within the law
- Create enforcement through inspections, prosecutions, and suspensions and revocation of licences
- Establish the Ontario Payday Lending Education Fund to promote an understanding of the proposed legislation and financial planning
- Increase public confidence in the integrity of the payday lending market.
Ontario is committed to broad consultation on payday lending. On April 29, 2007, Ontario released a public consultation paper on payday lending. The Ministry of Government and Consumer Services received 21 written submissions. Of the respondents 76 per cent were in favour of seeking designation under federal Bill C-26. Sixty-nine per cent of respondents supported licensing and 87 per cent supported limits on the cost of borrowing.
Federal Bill C-26 amends the Criminal Code and provides provinces with the opportunity to regulate the total cost of borrowing for payday loan agreements. The Payday Loans Act, 2008 meets the requirements for designation under Bill C-26.
Additionally, 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.
Ontario will establish an expert advisory board that will seek broad input and recommend an upper limit to the maximum total cost of borrowing for payday loan agreements.
The Ministry of Government and Consumer Services Consumer Protection Branch will conduct inspections, investigations, respond to consumer complaints and may impose administrative monetary penalties for non-compliance.
British Columbia, Manitoba, Saskatchewan and Nova Scotia have also passed payday lending legislation that meets the requirements for designation under Bill C-26.