Canadian provinces offer some of the best payday loan regulations in the world. Though some provinces are currently working on implementing them for the first time, others like Ontario & British Columbia are paving the road to safer interactions, capped fees & other protections for consumers and lenders alike.
What Should I Know Before Getting a Payday Loan?
Does your lender of choice have a license to operate? This should be obvious to you before you speak to anyone at a storefront, or enter any personal information online. The law requires that lenders display their current license in clear sight. And do indeed make sure that it’s a current license (check for the year). If it doesn’t cover up until the year you’re presently in (eg: 2014-2015), go somewhere else.
If they do have an outdated license, and they still gave you a loan, guess what – you don’t have to pay back the cost of borrowing (aka: the fees). You’re only required to return the principle amount you borrowed.
For example; you walk into a new payday loan establishment and borrow $200. The fees on that are $42. Half way through your loan term, you realize their license is out of date. You have the right to tell your lender that you are only repaying $200, not $242.
Chances of this happening are very, very slim however. Companies are highly regulated and audited in Ontario & BC, but it is something important to know, as even big companies can lose their license. Also keep an eye out for companies that have recently changed in ownership. If company A was acquired by company B, and they didn’t get a new license, stay away until they do. New licenses must be issued to any company that has a change in ownership.
B) Loan Fees & Late Fees
Ask yourself how clear the loan fees are. This area of payday lending has improved significantly in the last few years, but companies online are notorious for not having clear outlines for how much they charge.
Remember that the very maximum cost of borrowing in Ontario is $21 per $100 borrowed & $23 per $100 borrowed in British Columbia. Those are the only borrowing fees a lender is allowed to charge you. No additional fees, no extension fees, nothing else. The only time you may be charged additional fees, however, is IF you break your terms of the lending agreement by not paying back on time. Then, the company is completely within their right to charge you a late fee.
However, this late fee must be clearly outlined in your lending agreement. A company can also not be held responsible for any NSF fees you may incur from your financial institution as a result. However, in the event you find that you were indeed the victim of a extra fees, you are not required to repay them, only the principal amount borrowed.
Please also note, however, that British Columbian residents can be offered payday loan insurance in the event they may default for a small additional charge. This is not a service yet regulated in Ontario, and therefore companies are not allowed to offer it. The loan insurance rate should be a completely separate amount, that is easily identifiable on your loan agreement.
C) Cancellation Periods
If in the event you get a loan but find yourself no longer needing it, the Payday Loan Act in Ontario does allow you to cancel at within 2 business days from the date you received your loan. The regulations in British Columbia are slightly different. You are allowed to cancel your loan without penalty within 1 business day. Cancellation periods are also called “cooling off” periods.
“Business days”, however, does not refer to a typical calendar week (or bank/government hours for example). If the lender operates on a Saturday, the Saturday is considered a business day. Same applies if they’re open on Sunday’s as well. However, if the lender is closed for the entire weekend, and you received your loan, for example, on a Friday, you have until the following Tuesday to cancel.
If, by chance, you are unable to repay your loan, understand that you will incur late fees and additional interest. The sooner you inform your lender that you can’t repay, or that you will be delayed in repayment, the better it will be for you. Most lenders have in-house collections departments who want to work with you and your current situation. The last thing they want to do is send you off to a third-party, or worse, pursue legal action (it happens).
Lenders are able to contact you within allowable calling hours about an over-due balance, as well as any other means of contacting you that you’ve provided. They are not, however, allowed to use threatening language or harass you.
Alternative financial services are presently under the eye of the Ministry of Consumer Services in Ontario and they’re looking for public opinion. If you’re a payday loan borrower and have an opinion you want to share with them, you can fill out their Consumer Financial Protection Survey. Please review the Strengthening Consumer Financial Protection discussion paper prior to submitting your responses.