The Criminal Code of Canada was amended in 2006 that allow provinces to regulate the payday loan industry, since then three provinces; Ontario, British Columbia and Saskatchewan have legislations to deal with payday loan restrictions. Cost of payday loans capped, and any rate of interest charged above 60% per annum considered criminal. After more than two years of provincial effort Ontario payday loans Act was passed in 2008 to provide better consumer protection for users of payday loan services.

Enforcement Action Scenario

Consumer protection concerns about payday loans have been in the CBC News of Feb 5, 2013 in which Ontario government is attempting to revoke the license of one of the country’s biggest Edmonton-based cash advance stores, The Cash Store to operate in the province due to violations of the Act.

Ontario Canada enacted the Payday Loans Act, 2008 to limit the fees charged on loans in the province. Ontario Payday Loans Act, 2008 provides additional protection for users of payday loan services, as a borrower you have number of rights and protections under a payday loan agreement.

The Ontario Payday Loans Act, 2008:

  • Requires payday lenders and payday loan brokers to be licensed by the Ministry of Consumer Services and comply with the provisions of the Ontario Payday Loans Act, 2008.
  • Prohibits certain industry practices, including “rollover” loans
  • Gives payday loan brokers a two-day “cooling off” period to cancel a loan with no reason without incurring a penalty.
  • Maximum total cost of borrowing cap for payday loan agreements in Ontario is set on $21 per $100 borrowed.

Ontario Ministry of Consumer Services clearly indicates all the points that protect consumers taking payday loans in Ontario, before taking out a payday loan; you should know your consumer rights:

  • As a borrower, you cannot be charged more than $21 for each $100 you borrow. This is called the maximum cost of borrowing.
  • All fees charged when obtaining a payday loan are included in the maximum cost of borrowing. Fees cannot increase your cost of borrowing to more than $21 for each $100 you borrow.
  • You are entitled to receive the full amount of your loan without deductions for any fees or other charges.
  • You are entitled to access the payday loan in cash immediately upon entering into a payday loan agreement. The payday loan lender may offer to provide your loan to you by cheque or debit card. However, they cannot charge you additional fees to do this if the fees increase your cost of borrowing to more than $21 for each $100 you borrow.
  • You have two business days to change your mind and cancel the payday agreement without a penalty.
  • You cannot get a second payday loan from the same payday lender until you pay off the first loan in full.
  • The lender cannot offer you other goods or services (on their own behalf or on behalf of another person), such as insurance, in connection with your payday loan agreement.

Demand of payday loan in Ontario Canada is higher in accordance with the other Canadian provinces and territories so do there are number of stores operating in Ontario are also high. Thats the reason enforcement of payday lending rules can make a big difference with such kind of news action. According to the Government officials it’s a “major consumer protection enforcement action” on what they will release more information. These kinds of news will not even bring good result in achieving best practice while controlling Ontario payday loan rates but it will help in other provinces and territories to discourage such predatory payday lending companies that are charging exorbitant interest rates or hidden fees when lending money to the moderate, limited and low income class of working individuals.