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Click n Cash reacts to the new payday loan rate cap in Ontario
Press Release
Staff Writer
On March 13 2009, Ontario capped the interest that a payday loan lender can charge a consumer at $21.00 per $100 borrowed. This interest rate cap was based on the recommendations from the Maximum Total Cost of Borrowing Advisory Board. This board was set up to consult with payday loan companies and users after the new payday loan legislation was passed in June 2008.
Many news articles have been written about this topic and they are a bit misleading. There have been reports that this will take effect as soon as April 1 2009. This however is not the case. The Ontario government still needs to receive designation from the federal government under the Criminal Code of Canada. How long is this process going to take? We don't know, but you can be assured, when it does come into affect, Click n Cash will make all necessary changes to their software and websites to abide by this.
Click n Cash offers short term loans to their clients to help them get through unexpected emergencies that come up from time to time. Click n Cash is here to help clients who find themselves short on cash to make their car payment, mortgage payment or to pay a utility bill. Click n Cash welcomes these changes to the payday loan lending system.
Click n Cash stays in touch with the payday loan legislation
Press Release
Staff Writer
Click n Cash is a web based payday loan company in Canada. We keep informed of all ongoing changes to each province of Canada on the payday loan legislation when amendments have been approved.
Some provinces do not have payday loan legislation in place at this time however; Manitoba was the first province to put payday loan legislation in place. Other provinces have followed or will start to follow Manitoba with different rules and regulations for their own legislation.
Legislation starts when a proposed law is set out before the House of Representatives or Parliament. At that time, the proposal is not yet a law or even a bill. Once approved it is then called legislation, a fully enforceable law and all payday loan companies have to abide by the rules set forth in that province. This could include how much the payday loan industry is allowed to use for a percentage rate, if rollovers are allowed and how much one consumer is allowed to borrow at one time.
Here at Click n Cash we want to keep our clients informed of all the upcoming legislation for all the Canadian provinces on our website and current news about the payday loan industry.
Click n Cash Payday Loan Quick & Easy Approval
Press Release
Staff Writer
Click n Cash has done it again! The leader in the Canadian payday loan industry now has the ability to verify your payroll deposits with the click of a button.
Click n Cash has created a Screenshot Utility that will capture an image of your bank statement and will send it directly to the approval center. Now there is no need to find a fax machine and pay someone to fax in your bank statement. Simply log onto www.clickncash.ca click on the link that says "Screenshot Utility" and follow the easy to use instructions.
To apply for a secure, fast payday loan at Click n Cash, fill in an application and use the secure Screenshot Utility to send verification of your payroll and you could be approved in minutes. No need to wait for a phone call, you will receive and email minutes after your application is complete. Once approved, you will receive a second email detailing your loan information and your payment terms. You will never have to wonder how much is coming out of your bank account again with the payment notification email.
Click n Cash is constantly trying to stay one step ahead of the Canadian payday loan market. Listening to what the consumer wants and trying to fulfill their needs is how Click n Cash stays at the top of the industry.
Alberta Following Provinces in Capping Rates on Payday Loans
Press Release
Staff Writer
Alberta is one of the remaining provinces in Canada to yet cap the interest rates allowable for payday loan companies. The province plans to join the other provinces.
Other aspects of the industry will also be regulated. These will focus on issuing licenses to payday loan businesses and ensuring that the rates and fees are clearly disclosed. The changes are expected to come into effect by spring.
"We are looking at taking the responsibility for setting the interest rates for payday lenders - setting a cap, or a maximum rate they can charge," Service Alberta spokesman Eoin Kenny said.
"We recognize that there is need for improvements on how the payday industry is regulated. These are some of the most vulnerable consumers who use these services, and we want to determine the most practical and effective way of protecting consumers."
A bill passed last year in Ottawa gives the provinces the option of regulating the industry if they impose a rate cap. The only province with details about limits is Manitoba.
"The province's Public Utilities Board plans to cap rates at 17 per cent for loans up to $500 starting this fall. Some payday loan companies plan to appeal that ruling in court next week, saying the rate is too low for their businesses to survive."
Alberta will be reviewing Manitoba's progress with the set rates.
"We just want to get it right the first time. The major banks have gotten largely away from providing short-term, unsecured loans. We recognize there is a need for that, but we want to ensure that people aren't taken advantage of."
The remaining provinces including Ontario, British Columbia, Saskatchewan, Nova Scotia and New Brunswick have decided to regulate the payday loan industry, but have not yet provided a set rate on fees and interest charges.
Source:
Cotter, John. (2008). Alberta to cap interest rates that payday loan companies can charge customers in Bugle-Observer Online Edition.
http://bugleobserver.canadaeast.com/article/349539
Legislation in Ontario
Press Release
Staff Writer
The Canadian Payday Loan Association, which states that it welcomes regulation, states, "Payday loans are unsecured small-sum short-term loans typically for a few hundred dollars. The average payday loan is around $280 for a period of 10 days.
"Payday loans are specifically designed to help customers with one-off, unanticipated expenses. Payday loans are not a form of "revolving" credit designed to keep customers in a permanent debt position.
"The lender will typically lend up to a specified percentage of a customer's net pay for a period of 1-14 days, ending on the payday. The borrower writes a post-dated cheque for principle plus interest and fees, dated on the next payday.
"To qualify for a payday loan, a customer must be employed and have a bank account."
The new Payday Loans Act which received Royal Accent June 18, 2008, is designed to regulate the industry in Ontario.
"Bizarrely, Bill 48 and subsequent regulations will likely lead to an interest rate cap that is higher than the current 60 percent limit," said DiNovo. "That doesn't sound like a crackdown, it sounds like the deal of a century for these payday lenders. If the province simply enforced the Criminal Code, Ontarians trapped in the cycle of poverty would be better off."
What most fail to recognize is that there obviously is a higher interest rate for borrowing but the intention is to provide immediate funds for emergency usage and to be paid back on the following payday. If consumers paid back the loan on their following payday the rate of interest and fees attached to borrowing the loan would not be an issue. The problem begins when a consumer misses a payment or cannot pay back the loan in full and goes to a different company to borrow funds to pay back the first loan.
Included in regulating the industry is an education fund which will provide consumers with information about the payday loan industry. Educating the consumer on the proper way to borrow and re-pay the loan is essential as the loan is not intended for a prolonged period of time. Providing the consumer with information about loans may help them in the long run.
Source:
Author unknown. (2008). Ontario's payday loan legislation.
http://netnewsledger.com/index.php?option=com_content&task=view&id=972&Itemid=26
Payday Loan Legislation in Canada 2008
Legislation by Province Updated
Friday, June 20, 2008
Federal Legislation
"Section 347 of the Canadian Criminal Code prohibits lenders from charging borrowers interest rates in excess of 60% per year. This provision was originally intended to address loan sharking activities; however, with the advent of payday lending in Canada, it became clear that annual interest rate restrictions on such short term loans were inappropriate for a variety of reasons. Such reasons include the risks that payday lenders incur in offering such loans; the need for temporary or emergency credit that is not provided by traditional financial institutions; and, according to some, the lack of profitability of payday lending if such loans are restricted to a 60% interest rate. Consequently, Section 347 was amended by Bill C-26, An Act to Amend the Criminal Code, in May 2007. This amendment created an exemption to the criminal interest rate for payday lenders provided such lenders operate in provinces which have consumer protection measures in place; the amount of the loan is less than $1,500 and the term of the agreement is for 62 days or less. Bill C-26 effectively allows the provinces and territories to set limits on the cost of borrowing."
The province of Manitoba:
- The first province introducing legislation relating to the payday loan industry
- The legislation focuses on consumer protection in which borrowers need to be provided with a full disclosure about all information about the loan and their rights, including postings of costs of borrowing
- All lenders must be licensed
- A borrower can cancel a loan within 48 hours without any additional fees
The province of Ontario:
- Consideration for regulating the industry was introduced August 1, 2007
- The legislation is similar to that of Manitoba
- "The amendments also regulate the content of payday credit agreements. If such content requirements are not met, borrowers have the right to demand a refund of any cost of borrowing they have paid to the lender within one year of making the payment."
- Bill 48
Bill 48 has received Royal Ascent. It was originally introduced by the Minister of Government and Consumer services and "proposes to enact new legislation that will provide consumers with additional protections. One of the most significant changes to existing legislation would involve the introduction of licensing requirements for lenders." Furthermore, Bill 48 "prohibits false, misleading or deceptive statements in marketing materials." Bill 48 also lead to the creation of the Payday Loan Education Fund, which will work to educate consumers on the use of payday loans.
The province of Nova Scotia:
- Similar to Ontario, the legislation first began in August 31, 2007
- "Some of the features of the new legislation include mandatory licensing for payday lenders as well as disclosure requirements at the time of making the initial advance"
- Borrowers also have a right to cancel any loan before the end of the business day
All other provinces:
- No legislation has been introduced as of yet
- Quebec bans payday lending
Source:
Moffatt, Kelly. (2008). Payday loans being regulated in many jurisdictions across Canada in Advertising and Marketing Review.
http://www.osler.com/resources.aspx?id=14898
Bill 48, Payday Loans Act, 2008: What this Bill is About
Friday, June 13, 2008
Staff Writer
Part I
- The current Act being reviewed will regulate the payday loan industry. A payday loan is defined "as in section 347.1 of the Criminal Code (Canada) to be an advancement of money in exchange for a post-dated cheque, a pre-authorized debit or a future payment of a similar nature but not for any guarantee, suretyship, overdraft protection or security on property and not through a margin loan, pawnbroking, a line of credit or a credit card."
- Furthermore, the Act will also regulate any loan agreements relating to payday advances. The agreements are defined "to be agreements under which a lender makes a payday loan to a borrower, with or without the assistance of a loan broker."
Part II
- Under the Act, all person acting as a payday lender must have a license that is issued by the Registrar, regardless of parties entering into a payday loan agreement. A license can be suspended or even revoked by the Registrar. If any discrepancies occur or the lender is affected by any decisions previously made by the Registrar, the lender is entitled to a hearing before the License Appeal Tribunal.
Part III
- A payday loan lender must provide the Registrar with any updated information relating to their company (i.e. change of address or service charges) when applying for or renewing a license.
- Materials used by the payday loan lender to conduct business may be requested by the Registrar.
- The new Act ensures the protection of consumers. The payday lender is to provide the client upon approval of a loan, a copy of the loan agreement. The borrower is permitted to cancel a loan within two days. Any costs for borrowing the loan are not to exceed what is stated in the regulations under the Act.
Part IV
- When a client cancels a payday loan, under the new bill the lender must return all payments to the borrower, return all post-dated cheques and cancel any future authorizations. The client is not required to pay any fees associated with the loan.
Part V
- A number of enforced measures will be included in the Act, such as:
- Any complaints received about the lender, the Registrar may request any information or documents relating to the complaint.
- An inspection of the premises in regards to the complaint and ensuring compliance with regulations in the Act may occur at a reasonable time.
- A search warrant may be issued by a justice of the peace to investigate the lenders premises.
- "An assessor designated in writing by the person prescribed by the regulations made under the Act can, by order, impose an administrative penalty against a licensee if the assessor is satisfied that the licensee has contravened or is contravening a provision of the Act or the regulations that is prescribed by the regulations. The amount of the administrative penalty is the amount set by regulations made by the Minister, not to exceed $10,000."
Part VI
- This focuses on "the confidentiality of information, service of notices, orders or requests and the use in evidence of statements certified by the Director."
Part VII
- A corporation referred to as the Ontario Payday Lending Education Fund will be established in which lenders will be required to submit funds. The purpose of the fund relates to providing consumers education on their rights and obligations under the Act.
Part VIII
- The Minister will be able to charge any fees relating to regulations in respect to any administrative penalties. The Lieutenant Governor in Council has the power to make any changes or regulations to the Act, which may include outlining the responsibilities of the lenders, reviewing their business activities and "governing the required contents for payday loan agreements."
Part IX
- The current Bill will review the Consumer Protection Act, 2002 and the License Appeal Tribunal Act, 1999 and make amendments.
Source:
Legislative Assembly of Ontario. (2008). Explanatory Note: Extracted from the Second Reading amended version of the Bill.
http://www.ontla.on.ca/web/bills/bills_detail.do?locale=en&BillID=1956&detailPage=bills_detail_about
Bill 48, Payday Loans Act, 2008: Third Reading Carried
Friday, June 13, 2008
Staff Writer
The Ontario government recently passed a new law that regulates the payday loan industry. The legislation will balance the industry and provide consumer protection. Ontario has become the sixth province with the passage of Bill 48, to have the payday loan industry regulated.
"The next step will involve the creation of companion regulations that will include a provision placing a maximum cap on the total allowable fees and charges for a payday loan. An advisory panel will move ahead over the summer to consult with the industry and other stakeholders, and to provide advice to the government on the rate cap for payday loans." The Canadian Payday Loan Association (CPLA) will actively be involved in these consultations.
The CPLA has been actively trying to promote the payday loan legislation to governments across the country for over three years. "This legislation is an important step forward for real consumer protection in Ontario," said Stan Keyes, the President of the CPLA. "The CPLA will continue to be an industry leader in protecting consumers and will participate actively in the rate-setting process for this mainstream, convenience financial product. Regulations must ensure real consumer protection and a viable, competitive industry."
The next steps over the summer will be to review the fees for a loan and to set a maximum cap that lenders will be allowed to charge. Ontario follows British Columbia, Saskatchewan, Manitoba, Nova Scotia and New Brunswick in regards to the payday loan legislation.
Source:
CNW Group. (2008). Canadian Payday Loan Association applauds Ontario payday loan legislation. http://www.newswire.ca/en/releases/archive/June2008/09/c9949.html
Lenders want to appeal capped rates
June 6, 2008
Payday loan lenders are considering appealing the courts for the decision that caps loan rates. The Manitoba board recently approved a new law that prohibits lenders charging their clients over a maximum amount per year. A motion was filed by a lawyer of The Cash Store Financial Services Inc., appealing a decision by The Public Utilities Board of Manitoba.
The appeal is also centered on the argument that some of the smaller and medium-sized stores will eventually be forced to close. "We feel that in many respects the board exceeded its mandate by specifically structuring a ruling that is designed to force payday lenders out of the market," said Michael Thompson, senior vice-president and corporate secretary for the Edmonton-based company.
"Ontario introduced its own legislation to regulate the payday loan industry and expects an independent advisory board to deliver a report recommending the total cost of borrowing in September."
Source:
http://www.thestar.com/News/Canada/article/424058
What's happening with Payday Loans in Canada
Friday, May 30, 2008
A recent state that has passed legislation is Ohio. With a capped interest rate at 28%, payday lenders are clearly concerned. There is also concern over the lack of alternatives for those individuals seeking a short term loan for the emergency financial needs. The intent of payday loans are to cover the period between paydays when an individual needs a cash advance. A fee of about $15 for every one hundred dollars is normally charged. With the interest rates capped, the industry will not be able to survive.
Canadian payday lenders may be feeling a little apprehensive about the current legislation that is being considered in Canada, although each province is taking a close look at passing the laws and will make the decision individually.
Nathan Slee, who represents payday lenders through the BC Payday Loan Association, stated his opinion on the difference between the approach that Canadian and American countries are taking in regards to payday loans. Slee states, "I think the difference between the Canadian approach and the American approach is that the issue is far less politicized here so governments have taken a more pragmatic approach to regulating the industry. A joint federal/provincial body called the Consumer Measures Committee studied the industry for over ten years before we got to the point of regulations so there has been a coordinated effort to understand the product and how it fits within the credit options that are available to Canadians."
Source:
Barrett, Simon. (2008). Payday Loans, What's Happening in Canada in Business News, Canada News. http://www.bloggernews.net/115855
A Personal Opinion about Payday Loans: Lawrence Meyers
Wednesday, May 21, 2008
The following excerpts are from an interview with Lawrence Meyers who is involved with the payday loan industry from a financial standpoint. He discusses the industry and the current challenges.
The current legislation being considered in Ohio, if passed, will implement laws that include a 28% APR, 30 day loan term and 4 loans per year. Based on these figures, Meyers does not believe any payday loan company will be able to survive.
Meyers states, "the average payday loan store lends out $75,000 every two weeks and earns $15 per hundred. However 7% of those loans default, or about $5300.
Revenue collected = $75,000 - $5,300 = $69,700 x .15 = $10,455 every two weeks, or about $21,000 per month.
Against that revenue, they lose that $5300 in defaults, and spend about $9000 on overhead, or $14,300 total. So their net profit for the month (before owner salary and taxes!) is $6,700.
A 28% APR rate cap means 28% divided by 26, or 1.07% every two weeks. That's $1.07 per hundred instead of $15 per hundred. That is a 93% revenue cut. Revenue collected drops to $750 every two week."
He further argues that if the payday loan industry were banned, the demand for immediate funds would still exist. "The only place people can go are to unregulated offshore internet lenders who charge $25 - 30 per hundred, or to bounce checks at a cost of $48 - 60 per check. Or people can elect not to pay a bill and suffer the consequences such as having utilities cut off."
Meyers includes his ideas about a public policy relating to loans.
- Payday lenders permitted in every state.
- The fee, or interest, is a minimum of $15 per hundred. That amount could be higher and should be left to the states to decide, and should be adjusted for inflation.
- Borrowers are permitted two rollovers/renewals of a single loan or a maximum of 3 loans out at any time. (This will account for people who have longer term emergencies or can only pay off part of the loan come their next paycheck; it also keeps lenders from over-lending)
- Loans cannot exceed 25 - 35% of a customer's net pay.
- After the second renewal, the client may have a 30 - 60 day payment plan, but may only have that option once per year. (If they can pull the payment plan ripcord every time, then they will. That lengthens the loan maturity and cuts revenue. Plus, if they know they always have an out, they will not learn that every action requires responsibility).
- Every state should have a mandatory class in personal finance offered in the senior year of high school.
There are still many individuals who oppose payday loans and applaud the governments for considering regulating the industry. Meyers argues those who are against payday loans are uneducated and have no supporting evidence to back of their claims. He suggests asking payday loan opponents the following questions, and also guarantees they will not have an answer.
- Does a rate cap of 36% put payday lenders out of business?
- If payday lenders were banned, where would people go for short-term loans?
- If payday lenders were banned, would you loan money to people who provide you with a post-dated check? If so, at what interest rate? If not, then how can you fight to ban them yet not offer an alternative?
Source:
Barrett Simon. (2008). An Interview with Lawrence Meyers about Payday Loans in Interview, Society and Culture. http://www.bloggernews.net/115609
A Valued Service
Friday, May 16, 2008
Payday loan firms across Canada are under review for their current practices. Consumer protection is part of the consideration, along with viewing the demand for the industry within each province. Many believe the industry is viable but some want some sort of regulation among all companies.
Alberta is currently in the process of regulating the industry. However, the payday loan business has a long history within its community, as B.C. and Alberta were among the first provinces to have payday loan stores. Payday loan companies are a thriving business out west.
"It also has a little bit to do with the economy in this neck of the woods," said Michael Thompson, senior vice-president of Cash Store Financial. "In Western Canada particularly there's been a really rapid acceleration in housing prices, and that kind of puts a strain of people from time to time. And they need short-term financing to get them from one payday to the next," Thompson said.
Stan Keyes, president of the Canadian Payday Loan Association, said his organization has been calling for greater regulation of the industry. As well, part of his job as the formal Liberal cabinet minister is to "dispel the misconception that payday loan users are poor, uneducated and can't handle their credit, and the industry itself is inherently bad."
Others believe that individuals resort to payday loans since there is a lack of options for borrowing immediate funds.
With over two millions Canadian using payday loans per year there is a need to review the practices and to understand both the business and consumers perspective.
Source:
http://www.canada.com/calgaryherald/news/story.html?id=f403d3c3-c231-4823-ab7d-92735640d9ac&k=34825&p=3
Payday Loan Legislation Not Meant to Eliminate the Industry
May 8, 2008
Payday loan companies have long been accused of targeting the low income communities. However, the results of surveys conducted on the consumers of payday loans indicate that the majority of individuals have an average income and many are educated. The current payday loan bill is based on the notion of this vulnerable population being targeted by the industry. The bill is designed to regulate not eliminate the industry. It will seek to set apart the companies that are following regulations and conducting business that is geared towards protecting the consumers and those companies who are not.
It may be that payday loans appeal to a lower income family or those with immediate financial need. The purpose of the payday loan industry is to provide immediate assistance to those who require it. Individuals also need to be employed full time in which the loan is meant to be paid back in full on their next payday.
The fees charged on a payday loan are not meant to be calculated at an annual percentage. It is based on borrowing the loan for a short period of time. For instance, if a client borrows $100 for two weeks, the fees plus regulatory costs are $30.
The Canadian Payday Loan Association (CPLA) who has been working with the governments to regulate the payday loan industry, also refuse to acknowledge annualized interest rates. "How can you apply an annual rate against a loan that you only get until your next payday? It makes no sense," Keyes said. "It's a meaningless number." The CPLA also agrees with a cap on fees with about $20 to $23 on a two-week loan of $100, plus any regulatory costs.
The CPLA also agrees that the industry fills a need which provides immediate assistance for emergency loans.
Sources
Payday loan crackdown. (2008). http://register.thestar.com/News/Ontario/article/407813
From the Ministry of Government and Consumer Services:
April 21, 2008
Key findings in the most recent survey conducted in Ontario in regards to those consumers who use payday loans, have found:
- consumers are on average an age of 39 years of age
- at least 68% are employed full time
- over half have a post-secondary education in college, university and professional programs
- 62% borrow less than $300 on average and would expect to pay about $23 in interest to borrow $100 for two weeks
- payday loan consumers also have average household incomes
The proposed legislation is currently being reviewed in order to protect Ontario's consumers. Currently, an advisory board of expects, representatives from local businesses, and poverty advocates are examining payday loan costs and will recommend a cap on the fees for borrowing a loan.
The proposed act would also:
- "Require lenders to include in the total cost of borrowing all charges the consumer is required to pay.
- License all payday lenders.
- Allow borrowers to cancel agreements during a cooling-off period.
- Require operators to contribute annually to a public education fund on payday lending.
- Create enforcement through inspections, charges and license suspensions."
"We want payday lenders in Ontario to be ethical and accountable, and the new Payday Loans Act is another important step in protecting Ontario consumers who use this service," said Ted McMeekin, Minister of Government and Consumer Services Minister.
Source:
http://ogov.newswire.ca/ontario/GPOE/2008/03/31/c8715.html?lmatch=&lang=_e.html
Financial Consumer Agency of Canada (2005)
http://www.cpla-acps.ca/english/reports/3631%20Ontario%20CPLA%20Report %20FINAL%20(Oct%2026).pdf
Province sets rates to protect consumers
Manitoba, Ontario
April 25, 2008
The proposed legislation has now become law in Manitoba, Ontario. The province has set limits on the rates that businesses are allowed to charge payday loan consumers. "The maximum cost of credit will be 17 per cent for loans up to $500,"and rates even lower for those on employment insurance or social assistance.
Among the provinces considering following Manitoba in its consumer protection act are Quebec, Ontario, Saskatchewan, New Brunswick, Nova Scotia, British Columbia, and Alberta.
The Canadian Payday Loan Association has predicted that the cap on the interest rates will hurt both businesses and payday loan consumers. Smaller businesses may be forced to close and consumers will have to "do without."
However, the executive director of the Consumers Association of Canada's Manitoba branch Gloria DeSorcy believes that the caps on interest rates will help consumers. "While payday loans are still very expensive, Manitoba consumers can expect to save between 20 per cent and 50 per cent on what they currently pay," she said.
The other provinces are still considering the new payday loan legislation.
Source:
http://money.canoe.ca/News/Other/2008/04/04/5198511-cp.html
In Regards to the Payday Loans Act, 2008
Thursday, April 17, 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."
A payday loan is considered a short term loan (usually between $50-$500) plus interest that is due back on a client's next payday. The intent is to cover a borrower's immediate expenses. Criteria for a loan includes; proving employment, being at least twenty-three years of age, and having an active personal bank account.
New legislation from the Ontario Government was introduced March 31, 2008. If passed it will:
- "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, the laying of charges and suspensions of licenses.
- 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."
There will also be enforcement of the laws, if passed, by the Ministry of the Government and Consumer Services Consumer Protection Branch. They will respond to any complaints by consumers, conduct inspections and investigations, and monetary penalties may be imposed.
Source:
http://www.gov.on.ca/mgs/en/News/226928.html
New Payday Loan Legislation Welcomed in Ontario
(April 3, 2008)
For the past three years, the Canadian Payday Loan Association (CPLA) has been trying to introduce the legislation to governments in order for them to pass the new law. On April 1, 2008, the Government of Ontario the legislation that will regulate the payday loan industry. This will help with consumer protection and create a more viable industry.
Furthermore, in an attempt to balance consumer protection, the CPLA has been promoting consumer awareness by educating through credit counseling brochures.
So what does this mean for the industry? The CPLA will help those businesses that are serious about participating in protecting its consumers but it will also work to eliminate those conducting bad business practices.
Ontario is following British Columbia, Saskatchewan, Manitoba, and Nova Scotia that are among those provinces that have also recently passes the new legislation and are currently processing a maximum on fees.
More information is to be followed in coming months.
Source:
http://www.newswire.ca/en/releases/archive/April2008/01/c9494.html
Legislative Summary:
An Act to Amend the Criminal Code
(regarding criminal interest rates)
(March 19, 2008) A payday loan is defined as "an advancement of money in exchange for a post-dated cheque, a preauthorized debit or a future payment of a similar nature but not for any guarantee, suretyship, overdraft protection or security on property and not through a margin loan, pawn broking, a line of credit or a credit card."
The Minister of Justice and Attorney General of Canada, the Hon. Vic Toews, introduced Bill C-26, An Act to amend the Criminal Code (criminal interest rate), in the House of Commons on 6 October 2006.
Bill C-26 is not opting for a ban on payday loan lending, as this is viewed as a viable industry. The focus is on regulating the market and implementing consumer protection.
The following requirements are proposed to be in place in order to protect the consumer regarding payday loans:
- limitations on rollover fees and re-loans
- mandatory participation of the lenders in complaint resolution
- ensuring full and complete disclosure of terms in the contract
- practicing acceptable debt collection
- the right to rescind with full reimbursement by the end of the same day of borrowing
The majority of provinces are currently working on regulating the industry.
Sources:
http://www.parl.gc.ca/common/bills_ls.asp?lang=E&ls=c26&source=library_prb&Parl=39&Ses=1
PAYDAY LOAN LEGISLATION IN CANADA 2008
Legislation by Province
Alberta (7)
The province has expressed interest to develop new legislative laws and work with the governments in order to regulate the industry.
However, Alberta has been known to favor businesses more so than any other province and is currently considered the "least likely to develop Payday Loan legislation."
British Columbia (1)
Beginning in January 2004, The Canadian Payday Loan Association was created with the intention to:
a) "consult with and encourage government to develop and enact reasonable regulation to protect consumers while allowing for a viable competitive industry, and
(b) in the absence of regulation by governments, to develop a code of best business
practices to be practiced by its membership which would inform and protect the consumer
in relation to payday loan products."
The province is currently undergoing a study which will be completed April 2008 with a focus upon lenders in the private (non-public) sector of the payday loan industry. The goal is to analyze the cost of borrowing for the consumers in the province.
They study also sets to determine and define rates on the cost of borrowing. Furthermore, the province understands that other provinces have completed studies relating to this matter but B.C. wants to establish their own specifications and associated rules specific to their population.
Manitoba
The province has started their search for a solution to regulating the payday loan industry. The Public Utilities Board is currently accepting public opinions on the type of interest rates that should be allowed on each payday loan. Since the goal is to protect the consumer and to cap the rates that businesses are permitted to charge on a loan, it makes sense to take the publics opinion into consideration.
Nova Scotia (2)
Under the consumer protection law, N.S. has regulated the amount of interest allowed on payday loans. Lenders can be fined up to thirty thousand dollars for an infraction of the code created over two years ago by the CPLA. This fosters a viable competitive industry to provide service to Canadians using payday loans.
Nova Scotia is the first province to pass the consumer protection legislation. Highlights of the legislation include research conducted by Dr. Larry Gould (Professor of Finance at the University of Manitoba), concluding the following, "I recommend that the Board set the maximum fee for payday lending in the range of twenty dollars ($20) to twenty three dollars ($23) per one hundred dollars ($100) of a payday loan. A fee of twenty three ($23) would allow smaller companies to operate in Nova Scotia, allowing the forces of competition to operate more
fully."
Furthermore, any rates charged for those accounts in arrears, it was recommended that no more than 60 percent to be charged to the consumer.
No conclusive reports have been made in regards to the recommended rates.
Newfoundland (3)
Early 2008 legislation is expected to be introduced to the province of Newfoundland.
New Brunswick (9)
"New Brunswick's new legislation includes many elements of the CPLA's Code of Best Business Practices - introduced two years ago and monitored by an independent Ethics and Integrity Commissioner to ensure adherence among CPLA members."
The New Brunswick government is working hard to ensure the quality of the payday loan industry and to protect their consumers. The overall goal is to protect consumers and to set a maximum allowable fee on a payday loan.
Ontario
Latest concerns center on the idea that poorer individuals are turning to payday loans due to lack of options.
"Our purpose here is not to vilify the fringe lending sector. Clearly, these businesses have found a market niche that fills a need for convenient, quick and easy credit, the demand for which,
at least in terms of payday loans and cheque cashing, may well extend to a broader cross-section of the population," states the report. (4)
There is a concern of what these individuals have to spend to get credit. They fear that they are trapped in a cycle of debt.
Current laws indicate that a maximum of 60 percent interest per year is allowed to be charged on a loan. The issue with payday loans is they have to be viewed separately from this law on the cap on rates.
Payday loans are only intended to have for a short period of time, usually a two week period.
The legislation passed late last year in Ottawa now gives provinces the ability to regulate the payday loan industry. (4)
Legislation is expected to be introduced in early 2008 in Ontario to protect consumers and enhance the viability of the payday loan sector. (3)
Prince Edward Island
Legislation is expected to be introduced in late 2007 / early 2008. (3)
Saskatchewan (8)
The province is currently working towards regulating the payday loan industry in regards to the proposed legislation.
They intend to focus on implementing the following protocols:
- Licensed lenders
- Caps on fees and interest
- Fees must be clearly stated
- A loan can be cancelled by the end of the next business day
- Only one loan per customer at a time
- Maximum limits that a customer can borrow is connected to the borrowers pay
Quebec (5)
Currently Quebec is not included in the payday loan sector, as these businesses do not exist in this province.
Sources:
- Response to consultation paper on regulation of payday lenders under the business practices and consumer protection act- British Columbia. (2008). http://www.cpla-acps.ca/english/reports/Consultation%20Paper%20-%20British%20Columbia.pdf
- Evidence of the Canadian Payday Loan Association Delivered by the Hon. Stan Keyes P.C. (2008). http://www.cpla-acps.ca/english/mediasubmissions.php
- Canadian Payday Loan Association. (2008) http://www.cpla-acps.ca/english/aboutcpla.php
- Rankin, Jim. (2007). Proliferation of lending stores a signal people are poorer: Report. http://www.thestar.com/News/article/279841
- http://www.canpayday.ca
- Severs, Laura. (2007). Payday loan association welcomes regulations. Business Edge, (7) 24. http://www.businessedge.ca/article.cfm/newsID/16772.cfm
- http://www.canpayday.ca/Alberta-Payday-Loans.aspx
- http://www.canpayday.ca/Saskatchewan-Payday-Loans.aspx
- Canadian payday loan association applauds New Brunswick for new payday loan legislation. (2007). http://www.newswire.ca/en/releases/archive/November2007/28/c5444.html
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