Law Talk: Easy cash and payday lending services
Consumers facing financial difficulty who
are unable to obtain credit from a bank or
other conventional lender often resort to
using the services of a payday lender. Here
is some information you should know when
dealing with a payday lender.
What is a payday loan?
In a payday loan, the borrower asks for money before their paycheque, government cheque or other funds become available. The payday lender advances the funds, and when the borrower receives the anticipated cheque, they use it to repay the loan. Payday lenders often operate under names like "Cash 4 You" and "Cash Money." While these loans may be quick and easy to obtain, interest rates can be very high and the repayment due date can come up sooner than you think, causing you to look to other sources to repay the loan on time.
How are payday loans regulated?
The Criminal Code
If the amount of a payday loan is greater than $1,500, the Criminal Code prevents a lender from charging more than 59 per cent interest. If you are in this situation, you should call your local police department.
The Payday Loans Act
For payday loans of $1,500 and under, lenders are regulated by Ontario's Payday Loans Act (PDLA). Under the PDLA, payday lenders must be licensed by the province. Payday loan companies must provide information that is truthful and clear, and cannot make false, misleading or deceptive statements. This applies to communications through advertising, posters, pamphlets and contracts. Posters must be displayed in all of the lender's offices and be visible to all potential borrowers. The posters must state that the maximum amount the payday lender may charge you for borrowing from them is $21 for every $100 you are loaned, and must display the amount that the lender is actually charging you. Written contracts are required for all loans. A signed copy of the written contract must be given to you at the time your loan is negotiated.
Under the PDLA, a lender cannot try to sell you other services (such as cheque cashing or currency exchange) when you are there to get a payday loan. The lender cannot deduct any amount from the loan for administrative fees. You must receive the cash from the loan immediately upon signing the agreement, or within one hour if the agreement was made online. You have an automatic two-day cooling-off period after you sign the loan agreement, during which you may cancel the agreement for any (or no) reason. If you cancel, you must return the funds you received, and the lender must return any post-dated cheques or debit forms you gave them. You have the right to repay a loan at any time before it is due without paying a prepayment charge or a penalty. Finally, lenders are not allowed to issue you another loan before your first loan is repaid.
Can a payday lender contact me to collect a loan?
If your loan is in default, a lender may contact you, but only on weekdays between the hours of 7 a.m. and 9 p.m. and on Sundays only between the hours of 1 p.m. and 5 p.m. They may not contact you at all on statutory holidays, or more than three times during any seven-day period. They may not use threatening, profane, intimidating or coercive language, or communicate with you in a way that constitutes harassment.
What can I do if I have problems with a lender?
If you feel that a payday lender has violated your rights, you have several options. First, you can complain to the Registrar of the Payday Loans Act. This can lead to mediation, the payday lender being given a written warning, the lender's license not being renewed, or the lender being fined up to $10,000. Second, you may be able to request a prosecution under the Payday Loans Act, which may result in the lender paying a fine or being imprisoned. If neither of these options resolves the matter to your satisfaction, you may be able to sue the lender in either the Small Claims Court or the Superior Court (depending on the amount of your claim).
For more information on consumer rights and complaints related to payday lending services, visit the Ministry of Consumer Services website at http://www.sse.gov.on.ca/mcs/en/Pages/default.aspx or call them at 1-800-889-9768. In addition, you can find more information about consumer protection topics at any time in a series of Community Law School webinars archived online at yourlegalrights.on.ca/training-topic/consumerlaw. Be empowered, and stay tuned.
This column is brought to you by Community Law School (Sarnia-Lambton) Inc., and Community Legal Services and Pro Bono Students Canada at Western University, with financial support from the Law Foundation of Canada. It provides legal information only. The information is accurate as of the date of publication. Laws change frequently so we caution readers from relying on this information if some time has passed since publication. If you need specific legal advice please contact a lawyer, your community legal clinic, Justice Net at 1-866-919-3219, or the Law Society Referral Service at 1-800-268-8326.
Editorial opinions or comments expressed in this online edition of Interrobang newspaper reflect the views of the writer and are not those of the Interrobang or the Fanshawe Student Union. The Interrobang is published weekly by the Fanshawe Student Union at 1001 Fanshawe College Blvd., P.O. Box 7005, London, Ontario, N5Y 5R6 and distributed through the Fanshawe College community. Letters to the editor are welcome. All letters are subject to editing and should be emailed. All letters must be accompanied by contact information. Letters can also be submitted online by clicking here.
What is a payday loan?
In a payday loan, the borrower asks for money before their paycheque, government cheque or other funds become available. The payday lender advances the funds, and when the borrower receives the anticipated cheque, they use it to repay the loan. Payday lenders often operate under names like "Cash 4 You" and "Cash Money." While these loans may be quick and easy to obtain, interest rates can be very high and the repayment due date can come up sooner than you think, causing you to look to other sources to repay the loan on time.
How are payday loans regulated?
The Criminal Code
If the amount of a payday loan is greater than $1,500, the Criminal Code prevents a lender from charging more than 59 per cent interest. If you are in this situation, you should call your local police department.
The Payday Loans Act
For payday loans of $1,500 and under, lenders are regulated by Ontario's Payday Loans Act (PDLA). Under the PDLA, payday lenders must be licensed by the province. Payday loan companies must provide information that is truthful and clear, and cannot make false, misleading or deceptive statements. This applies to communications through advertising, posters, pamphlets and contracts. Posters must be displayed in all of the lender's offices and be visible to all potential borrowers. The posters must state that the maximum amount the payday lender may charge you for borrowing from them is $21 for every $100 you are loaned, and must display the amount that the lender is actually charging you. Written contracts are required for all loans. A signed copy of the written contract must be given to you at the time your loan is negotiated.
Under the PDLA, a lender cannot try to sell you other services (such as cheque cashing or currency exchange) when you are there to get a payday loan. The lender cannot deduct any amount from the loan for administrative fees. You must receive the cash from the loan immediately upon signing the agreement, or within one hour if the agreement was made online. You have an automatic two-day cooling-off period after you sign the loan agreement, during which you may cancel the agreement for any (or no) reason. If you cancel, you must return the funds you received, and the lender must return any post-dated cheques or debit forms you gave them. You have the right to repay a loan at any time before it is due without paying a prepayment charge or a penalty. Finally, lenders are not allowed to issue you another loan before your first loan is repaid.
Can a payday lender contact me to collect a loan?
If your loan is in default, a lender may contact you, but only on weekdays between the hours of 7 a.m. and 9 p.m. and on Sundays only between the hours of 1 p.m. and 5 p.m. They may not contact you at all on statutory holidays, or more than three times during any seven-day period. They may not use threatening, profane, intimidating or coercive language, or communicate with you in a way that constitutes harassment.
What can I do if I have problems with a lender?
If you feel that a payday lender has violated your rights, you have several options. First, you can complain to the Registrar of the Payday Loans Act. This can lead to mediation, the payday lender being given a written warning, the lender's license not being renewed, or the lender being fined up to $10,000. Second, you may be able to request a prosecution under the Payday Loans Act, which may result in the lender paying a fine or being imprisoned. If neither of these options resolves the matter to your satisfaction, you may be able to sue the lender in either the Small Claims Court or the Superior Court (depending on the amount of your claim).
For more information on consumer rights and complaints related to payday lending services, visit the Ministry of Consumer Services website at http://www.sse.gov.on.ca/mcs/en/Pages/default.aspx or call them at 1-800-889-9768. In addition, you can find more information about consumer protection topics at any time in a series of Community Law School webinars archived online at yourlegalrights.on.ca/training-topic/consumerlaw. Be empowered, and stay tuned.
This column is brought to you by Community Law School (Sarnia-Lambton) Inc., and Community Legal Services and Pro Bono Students Canada at Western University, with financial support from the Law Foundation of Canada. It provides legal information only. The information is accurate as of the date of publication. Laws change frequently so we caution readers from relying on this information if some time has passed since publication. If you need specific legal advice please contact a lawyer, your community legal clinic, Justice Net at 1-866-919-3219, or the Law Society Referral Service at 1-800-268-8326.
Editorial opinions or comments expressed in this online edition of Interrobang newspaper reflect the views of the writer and are not those of the Interrobang or the Fanshawe Student Union. The Interrobang is published weekly by the Fanshawe Student Union at 1001 Fanshawe College Blvd., P.O. Box 7005, London, Ontario, N5Y 5R6 and distributed through the Fanshawe College community. Letters to the editor are welcome. All letters are subject to editing and should be emailed. All letters must be accompanied by contact information. Letters can also be submitted online by clicking here.
