Payday loan: at what price?

In your neighborhood, a brightly lit shop makes a tempting offer: it promises access to funds quickly in few conditions. You are late in your car, rent and credit card payments. What luck! You are entitled to a payday loan! Warning: Do you know the costs of a payday loan? 

You want money fast. What is a payday loan?

You want money fast. What is a payday loan?

A payday loan is an advance on your salary that you must repay with your next payday. This is an expensive way to borrow money over a short period of time. These loans can have very high interest rates.

In most Canadian provinces, traders offering payday loans are regulated. Generally, they must have a license and register with the consumer protection agency in their province.

What documentation do you need to present to the lender to obtain a loan?

What documentation do you need to present to the lender to obtain a loan?

In general, a payday lender requires proof of salary (eg, government employment or benefits), bank account and address. The lender may also ask you for a post-dated check for the full amount of the loan (including loan and interest) or a form authorizing you to withdraw the full amount from your bank account by the due date established in the policy.

What should your payday loan contract include?

What should your payday loan contract include?

The loan agreement should include the following conditions:

  • The loan amount,
  • The number of days of the loan,
  • The total cost of borrowing,
  • The maximum cost per loan tranche of $ 100,
  • The total amount that will have to be repaid,
  • The date on which the loan will have to be repaid,
  • The name and address of the lender,
  • The signature of the borrower.

Some lenders require that the loan agreement be signed in person and not over the Internet or over the phone.

What is the maximum amount of a payday loan?

What is the maximum amount of a payday loan?

The amount you can borrow is based on your net income in most provinces. In any case, payday loans can not exceed $ 1,500.

Provinces and territories

Maximum amount you can borrow for two weeks

Alberta

The law is silent, ask the lender.

British Columbia

50% of your net income for two weeks.

Prince Edward Island

The law is silent, ask the lender.

Manitoba

30% of the annual average of your net income for two weeks.

New Brunswick

30% of your net pay from the last pay slip.

New Scotland

The law is silent, ask the lender.

Nunavut

The law is silent, ask the lender.

Ontario

50% of your net income for two weeks.

 

Saskatchewan

50% of your net income from the last pay slip

Newfoundland and Labrador

The law is silent, ask the lender.

Northwest Territory

The law is silent, ask the lender.

Yukon

The law is silent, ask the lender.

What is the total cost of my payday loan?

What is the total cost of my payday loan?

From province to province, the cost of a loan varies between $ 15 and $ 25 per $ 100.

Provinces and territories

Maximum cost that can be billed for a two-week payday loan per $ 100

Alberta

$ 15

British Columbia

$ 17

Prince Edward Island

$ 25

Manitoba

$ 17

New Brunswick

$ 15

New Scotland

$ 25

Nunavut

There is no maximum amount in the law. Ask the lender and consult your contract.

Ontario

$ 15

Saskatchewan

$ 23

Newfoundland and Labrador

There is no maximum amount in the law. Ask the lender and consult your contract.

Northwest Territory

There is no maximum amount in the law. Ask the lender and consult your contract.

Yukon

There is no maximum amount in the law. Ask the lender and consult your contract.

When do you have to pay back the payday loan? Can you renew it?

 

Normally, the payday loan repayment date is indicated in your contract. It can be 62 days, or calculated according to the date of your next pay or government benefit. Make sure you understand the deadlines for repaying your loan before borrowing the money.

In addition, payday lenders in the provinces of Alberta, British Columbia, New Brunswick, Nova Scotia, Saskatchewan and Ontario can not renew or extend the terms of your payday loan.

You have a payday loan that is not paid back. Can you have a second one to pay back the first?

You have a payday loan that is not paid back. Can you have a second one to pay back the first?

No. In provinces where payday loans are regulated (Alberta, British Columbia, Prince Edward Island, Manitoba, New Brunswick, Nova Scotia, Ontario and Saskatchewan), you can not get a new payday loan before paying the first.

In the unregulated provinces and territories (Nunavut, Newfoundland and Labrador, Northwest Territories and Yukon), you must contact the lender for policy.

Can you cancel your payday loan if you change your mind?

Can you cancel your payday loan if you change your mind?

Yes, but only in some provinces. In these provinces, consumer protection laws provide a “cooling off period” during which you can cancel the loan without having to pay interest. It varies from one to two business days depending on the province.

In other provinces and territories, you must ask the lender if you have a cooling off period.

Provinces and territories

Time to think about canceling a payday loan without interest or interest

 

Alberta

2 working days

British Columbia

Next business day

Prince Edward Island

2 days

Manitoba

48 hours, excluding Sundays and holidays

New Brunswick

48 hours, excluding Sundays and holidays

New Scotland

Next business day

Nunavut

There is no cooling-off period in the law, you must check with the lender and consult your contract.

Ontario

2 working days

Saskatchewan

Next business day

Newfoundland and Labrador

There is no cooling-off period in the law, you must check with the lender and consult your contract.

Northwest Territory

There is no cooling-off period in the law, you must check with the lender and consult your contract.

Yukon

There is no cooling-off period in the law, you must check with the lender and consult your contract.

 

IMPORTANT:

When you cancel your loan during the cooling off period, you must return the borrowed amount to the lender and tell them of your intention, ideally in writing. To cancel your loan, you can complete the cancellation form available on the website of the New Brunswick Financial and Consumer Services Commission.

 

EXAMPLE:

You live in New Brunswick. You have 48 hours to cancel your loan without any fees or interest. You take out a loan of $ 100 at noon on September 1 st . On the 3rd of September in the morning, you give the borrowed amount to the lender, informing him in writing that you are terminating your contract. You do not have to pay any fees or interest since you terminated your loan during the cooling off period.

Your payday loan expires and you are unable to repay it. What are the consequences?

Your payday loan expires and you are unable to repay it. What are the consequences?

You may have to pay a penalty ranging from $ 15 to $ 40, depending on the province where you made the loan.

The penalty is in addition to the amount you owe the lender and interest accrues until you repay the loan in full.

Provinces and territories

Penalty for failure to pay a payday loan

Alberta

$ 25

British Columbia

$ 20

Prince Edward Island

There is no penalty in the law, check with the lender and consult your contract.

Manitoba

$ 20

New Brunswick

$ 40

New Scotland

$ 40

Nunavut

There is no penalty in the law, check with the lender and consult your contract.

Ontario

$ 15

Saskatchewan

$ 23

Newfoundland and Labrador

There is no penalty in the law, check with the lender and consult your contract.

Northwest Territory

There is no penalty in the law, check with the lender and consult your contract.

Yukon

There is no penalty in the law, check with the lender and consult your contract.

 

EXAMPLE:

You live in British Columbia. On May 1, you borrow $ 100 to a payday lender. The loan will cost $ 17 and expires on May 15. You give the lender a check for $ 117 postdated on May 15th. You sign the contract and leave with your $ 100 in your pocket.

On May 15th, your check is rejected for insufficient funds and the lender charges you a penalty of $ 20. You must now repay a total of $ 137 to the lender.

May 30th, nothing goes well. Your financial situation still does not allow you to repay your loan. You owe $ 25 of interest for a total of $ 162.

In less than a month, you have accumulated $ 62 in fees and interest on a $ 100 loan … Interest continues to accrue as long as you have not repaid the full amount.

What are the recovery methods offered to payday lenders?

What are the recovery methods offered to payday lenders?

Payday lenders can use the services of a collection agency. The agency or lender can sue you in court to get the money you owe them. If a judgment is ordered against you, your salary or government benefits could be seized at source.

What are your remedies against payday lenders?

What are your remedies against payday lenders?

Since payday loans are consumer contracts, the general principles of consumer protection apply to payday lenders. A lender can not lie to you, take advantage of your vulnerability, make abusive claims or use unfair practices.

IMPORTANT:

In Alberta, a lender must provide you with sound financial management documents before granting you a payday loan. These documents :

  • are approved by the government,
  • explain the programs, services and resources available to consumers who wish to borrow,
  • must be clearly visible on the premises and on the lender’s website.

A lender who fails to comply with these conditions is subject to sanctions.

If you believe that your rights as a consumer have been violated or that the lender has breached its obligations as a payday lender (for example, if the interest rate it requires is higher than the prescribed rates in your province or territory or if the lender refuses a cooling-off period when you are entitled to it) you can lodge a complaint against the lender with the consumer protection agency of your province or territory or sue the lender.