Ontario Caps Payday Loans
Posted December 15, 2009 10:22 am.
This article is more than 5 years old.
It’s not a pound of flesh, but it comes pretty close.
Payday loans in the province have been capped: As of Tuesday, consumers can not be charged more than $21 for each $100 borrowed in Ontario.
That’s on par with many credit card companies.
Back in February, the Public Interest Advocacy Centre warned that the proposed cost would hurt “needy” consumers at a time of economic instability.
The average payday loan in Canada is about $300 over two weeks, and at the approved rate, “would cost $63,” cautioned John Lawford, counsel at PIAC.
“If it were payable in 10 days, that would be an annual percentage rate of over 766 per cent,” he added.
“We urge the Ontario Cabinet and the Minister of Small Business and Entrepreneurship to reject this astronomically high proposed lending rate. Ontario consumers are feeling the economic downturn in record numbers and if they turn to payday loans at this rate they will never recover,” Lawford outlined in press release.
The Liberal government said that the move would protect consumers.
“This cap is part of a package of key consumer protection measures we have introduced in this province – including requiring lenders and loan brokers to be licensed and prohibiting certain practices in the industry,” countered Ted McMeekin, Minister of Consumer Services.
Ontario is one of four provinces, including British Columbia, Alberta and Nova Scotia, that regulate payday loan companies. Saskatchewan is considering similar legislation.
Ontario’s Payday Loans Act, 2008 includes:
- A licensing system for payday lenders and loan brokers
- Authority for Ontario to set, in the regulations, a ceiling on the total cost of borrowing for payday loan agreements
- Prohibition of certain industry practices, such as concurrent and rollover loans
- A cooling-off period so borrowers can cancel payday loan agreements, without penalty, within two business days
- Enforcement through prosecutions and, subject to appeal, the suspension and revocation of licences.
