In British Columbia, interest is capped at 17% of the principal, although it will be moving to 15% as of September 1, 2018. In the event that a loan goes into default, overdue interest can be charged at a rate of up to 30% per annum, but only up to a maximum of 7% of the principal. This doesn’t include the cost of dishonourment fees, which are essentially NSF fees like a bank charges. In BC, dishonourment fees are limited to $20 per dishonourment. This fee only applies if a payment instrument is presented to the bank, so it is important that if you have a loan payment due that you can’t make, you must contact the lender a few days ahead of time to tell them to reschedule. While you will be charged the overdue interest of 30%, that will only add up to a few cents over a week. To take a concrete example, consider an outstanding loan of $300. If you reschedule your payment by 14 days, that’s 0.3 x (14 / 365) x 300 = $3.45. If you didn’t call to reschedule, you’re still obligated to pay the overdue interest, but you also must pay the $20 dishonourment fee, for a total of $23.45. That works out to 203.80% APR!
Other Laws of Interest
In addition to interest rate caps, the government of British Columbia also has a mandated minimum time between payday loans. If a customer’s third loan is initiated within 62 days of the previous two, the loan repayment must be spread over three pay periods, or two if the customer is paid on a monthly or less frequent basis.
Lenders operating in British Columbia include:
For more information about the laws in British Columbia, please check with Consumer Protection BC.