Ontario is among the largest of the Canadian provinces, and is home to the nation’s capital, Ottawa. In 2010 the population was 13,210,667. At the same time, the province was home to approximately 750 payday loan storefronts out of the roughly 1,350 storefronts operating in all of Canada. That’s around one payday loan storefront per 17,614 people.
Payday loans have been strongly regulated in Ontario since 2009, shortly after the Canadian federal government passed legislation allowing provinces to regulate the industry. Previous to that point, Canadian usury law prohibited loans from exceeding 60% APR, which effectively made all payday loans illegal.
In Ontario, interest is capped at 15% of the principal borrowed, which is the second lowest legislated rate in Canada. Alberta and Manitoba have lower maximum rates, at 15% and 17% respectively. In the event of default, overdue interest can be charged at any rate up to that prescribed by the Criminal Code, which generally means 59% per annum. In addition, lenders can charge a dishonourment fee every time a payment instrument (such as a cheque or EFT authorization) is rejected by the bank. The dishonourment fee has been capped by the government at $50.
Other Laws of Interest
Under the rules of the Canadian Payments Association (the CPA), a direct debit authorization comes in two forms: one-time and repetitive. Payday lenders fall under the one-time category. Under normal circumstances, if one-time authorization is rejected by the bank, it may be represented (that is, reused) one time within 30 days for the exact same amount. The Ontario Payday Loan Act specifically prohibits this in the case of payday loans.
Lenders operating in Ontario include:
For more information, please check with The Ontario Ministry of Consumer Services.
Payday lenders can be found in virtually every city in Ontario, and we will be detailing them in a comprehensive list. See below for what we have so far:
Hi, In reading the legislation I am curious about what you say here about interest rates for defaulted payday loans. As payday loans are exempt from the criminal code S. 347 , how is it that their default interest rates have a cap at 59% as per the Code?
Payday loans are exempt from CC 347’s federal interest rate limits if and only if the province has enacted sufficient provincial regulations governing the interest rates of of an exempt loan. Those regulations always contain limitations on interest rates; they’re just higher than CC 347’s limit. It’s almost coincidental that Ontario limits default rates at that level; as an example, British Columbia limits default interest rate at 30% simple interest.
Hi, I have been told that a lender is not allowed to lend to a borrower if there is evidence of that borrower being with a credit counselling company.
If a lender retains copies of bank statements (last 30 days before the loan), and that bank statement shows a payment to a credit counselling company, would the borrower have the right to: (1) obtain a copy of their own file from the lender, which would include the bank statement, and (2) use that to argue that they should not have been charged for the interest, but only the principal?
Is there a legal limit to the amount borrowed from a lender, based on the borrower’s last paycheque amount? And if that limit was artificially increased to ‘help the borrower out’, could that be cause for dismissal of fees for the loan?
Thanks in advance. Your website is very informative. I looked for the answers to my questions in the updated Payday Loans Act, but I could not find them.
There are no laws preventing lenders from lending to borrowers that are using a credit counselor.
As for limits to the amount borrowed, it depends on your province. For example, in BC you can only borrow up to 50% of your net pay, while in Manitoba you can only borrow up to 30% of your net pay. If you tell me what province you are in, I can tell you the exact formula that is being used and what any consequences of that will be.
Rates need to be updated. $18 per $100 effective January 1, 2017. Alberta is now at $15 per $100.
Right you are.