More than half of the payday loan stores in Canada are situated in Ontario. In 2007, a federal government directive allowed the state/provincial governments to take steps to regulate these businesses in a better way. The rising consumer dissatisfaction with the payday loan companies has led the Ontario government to take certain concrete measures to regulate these businesses. Some of these measures incorporated in the Payday Loans Act, 2008 gives better protection to the consumers. Some of its key provisions are:
1. Compulsory licensing: The lenders and the brokers of payday loans need to take license for doing the business. The lender must provide the license information online as well on the very first contact. Similarly, the license must be clearly visible on the store.
2. Put a ban on the practice of ‘rollovers’. Roll over of loans meant taking of new loans even when the earlier ones have not yet been paid.
3. Assignment of wages requirement dispensed off. The lender cannot ask for the same now.
4. Strong-arm collection tactics not allowed: Lenders cannot use threatening language, put excessive pressure or contact you more than three times a week.
5. Full amount given: Lenders are no longer allowed to deduct the fees upfront from the amount they give.
6. 1 hour maximum time limit for extending the loan, in case the deal is struck via internet or phone.
7. Cooling off period provision: When you took a Canada payday loan before this enactment and wanted to cancel the same, you were imposed penalties. With the new Act coming into force, the borrowers will have a two day time to return or cancel the loan without attracting any penalty and without giving any reason for the same.
8. Education fund: This is a noble feature of this act. It will require the licensed lenders of payday loans to contribute to the Ontario Payday Lending Education Fund whose proceeds will be used to educate the customers on all the aspects of payday loans. This was felt necessary because many studies pointed out that customers take to these loans since they are not aware of the alternative channels of taking loans.
9. Caps on cost of borrowing: For all payday loan agreements entered in Ontario, there will be a maximum cap on the cost of borrowing, placed at $21 per $100 borrowed.
Apart from these measures, the website of the Ministry of Consumer Services in Canada informs about the all relevant aspects of these loans to payday loan consumers.
