Some key facts associated with the Canada payday loan industry, as determined by an authoritative study, are:
1. Charging more than 60% p.a. interest rate is a crime in Canada, as per section 347 of the Criminal Code.
2. In 2006, the average payday loan was valued at $280, given for a period of 10 days.
3. Lenders typically give the credit based on the percentage of net pay.
4. Demographic break up of most likely borrowers is: males; people in 18-34 age group; urban residents and earning less than $30000 per year.
5. Payday lenders follow three models of operation: traditional, broker and insurance. The last two also give them a way to circumvent section 347 of Criminal Code.
6. Most people use check cashing service to get the money and next in number are the Canada payday loan takers.
7. The companies offering instant payday loan also offer money transfers, foreign currency exchange, bill payment and money orders.
8. The most important reasons for the use of the Canada payday loan services were the facility to take immediate loans, faster operations, more efficient services, convenient opening hours and opening on weekdays and availability of facility even for the bad credit people.
9. Only about of a tenth of the people surveyed who needed these loans are likely to approach these companies more than once a month. Close to half of people go to them less than once a year.
10. The high effective annual rates are directly related to the short terms and small amounts of these loans.
11. Two major cost components of these companies are: operating costs and cost of loans not paid till 90 days. Operating costs are fixed in nature and this makes the interest rate higher.
12. Despite the high EARs customer are willing to take these loans because of the reason that they consider the actual dollar cost of the loans which has to be paid back in a short span of time.
13. No criminal case has been instituted against the payday lenders even though section 347 provides it. However, there are many civil cases underway.
14. In Canada, the prior sanction of Provincial Attorney General is required for initiating a case under section 347.
15. Government‘s reluctance to initiate criminal proceedings stems from the fact that the borrowers might turn to illegal means in the absence of Canada payday loan stores.
