Payday Lending Tips
A payday loan is a short term loan of $1,500 or less that must be paid back within 62 days. If you chose to enter into a contract with a payday lender, there are several steps you can take to protect yourself.
Check to see that the payday lender is licensed;
As of November 1, 2009 all payday lenders operating in British Columbia are required to be licensed by Consumer Protection BC. You can check our website here to see if a payday lender is licensed.
Ensure That You Entering Into A Payday Loan
If you loan does not meet the following criteria it is not a payday loan and you are not protected by the payday lending legislation.
• A payday loan a short term loan of $1,500 or less that must be paid back within 62 days.
• You do not provide any security such as using your vehicle as collateral.
Shop Around for a Rate
The most a payday lender can charge you is $23 for every $100 you have borrowed. This includes all charges such as admin fees and interest rates. Some payday lenders may chose to charge less for a loan. Payday lenders must have posters showing the rates they charge.
The only time a payday lender can charge you more than the $23 is if you do not pay your loan back on time. The payday lender is allowed to charge 30% on the outstanding principal.
Know Your Rights When Entering Into the Loan
• Your payday loan agreement must list all of the charges, terms and conditions of the loan.
• You have the right to change your mind and cancel the loan by the end of the following day, without paying any charges.
• You can repay a loan any time before the due date and cannot be charged extra for doing this.
Never Pay Upfront To Borrow Money
Some internet companies may require you to pay money upfront to secure a loan. In British Columbia it is illegal to ask for money upfront to obtain a loan. The amount should be calculated into the loan.
Be Aware Of The Rules
• Payday lenders may not issue you more than one loan at the same time nor can they rollover your loan - meaning they cannot extend or renew a loan at an additional cost to you or give you a new loan to pay out an old loan.
• Payday lenders may not issue a loan for more than 50% of what your paycheque or net income will be during the term of the loan.
These rules have been put in place to ensure that borrowers do not borrow more than is reasonable to pay back. If you are taking your third loan in a two month period, repayment of the loan must be phased over two or three pay periods.
Know Your Rights Around Debt Collection
Sometimes people may not be able to pay back their loan on time and the payday lender will attempt to collect the money. All companies that collect a debt from a BC resident must follow the BC debt collection laws. This means that when trying to collect an outstanding debt, a payday lender must follow BC debt collection laws. For more information on debt collection practices in BC please click here.
Know that We Can Help
If you feel that a payday lender is not following BC payday lending laws you should approach the payday lender and try to resolve the problem. If you are unsuccessful you can contact our Inquiry unit for more information on how to resolve the issue.