Q.What are payday loans?
Q.Why do we need special regulations for payday lenders?
Q.When did the Regulation take effect?
Q.What is the maximum amount a payday lender can charge for a payday loan?
Q.How did BC choose 23% for maximum charges?
Q.Besides setting the maximum charges, how does the Payday Loans Regulation protect consumers?
Q.Can borrowers repay the loan early if they want to?
Q.Can payday lenders charge extra for cash cards?
Q.What can consumers do if they have been overcharged for a payday loan, or if they have a complaint about another aspect of a payday loan?
Q.How many outstanding payday loans can I have?
Q.I received 3 loans from the same lender within a 62-day period. How long do I have to pay off the 3rd loan?
Q.What if there is more than 62 days between the date I receive my third loan and the date I receive my 4th loan?
Q.What happens if I take out one or more loans after the third loan?
A. Payday loans are small, short term loans - $1500 or less, that must be repaid within 62 days, when the borrower receives their paycheque or other income.
A. Because payday loans are for a short term, lenders might not be able to recover their costs under the current interest rate maximum set in the federal Criminal Code - 60% per year, or about 2.3% for a two week loan.
To address this the federal government changed the law to allow provinces to regulate payday lenders – including maximum charges. BC made certain amendments and additions to the Business Practices and Consumer Protection Act and established the Payday Loans Regulation. The legislative changes require payday lenders to be licensed, sets the maximum charges, requires full disclosure in loan agreements, and regulates unfair practices that are harmful to consumers.
A. The Payday Loans Regulation took effect on November 1, 2009. All payday lenders doing business with BC consumers must be licensed with Consumer Protection BC – that includes lenders doing business over the internet and by telephone.
A. A payday lender may charge up to 23% of the principal of the loan. This amount must include all fees and interest except interest charged if the borrower defaults by not repaying the loan as agreed to in the loan agreement.
A. BC consulted fully with consumer groups and the payday loan industry, looked at research on current charges, costs and practices in the industry as well as the impact on consumers. BC also looked at maximum charges in other jurisdictions in Canada and the U.S. The impact of maximum charges and other regulated measures on consumers and businesses will be monitored and reviewed.
A. Payday lenders must have posters showing the rates they charge, so that borrowers can easily compare rates with other payday lenders and with other types of lenders, such as banks.
Payday lenders must use a payday loan agreement that sets out all of the charges, terms and conditions of the loan. Borrowers have the right to change their mind and cancel the loan by the end of the following day, without paying any charges.
Payday lenders may not issue more than one loan to a borrower at the same time. They may not roll over one loan into another loan with new charges. Payday lenders may not issue a loan for more than 50% of the borrower’s paycheques or net income to be received during the term of the loan. If a borrower is taking their third loan in a two month period, repayment of the loan must be phased over two or three pay periods.
Other unfair practices are prohibited, such as collecting a repayment from an employer, getting unrestricted access to a borrower’s bank account, and requiring repayment dates before payday.
A. Yes, a borrower can always repay the loan any time before the due date. The lender must not charge extra for repaying the loan early.
A. Many lenders issue cash cards instead of cash for convenience and safety. A payday lender may charge extra for issuing a cash card, but total charges for the loan must include the cost of the cash card. The total of all charges must not be higher than 23% of the principal of the loan.
The payday lender must tell borrowers if they will be charged when they use the card, such as at an ATM or retailer. If there is $25 or less remaining on a cash card, the borrower can ask the payday lender to pay it out in cash.
Q. What can consumers do if they have been overcharged for a payday loan, or if they have a complaint about another aspect of a payday loan?
A. Consumers can check the website of Consumer Protection BC or they can telephone and get help with an enquiry or complaint.
Overcharging can result in a payday lender forfeiting all charges and only getting back the loan principal. Non-compliance with the law could lead to a lender’s licence being suspended or revoked, a penalty of up to $50,000 or a fine or imprisonment on conviction.
Q. How many outstanding payday loans can I have?
A. A payday lender is prohibited from having more than one outstanding loan with a borrower.
Q. I received 3 loans from the same lender within a 62-day period. How long do I have to pay off the 3rd loan?
A. a) If you receive a paycheque, or other income on a bi-weekly, semi-monthly or more frequent basis, the lender must allow you to repay the loan over at least 3 pay periods.
For example, if
• you are paid on the 1st and 15th of the month (i.e. semi-monthly), and
• you received your third loan on November 7, 2013,
your loan payments would be due on November 15th, December 1st and December 15th.
b) If you receive pay or other income on a less frequent basis (e.g. monthly) than that referred to in paragraph (a) above, then your repayment would be spread over at least 2 pay periods.
For example, if
• you are paid on the last working day of each month, and
• you received your third loan on November 20, 2013,
your loan payments would be due on November 30th and December 31st .
Q. What happens if I take out one or more loans after the third loan?
A.The same rules as above would apply to any subsequent loan where there is a period of 62 days or less between the receipt of the loan immediately preceding, and the current loan.
Let’s use the example in b) above, where your third loan would be fully repaid by December 31, 2013. If you borrow again on January 1, 2014, the number of days between the date you received your third loan (November 20, 2013) and the date you received your 4th loan (January 1, 2014) would be 42 days, which is less than 62 days, so the same rules would apply. You would be allowed at least 2 pay periods to repay this 4th loan: the first payment would be due on January 31st and the second on February 26th.
Q. What if there is more than 62 days between the date I receive my third loan and the date I receive my 4th loan?
A.Your “4th” loan would be treated the same as a first loan.