Written by Consumer Protection BC’s enforcement department
You missed five days of work because your kids were sick and your pay cheque is less than what you normally get. It’s the end of the month and you’re $300 short on your rent. You see an ad in the newspaper for payday loans. You think to yourself that this is exactly what you need to get you through to your next pay cheque. You borrow the money and pay it back on your next payday. But now you need another payday loan to make up the shortfall. You end up getting three payday loans over the next two months, and the payday lender gave you another loan to pay off the previous one. You find yourself in a no-win situation, you can’t seem to pay it off without having to borrow more and you aren’t sure when you have to pay the money back.
What would you do?
(a) Check your contract for the terms of repayment.
(b) Call the payday lender to tell them you have the right to repay the loan over two or three pay periods.
(c) Contact Consumer Protection BC if the payday lender won’t allow you to extend the repayment terms.
It’s actually all of the above. By law, if you are taking out your third loan in a two-month period, you can pay it back over three bi-weekly pay periods. Here are a few examples of how that can work:
If you receive a pay cheque, 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 three pay periods. So, if you are paid on the 1st and 15th of the month (i.e. semi-monthly), and you received your third loan on February 7th, then your loan payments would be due on February 15th, March 1st and March 15th.
If you receive your pay cheque or other income on a less frequent basis (e.g. monthly) than that referred to in the example above, then your repayment would be spread over at least two pay periods. So if you are paid on the last working day of each month, and you received your third loan on February 20, your loan payments would be due on February 29 and March 31st.
As a general rule, if a payday lender does not follow the law when they give you a payday loan, you are only required to pay back the amount they loaned to you and not the fees associated with the loan.
Payday loans are small, short-term loans of $1,500 or less that must be repaid within 62 days (when the borrower receives their pay cheque or other income). Consumer Protection BC is responsible for enforcing BC’s payday lending laws which includes the maximum allowable cost of borrowing, disclosure of certain information, prohibiting certain unfair lending practices and more.
We hope this blog post can assist you in making an informed decision. For more information about your rights and responsibilities when it comes to payday lending, please explore our blog under the payday lending category.
Payday lending basics
Payday lending: changes to the cost of borrowing now in effect in BC
Helen’s story: knowing the payday lending rules pays off
2 thoughts on “What would you do? A guide to being a savvy consumer: payday loans”
Does this rule still work if the 3 payday loans are with 3 different payday loan companies?
Hi Jo, we may need to get more details from you about the loans you have – would you be able to contact us by phone (1-888.564-9963) or through our complaint process? We would be able to help you more directly that way. Thank you, Jo!