If you’re planning on taking out a loan, working with legitimate lenders is the most important thing you can do. We’re going to tell you why and explain the risks of borrowing money from unlicensed lenders.
Regardless of what type of lender you work with, it’s important to make sure you know what type of loan you are getting, understand your loan agreement, and know whether you’re borrowing money from a legitimate business. Verifying that you are borrowing from a law-abiding and regulated business may be the most crucial step in the loan process.
Banks and credit unions
If you are borrowing money or taking out a loan from a federally regulated financial institution, such as a bank or credit union, they must follow certain rules and operate within the laws set by the Financial Consumer Agency of Canada (FCAC).
Payday lenders and other high-cost lenders
Loans from banks and credit unions are not always available to everyone depending on credit histories and other scenarios. These means you may decide to borrow money from a payday lender or other high-cost credit grantors. We license these lenders in BC and regulate certain aspects of their business practices. Learn the difference between a payday loan and a high-cost credit product.
If you’re taking out a payday or high-cost loan, it’s incredibly important to make sure the business you are borrowing money from is licensed. This means they are inspected and must comply with certain laws. It also means you are more likely to have success exercising your rights under BC’s consumer protection laws if the business breaks the rules.
The risks of borrowing money from unlicensed lenders
- If a lender is not licensed when they are required to be, they are already operating outside of the law – potentially like a scam or criminal enterprise
- There’s a chance your loan agreement is also not compliant with the rules and your annual percentage rate (APR) could be more than 60%, which is the legal maximum set by Canada’s Criminal Code
- If you don’t pay your debts on time, unlicensed lenders may follow illegal collection behaviour, such as sending non-stop threatening emails, repeatedly auto-dialing your place of work, and continuing to operate outside of the law
- Your options may be limited. If you need help or want to exercise your rights, it can be difficult to enforce the rules when a business is not licensed, has no real business address, and refuses to follow the law in the first place, leaving you with few options
Where to go for help
Unlicensed lenders: If you are dealing with a business that is unlicensed and operating illegally, please report it to your local police. Be aware that it is often difficult to resolve issues when dealing with intentionally unlicensed lenders.
Banks and credit unions: If you believe that a federally regulated bank isn’t respecting your rights, you can file a complaint with the FCAC.
Licensed payday lenders and high-cost credit grantors: If you borrowed money from a licensed payday lender or licensed high cost credit grantor and are having issues, please read through our resources on our website to learn about your rights when it comes to payday loans and high-cost credit products. If you believe the business is breaking the rules after reading through that information, you can submit a complaint to us directly.
Dealing with debt collection calls in BC
We know dealing with debt can be stressful, especially if you’re getting collection calls. In BC, you have rights when it comes to debt collection. Not everyone’s experience with debt is the same but the rules apply to all of us. Learn your rights in BC and access tools and resources to help you on your debt journey.
How to get the calls to stop
What to do if it’s not your debt
The rules debt collectors must follow in BC
The impact of debt on your credit report
4 ways to manage debt
Debt relief: Credit counsellors vs debt repayment agents
8 tips for choosing a debt relief service
3 simple steps to create a budget
How to save for a rainy day
How to prepare for changing interest rates
About Consumer Protection BC
In addition to licensing payday lenders and high-cost credit grantors, we are responsible for licensing debt collectors and regulating certain aspects of the debt collection industry in BC. The law speaks to when a collector can contact you and how they can communicate with you. We can’t help with every debt related issue and we’re not financial advisors. Find out more about us and the other industries and transactions we oversee by exploring our website.