Ever taken out a payday loan? The rules for payday lenders in BC are written in law. Learn your rights and brush up on the rules so you can make informed borrowing choices.
The payday lending laws in BC
Payday lenders are licensed and regulated by us. A payday loan is a small short-term loan with high fees that make it an expensive way to borrow money. With these loans, you can’t borrow more than $1,500 and it must be repaid within 62 days.
The rules for payday lenders in BC
The rules for payday lenders in BC apply to brick and mortar businesses and online lenders. No matter where the payday lender is located, if they are lending to BC residents, they must have a licence with us and follow the rules. The most important thing you can do is to make sure that you are dealing with a licensed business. The rules for payday lenders in BC are as follows:
- Payday lenders must be licensed in BC. Check to make sure your lender is licensed.
- Payday lenders can’t charge more than $15 for every $100 borrowed, including all charges and fees. A loan must not be more than 50% of your paycheque.
- Payday lenders cannot charge for cash cards.
- Payday lenders are not allowed to sell you insurance or require or request that you get your loan insured.
- The law requires that payday lenders include specific information in your loan agreement, give you a copy of it, and go over it with you at the time of signing. This info must be included:
- The name, address, contact information, and licence number of the payday lender
- The identity of the person taking the loan
- A statement that it is a high-cost loan
- The borrower’s cancellation rights
- The amount you initially borrowed before interest and fees, also known as the principal
- The total amount owing, including all fees and interest
- The time frame of the loan
- The date that each payment is due
- Information about what you can do if they don’t meet their obligations
- You must be allowed to repay your loan in full at any time before the due date and you must not be charged extra for doing so.
- By law, you have two business days to cancel your payday loan. You must not be charged extra for cancelling. After two business days, you need to follow the lender’s cancellation policy which must be included in your loan agreement.
- Payday lenders must never ask you to pay upfront to borrow money – this is illegal in BC.
- Payday lenders must have posters showing the rates that they charge.
- Payday lenders must not issue you more than one loan at the same time. They are also not allowed to roll over your loan. This means that they can’t renew a loan at an additional cost to you or issue you a new loan to pay an old one.
Payday loans: why licensing matters
By law, payday lenders in BC are required to be licensed by us. If you decide to take out a payday loan, it’s incredibly important to make sure the business you are borrowing money from is licensed. This means they are inspected and are meeting the licensing requirements.
Payday lenders must follow certain laws if they are lending to BC consumers, including how much they can charge you. When a business is licensed and regulated, that means that you have rights as a borrower and a place to go for help if the business breaks the rules.
If a lender is not licensed when they are required to be, they are already operating outside of the law –like a scam or criminal enterprise. These are not legitimate lenders and could be charging you more than what’s allowed or use threatening collection behaviour, like repeatedly calling your place of work. You may also have limited options if things go wrong. Learn more about the risks of unlicensed lenders.
Where to go for help
We license payday lenders in BC and regulate certain aspects of their business practices. Read through our resources on our website to learn about your rights when it comes to payday loans. If you believe a licensed payday lender is breaking the rules after reading through that information, submit a complaint to us directly.
Financial advice and information on other lenders aren’t something we can help you with but there are other options to consider. The Financial Consumer Agency of Canada has tons of information to help you make informed borrowing decisions and they regulate financial institutions in Canada.
You may also be interested in speaking to your financial institution or a financial advisor to see if they can offer you personalized advice on your financial situation.
About Consumer Protection BC
We’re a not-for-profit provincial regulator. The laws we oversee capture your rights when it comes to credit reporting, debt collection, payday loans, high-cost loans, and certain aspects of debt repayment services. Find out more about us and the other industries and transactions we oversee by exploring our website.
More debt and borrowing resources
How to make a plan to manage your debt
Comparing different debt relief options
The impact of debt on your credit report
How to improve your credit score
How to build healthy financial habits
Things to think about before you take out a loan
Understanding the cost of your loan
The rules for payday lenders in BC
The risks of borrowing money from unlicensed lenders
Buy now, pay later plans: what you need to know
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By completing the survey, you will be entered to win one of two $300 prizes and you’ll support consumer education in the province. Your feedback will help us fine-tune our educational resources so we can continually improve and help more people make informed debt choices in BC.