Changes to BC’s payday lending and cheque cashing rules
In June 2018, the BC Government announced changes to the cheque cashing and payday lending laws.
The changes come into effect on September 1, 2018. We are sharing the following information to help you understand and prepare for the new rules.
Information for payday lenders
This is an overview of the changes coming into effect on September 1, 2018.
- You must not charge more than $15 for every $100 borrowed. The maximum fees allowed are being lowered from $17 to $15 for every $100 borrowed and will match the rules in Alberta and Ontario.
- Borrowers will have two full business days to cancel a payday loan without any penalty. Currently, it is one business day.
- You will be prohibited from requiring, requesting or accepting consent from a borrower to use or disclose their personal information for anything other than for arranging or providing a payday loan.
- We will have the authority to set a uniform time period for when you must report your aggregate payday lending data.
You must disclose the cost of borrowing for payday loans in the form of an annual percentage calculation (APR). Currently, the maximum that may be charged for a payday loan in BC is $17 per $100 borrowed. For example, a 14-day loan charging the maximum cost of borrowing has an APR of 443.21%
As of September 1, 2018, the maximum that may be charged for a payday loan in BC is $15 per $100 borrowed. This change to the maximum cost of borrowing affects the calculation of the APR. As a result, a 14-day loan with a single repayment on the 14th day of the term that charges the maximum cost of borrowing, will have an APR of 391.07%.
You may need to change the language in your payday loan agreements to reflect the cancellation period (from one to two days). If you change your contracts, you must submit the updated contract template to us within 14 days of using it with borrowers.
Please remember that, by law, the APR must be included in the following:
- loan agreements
- signage at payday loan locations
- licensing application documents
If you offer payday loans online, the APR must also be shown as part of the disclosures made at or near the top of the introductory page on your website.
You can use this formula:
APR = (100 x C) / (T x P) where:
C = the total cost of borrowing;
T = the length of the loan term expressed in years;
P = the average outstanding principal over the term of the loan
If you are charging a rate other than $15 per $100 borrowed, a different APR will apply to those loans.
What is the cost of borrowing?
The cost of borrowing is the combined dollar amount of all fees, interest charges, costs, commissions, etc. The cost of borrowing does not include the principal of the loans or fees charged because of non-sufficient funds or other loan default charges.
What is the principal?
The principal is the dollar amount being borrowed, it is the net proceeds from the loan that is paid to, advanced to or is on behalf of the borrower. The principal does not include the cost of borrowing (e.g. fees, interest charges, costs, commissions) or fees for non-sufficient funds or loan defaults.
Information for all businesses that cash government cheques
As of September 1, 2018, the most you can charge to cash a BC Employment and Assistance cheque is either $2.00 plus 1% of the cheque amount or $10 – whichever is less. This means that you can never charge more than $10 to cash these cheques.
The following is information from the BC Government that we are sharing for informational purposes only.
Here’s how to recognize a BC Employment and Assistance cheque:
- The Ministry of Social Development and Poverty Reduction issues two kinds of BC Employment and Assistance cheques. The face of the cheque will indicate “BC Employment and Assistance” or “BC Employment and Assistance Imprest Account”.
- BC Employment and Assistance cheques include 2 electronic signatories rotated monthly issued on blue, green, or pink cheque stock.
- BC Employment and Assistance Imprest Account cheques include 2 signatories which can vary from cheque to cheque. The cheque will contain a 3-digit numeric code on its face (e.g., “123”) not alpha (e.g., “ABC”). There are some cheques issued under BC Employment and Assistance with alpha code on them. These are valid cheques; however, the fee cap doesn’t apply to them.
To combat fraudulent/counterfeit cheque activity, the following number is available to validate any BC Employment & Assistance or Imprest Account cheque. Call this number only if you have a specific reason to be concerned about the validity of a cheque: 1.877.815.2363 (Option Zero).
Do you use payday loans?
Here are some of the changes that will come into effect on September 1, 2018:
- You can’t be charged more than $15 for every $100 borrowed. (Right now, it’s $17 per every $100 borrowed.)
- You will have two full business days to cancel a payday loan without any penalty. (Right now, it’s one business day.)
- A payday lender can’t require, request or accept your consent to use or disclose your personal information for anything other than for arranging or providing a payday loan.
There’s a lot more to know about your rights when it comes to payday loans in BC.
Do you get your BC Employment and Assistance cheque cashed at a payday lender or another business?
If you choose to get your government cheque(s) cashed in this way, as of September 1, 2018, the most you can be charged is either $2.00 plus 1% of the cheque amount or $10 – whichever is less. This means that you can never be charged more than $10 to cash these cheques. But remember, this rule doesn’t come into effect until September 1, 2018. There are not currently any fee caps.
These rules only apply to BC Employment and Assistance cheques issued by the Ministry of Social Development and Poverty Reduction. They only issue two kinds of cheques: the face of the cheque will indicate “BC Employment and Assistance” or “BC Employment and Assistance Imprest Account”.
As the regulator for the payday lending sector, we license, inspect and enforce the law. As of September 1, 2018, we will be enforcing the cheque cashing rules. We also provide information and referrals to the public.
All of our core website content will be updated by September 14, 2018. At that time, this page will no longer be available and anything you read on our website will be current and reflect the law.