Payday Loans: Know Your Rights

Payday loans in Canada are legal under section 347.1 of the Criminal Code of Canada as long as the province where you borrow money enacted legislation about payday loans. Some provinces do not have existing legislations about a payday loan; in such cases, they are within the limitations of usury laws, with rates over 60% per annum considered against the law.

In 2006, an amendment to the Criminal Code of Canada allowed provinces to regulate companies that provided payday loans. Most provinces aside from Newfoundland, Labrador and Quebec have some form of legislation that deals with payday loan restrictions.

British Columbia

Since November 1, 2009, British Columbia has enacted Payday Loans Regulation. The maximum charge for a short-term loan is at 23% of the principal covering both fees and interest.

You can cancel the loan at the following day’s end after signing without additional charges. You can only get one loan at a time and the creditor’s ability to access your employer or bank has restrictions. A lender cannot lend more than 50% of your salary or require you to pay the loan before your next paycheque arrives.

Saskatchewan

The Saskatchewan government announced restrictions and regulations on payday credit similar to British Columbia since June 2010. The legislation has an interest cap of 23% of the principal, 30% on a defaulted loan and a limit of 50% of the net amount of your salary. Companies that offer this type of financial service have to pay a licensing fee of $2000 per location.

Ontario

The province has the Payday Loans Act 2008 that limits the fees charged on your loan to 21% of the amount you borrowed.

Newfoundland, Quebec and Labrador

These three provinces have decided to prohibit payday loans. Quebec has limited interest rates on all loans to 30% per annum; Labrador and Newfoundland does not have any legislation on the subject, which means any restriction is at the cap of 60% set by the federal government.

Other provinces have different legislations regarding any type of loan. Check with your local government to determine if your creditor is taking advantage of you.

Payday loans are a way out, if you have difficulties with handling and managing your finances. These are short-term solutions to short-term problems; at the end of the day, it is up to you to get out of debt and stay debt-free. Use the money you get wisely to avoid the cycle of credit.

If you are taking out a payday loan, work with duly registered lending companies governed by provincial laws. Companies such as GoDay even take it a step further by being a member of the Better Business Bureau and the Canadian Payday Loan Association, so you can rest assured that you are working with a reputable and reliable payday loan company.