Loans Expert

Ontario’s Payday Loans Act received Royal Accent on June 18, 2008. This new legislation is designed to regulate the payday loan business in Ontario.

The McGuinty Government enacted legislation this past April that is designed to bring Ontario’s payday loan industry into some semblence of control.

In today’s economy, many people have fallen into the trap of payday loans, where the fees and interest can rapidly climb, and exceed the actual amount borrowed.

The Canadian Payday Loan Association, which states that it welcomes regulation, states, “Payday loans are unsecured small-sum short-term loans typically for a few hundred dollars. The average payday loan is around $280 for a period of 10 days.

“Payday loans are specifically designed to help customers with one-off, unanticipated expenses. Payday loans are not a form of “revolving” credit designed to keep customers in a permanent debt position.

“The lender will typically lend up to a specified percentage of a customer’s net pay for a period of 1-14 days, ending on the payday. The borrower writes a post-dated cheque for principle plus interest and fees, dated on the next payday.

“To qualify for a payday loan, a customer must be employed and have a bank account”.

The Ontario legislation does not have a cap on interest rates. “The McGuinty government’s watered-down attempt to regulate the payday lending industry through its Bill 48 is nothing more than a payday lending debacle, says NDP MPP Cheri DiNovo.

“Without hard caps, Bill 48 will allow payday lenders to act like loan sharks and charge interest rates above those defined by the Criminal Code as usurious,” says DiNovo, the NDP’s representative on the committee that has heard public deputations on the bill.

Deputants like Charles Foster, principal of Justice Matters, supported the hard caps. Foster has successfully defended victims of payday lenders on the Criminal Code’s usury grounds, which define criminal interest rates at 60 per cent. He warns that if the government passes Bill 48 as is, without such a cap, usury could be effectively decriminalized.

“Bizarrely, Bill 48 and subsequent regulations will likely lead to an interest rate cap that is higher than the current 60 per cent limit,” said DiNovo. “That doesn’t sound like a crackdown, it sounds like the deal of a century for these payday lenders. If the province simply enforced the Criminal Code, Ontarians trapped in the cycle of poverty would be better off.”

Here in Thunder Bay, a person recently relayed their experience with a payday loan. The amount received in the loan was $180.00, the amount due to pay off the loan a month later is $350.00.

Ontario’s legislation does not include any cap on the interest rates on these payday loans.

Related posts:

• Province plans to cap payday loan rates
• Payday loan bill heads back to the Senate
• PayDay Loan Interest Rate Comparison
• Online Payday loans: Bridge Needs With Urgent Cash
• Deal With Unexpected Financial Need With Payday Loans in USA

Tags: Payday Loans