New, lower charges for high-cost, short-term cash loans – payday loans – came into effect Jan. 1, 2017.
The maximum allowable charge - including all fees - for a payday loan in British Columbia is $17 for every $100 borrowed, making it the second-lowest rate in Canada.
Lowering the total allowable charge to $17 from $23 builds on regulations the Province implemented in 2009. Before then, borrowers paid whatever the lender charged – as much as $30 per $100 borrowed, and had limited protections and recourse against harmful lending practices.
Mike Morris, Minister of Public Safety and Solicitor General –
“In 2009, we were one of the first provinces in Canada to regulate payday lenders to protect consumers who use these services. Now we have built on those protections by lowering the maximum allowable charge for these short-term loans to make them more affordable for people – the second-lowest rate in Canada.”
Scott Hannah, president and CEO, Credit Counselling Society –
“We applaud the Province for reducing the maximum amount that payday loan companies can charge British Columbians for a payday loan. Consumer debt levels are at record levels. By lowering the borrowing costs for payday loans, government is helping make it easier and more affordable for those British Columbians who take out a payday loan to repay their financial obligations.”
Tyler Shymkiw, councillor, Maple Ridge –
“High-interest payday loans often threaten to trap people in a vicious cycle of debt, the unfortunate effects of which I often saw when I was president of the local foodbank, and continue to hear about as a city councillor. These changes by the Province are an important step forward for protecting working families and vulnerable people in British Columbia.”
- A payday loan is a loan of $1,500 or less for a term of 62 days or less.
- Typically, borrowers have a bank account and a regular source of income. They provide a cheque or pre-authorized debit for the full amount of the loan, plus fees, to be repaid on their payday.
- Payday loan companies doing business with B.C. consumers, including those operating online or by phone, must be licensed by Consumer Protection BC.
- British Columbia’s laws provide a number of protections to payday loan borrowers including cancellation rights, disclosure requirements, prohibited practices and penalties for violations.
- Payday lenders must publicly display the cost of credit, and disclose all charges, terms and conditions in the loan agreement.
- They must not roll over one loan into another with new charges, nor issue more than one loan to a borrower at the same time.
- A payday lender cannot issue a loan for more than 50% of a borrower’s net pay for the period over which the loan is written.
- If a borrower is taking out his or her third loan in a two-month period, repayment must be phased over two or three pay periods
- Through Consumer Protection BC, people who have been overcharged for these loans have recourse against the companies. Since 2012, several payday loan companies have been ordered to refund a total of more than $1 million to consumers who were overcharged.
- Almost 159,000 British Columbians took out payday loans in 2015 according to information provided to Consumer Protection BC by the payday loan industry.
Consumer Protection BC: https://www.consumerprotectionbc.ca