Payday loans in Canada are limited by usury laws, with any rate of interest charged above 60% per annum considered criminal according to the Criminal Code of Canada.
On August 14, 2006, the Supreme Court of British Columbia issued its decision in a class action lawsuit against A OK Payday Loans.[1] A OK charged its customers 21% interest, as well as a "processing" fee of C$9.50 for every $50.00 borrowed.[1] In addition a "deferral" fee of $25.00 for every $100.00 was charged if a customer wanted to delay payment. The judge ruled that the processing and deferral fees were interest, and that A OK was charging its customers a criminal rate of interest. The payout as a result of this decision is expected to be several million dollars.[2] The British Columbia Court of Appeal unanimously affirmed this decision.[3]
In 2006, the Criminal Code of Canada was amended to allow for Provinces to regulate the payday loan industry.[4]
Since November 1, 2009, the Payday Loans Regulation[5] have been in force in British Columbia. The maximum charges for short term loans have been capped at 23% of the principal (including interests and fees), the borrower can cancel the loan by the end of the following day of signing the agreement without paying any charge, only 1 loan per borrower at a time is permitted, and the lenders ability to access the borrower's bank or employer has been restricted. In addition, lenders are prohibited from lending more than 50 percent of a borrower's take-home pay or requiring repayment before the borrower's next payday. All lenders are required to register and are regulated under the Business Practices and Consumer Protection Authority (also known as Consumer Protection BC).[6]
In June 2010, the government of Saskatchewan announced regulations on payday loans similar to those in British Columbia. They include an interest rate cap of 23% of the principal, a cap of 30% on a defaulted loan, and a borrowing limit of 50% of the net amount of the individual's next pay. Companies offering payday loans will be charged a licensing fee of $2,000 per location.[7]
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