Payday Loans - Consumer Rights and Responsibilities
What is a payday loan?
A payday loan is an advancement of money in exchange for a post-dated cheque, a pre-authorized debit or a future payment of a similar nature. The loan, plus additional fees and interest, is deducted from your account on a specified date. Before you decide to get a payday loan, make sure you understand all cost involved and what additional costs will be added if you do not pay on time.
What is a “two day cooling off period”?
Under a payday loan agreement, you may cancel the loan with no penalty and without any reason up to the end of the second day after signing the loan agreement. If the payday lender is not open for business on the second day, you may cancel on the next business day. To cancel the loan you must give notice to the lender.
What are the factors I should consider?
- ask yourself if you really need to take out a loan, or whether you can get by until your next pay cheque
- ask your bank or credit union for overdraft protection on your bank account, or a line of credit
- ask about all the fees, charges and interest that apply when you first get the loan, and what other charges you will owe if you can't pay the loan back on time
- ask for a copy of the loan agreement and read the document carefully before signing it
- keep a copy for your records
What are the rules of conduct for payday lenders?
- all payday lenders and loan brokers must be licensed and meet all requirements under the Payday Loans Act
- lenders must give you a copy of your loan agreement which will include the total cost of borrowing and other required information at the time of signing the agreement
- the right to cancel “Two day Cooling Off Period” must be clearly and prominently disclosed on the agreement
- if you cancel the agreement, the lender must refund all payments, return all post-dated cheques or pre-authorize debits and destroy any preauthorizations
- you must pay back any advance and return any goods received from the lender under the agreement.
- payday loans cannot exceed $1,500 and the term cannot exceed 62 days
- if a lender or broker is not licensed at the time of the agreement or if a lender does not give you a copy of the agreement at the time of signing, or if a broker requests payment for assisting you, or if a lender demands the cost of borrowing before the end of the term of the agreement, there is no costs to borrow
- a lender cannot demand a penalty fee for paying the balance ahead of time
- a lender/loan broker cannot enter another agreement with you (grant a rollover loan) unless you have proof that at least 7 days have passed since the full balance was paid on the first agreement
- the first page of the Payday Loan Agreement must include the following chart and only the following chart:
|Details of Payday Loan Agreement|
|Amount Borrowed||A (Amount borrowed)|
|Term of the Agreement in Days||B (# of Days)|
|Total Cost of Borrowing||C (Total Cost)|
|Maximum Allowable cost per $100 Borrowed||D ($ per $100) Could be left blank if agreement is before S. 30 comes into force|
|Cost per $100 Borrowed||E (Actual amount expressed as an amount per $100)|
|Total Amount Due under the Agreement||F Total of all payments|
|Payment Due Date||G Due Date|
Who can I contact for more information?
Consumer, Labour and Financial Services
4th floor, Shaw Building
95 Rochford Street
PO Box 2000
Charlottetown, PE C1A 7N8
Phone: (902) 368-4550
Toll Free: 1-800-658-1799
Fax: (902) 368-5283