How does Ontario protect consumers of payday loans?

Ontario has taken steps to provide additional protection for users of payday loan services.

Starting on April 1, 2009, users of payday loans benefit from stronger consumer protections in the Payday Loans Act, 2008. The legislation:

• Requires payday lenders and loan brokers to be licensed starting April 1, 2009.
• Prohibits certain industry practices, including “rollover” loans, effective July 1, 2009.
• Gives payday loan borrowers a two-day “cooling off” period to cancel a loan with no reason without incurring a penalty, effective July 1, 2009.
• Establishes an Ontario Payday Lending Education Fund, paid for by licencees.

As of December 15, 2009, the legislation has set a maximum total cost of borrowing cap for payday loan agreements in Ontario of $21 per $100 borrowed, as recommended by Ontario’s Maximum Total Cost of Borrowing Advisory Board.

Maximum Total Cost of Borrowing Advisory Board’s (PDF)
Report on an upper limit to the total cost of borrowing for payday loan agreements in Ontario.

The Cost of Providing Payday Loans in Ontario (PDF)
Report prepared by Ernst and Young.