New Rules For Payday Loans In BC

VICTORIA – New regulations to protect consumers by prohibiting abusive lending practices and limiting fees and interest rates charged by payday lenders come into effect Nov. 1, 2009.

A payday loan is less than $1,500 borrowed for a maximum of 62 days, and is not secured. The borrower provides a post-dated cheque or pre-authorized debit form to repay the whole loan at the end of the term, usually the next payday.

B.C.’s Business Practices and Consumer Protection (Payday Loans) Amendment Act and the Payday Loans regulation prohibit lenders, including phone and Internet lenders, from:

• Practices that unreasonably increase the borrower’s debt load, including rollovers that require borrowers to pay significant extra fees for extending the time to pay a loan.
• Requesting an assignment of wages, or collecting from a borrower’s employer.
• Charging more than 23 per cent of the amount borrowed in interest and fees.
• Lending more than 50 per cent of a borrower’s take-home pay or requiring repayment before the borrower’s next payday.
• Operating unless licensed by Consumer Protection B.C.

As well, borrowers will have the right to cancel a payday loan by the end of the following day without charge by returning the money borrowed. Payday lenders must display rates and fees, and Internet and phone lenders must make rates and fees known to borrowers.

Compliance and enforcement will be administered by Consumer Protection BC, a not-for-profit organization that operates at arm’s length from government. (It was previously named Business Practices and Consumer Protection Authority.) Information for borrowers and lenders is at www.ConsumerProtectionBC.ca.

Note: The new regulation limits the total amount a payday loan company can charge to 23% including interest and fees for the TERM of the loan. The loan term could be for 1 day or for 62 days and the total charged can not be more than 23%.

At the end of Oct. I phoned an online payday loan company and at that time the rate I was quoted was $21 per hundred per week ( 1- 8 days), $30 per hundred 9 - 16 days and $60 per hundred for 30 days. Under the new rules they can only charge $23 for 1 - 62 days. It will be interesting to see how they adjust their terms in light of this new legislation.