Ontario’s Ministry of Consumer Services will expand the Payday Loan Act to cover lines of credit that Cash Store/Instaloan introduced last Feb (apparently to skirt existing rules).
The new rules will ban the kind of rollover financing that payday LOCs represent as well as holding multiple payday products from the same lender at the same time. But perhaps the strongest protection from the consumer perspective is that the maximum cost of borrowing will now be limited to an annual 60% of the loan amount. That’s in sync with the legal cap for interest charges under Canada’s Criminal Code section 347.
Previously, the maximum charge in Ontario was $21 per $100 borrowed. That doesn’t equal a 21% cap, that percentage is just for the duration of the payday loan. A $280 payday loan for 10 days could cost $1,528.80 in charges if the consumer took out a new one every two weeks for a year – or roughly 546%. But get this: the fees for payday LOCs were even higher!
Payday financing products are sold for their convenience and quick accessibility but they seem like financial suicide to me.
QUESTIONS: Do you know of anyone who has been gouged by charges from The Cash Store/Instaloans or another payday lender? Why did they sign up in the first place?
The new rules will ban the kind of rollover financing that payday LOCs represent as well as holding multiple payday products from the same lender at the same time. But perhaps the strongest protection from the consumer perspective is that the maximum cost of borrowing will now be limited to an annual 60% of the loan amount. That’s in sync with the legal cap for interest charges under Canada’s Criminal Code section 347.
Previously, the maximum charge in Ontario was $21 per $100 borrowed. That doesn’t equal a 21% cap, that percentage is just for the duration of the payday loan. A $280 payday loan for 10 days could cost $1,528.80 in charges if the consumer took out a new one every two weeks for a year – or roughly 546%. But get this: the fees for payday LOCs were even higher!
Payday financing products are sold for their convenience and quick accessibility but they seem like financial suicide to me.
QUESTIONS: Do you know of anyone who has been gouged by charges from The Cash Store/Instaloans or another payday lender? Why did they sign up in the first place?