It's About Fairness: New Payday Lending Law To Regulate Industry

    McGuinty Government Protecting Most Vulnerable Consumers

    TORONTO, March 31 /CNW/ -


    Ontario is introducing legislation to help protect Ontario's most
vulnerable consumers.
    The new Payday Loans Act, if passed, will enhance consumer protection by
licensing all payday lending industry operators and banning controversial
lending practices.
    In a continuing effort to protect Ontario's most vulnerable consumers in
need of short-term loans, a process to place a cap on total costs of
borrowing, an inspection and enforcement regime and an education campaign will
empower consumers to make informed decisions and ensure integrity in lenders'
borrowing practices.
    An independent advisory board of experts, business representatives and
poverty advocates will examine the costs for payday loans and recommend a cap
on total costs of borrowing.
    The proposed act would also:

    -   Require lenders to include in the total cost of borrowing all charges
        the consumer is required to pay.
    -   License all payday lenders.
    -   Allow borrowers to cancel agreements during a cooling-off period.
    -   Require operators to contribute annually to a public education fund
        on payday lending.
    -   Create enforcement through inspections, charges and license


    "We want payday lenders in Ontario to be ethical and accountable, and the
new Payday Loans Act is another important step in protecting Ontario consumers
who use this service," said Ted McMeekin, Minister of Government and Consumer
Services Minister.
    "This proposed legislation will help shut the door on payday loan
businesses that take advantage of poor families' vulnerability," said Deb
Matthews, Minister of Child and Youth Services.


    -   A payday loan is a short-term high-interest loan, typically marketed
        as easy cash to cover costs until the borrower's next payday.
    -   There are between 600 and 700 payday loan operators in Ontario.
    -   Payday loan users are younger than the general population and have
        average incomes ranging from $35,000 to $41,000.
    -   On an average day, payday lenders make 16 loans of $300 apiece.
        That's about $1.5 million in loans over an entire year.


    Read more about Ontario's efforts to help protect consumers

    Looking for advice on how to help manage your debt, visit

    Read more about Ontario's payday lending industry at the Canadian Payday
    Loan Association's website

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                           Payday Loans Act, 2008

    Ontario's approach to payday lending is balanced, taking into
consideration the needs of borrowers and of the industry. It is also
consistent with the current government's direction to invest in Ontario's
capacity for growth and economic prosperity through a competitive regulatory
framework that protects consumers and investors.

    Payday Lending

    The payday lending industry has grown rapidly since coming to Canada in
the early 1990s. A payday loan is a short-term, small principal, loan made to
the borrower upon the guarantee of a post-dated cheque or pre-authorized
debit. Lenders typically require the borrower to prove three months continuous
employment, produce a recent utility bill in their name to establish address,
and have an active chequing account.

    Ontario Regulations

    Ontario amended its regulation under the Consumer Protection Act, 2002,
(CPA), to create protections tailored to users of payday loans. The amended
regulation made under the CPA came into force on August 1, 2007. It requires
lenders to post information to enable borrowers to compare lending costs;
requires specific information to be clearly set out on the first page of the
payday credit agreement; and requires the payday credit agreement to be
delivered to the borrower upon entering into the agreement.

    Proposed Bill: Payday Loans Act, 2008

    On March 31, 2008, the Ontario Government introduced new legislation
that, if passed, will:

    -   Create a licensing regime for payday lenders and payday loan brokers.
    -   Prohibit certain industry practices and require that all payday
        lenders and payday loan brokers in Ontario operate with a license and
        within the law.
    -   Create enforcement through inspections, the laying of charges and
        suspensions of licences.
    -   Establish the Ontario Payday Lending Education Fund to promote an
        understanding of the proposed legislation and financial planning.
    -   Increase public confidence in the integrity of the payday lending


    Ontario is committed to broad consultation on payday lending. On
April 29, 2007, Ontario released a public consultation paper on payday
lending. The Ministry of Government and Consumer Services received 21 written
submissions. Of the respondents 76 per cent were in favour of seeking
designation under federal Bill C-26. Sixty-nine per cent of respondents
supported licensing and 87 per cent supported limits on the cost of borrowing.
    Federal Bill C-26 amends the Criminal Code and provides provinces with
the opportunity to regulate the total cost of borrowing for payday loan
agreements. The proposed Payday Loans Act, 2008 meets the requirements for
designation under Bill C-26.
    Additionally, Ontario has been working in close cooperation with other
provinces for several years to ensure a harmonized approach to credit
agreements and the protection of borrowers.
    Ontario intends to establish an expert advisory board that will seek
broad input and recommend an upper limit to the maximum total cost of
borrowing for payday loan agreements.


    The Ministry of Government and Consumer Services Consumer Protection
Branch will conduct inspections, investigations, respond to consumer
complaints and may impose administrative monetary penalties for

    Other Jurisdictions

    British Columbia, Manitoba, Saskatchewan and Nova Scotia have also passed
payday lending legislation that meets the requirements for designation under
Bill C-26.

                                                      Disponible en français

For further information:

For further information: Greg Dennis, Minister's Office, (416) 327-3072;
Ciaran Ganley, Communications Branch, (416) 325-8659

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