New Payday Loans Act Provides Stronger Protection

    McGuinty Government Takes Action To Ban Controversial Lending Practices

    TORONTO, June 9 /CNW/ -


    Consumers who use payday loan services in Ontario now have enhanced
    The new Payday Loans Act, 2008 will enhance consumer protection by
licensing all payday lending industry operators and banning controversial
lending practices. The Act was unanimously passed today by the legislature.
    In a continuing effort to protect Ontario consumers in need of short-term
loans, the Act also includes an enforcement regime of inspections,
prosecutions and licence suspensions, as well as an education campaign to help
consumers make informed decisions.
    An independent advisory board of experts, business representatives and
consumer advocates will examine the costs for payday loans and recommend a
limit on the total cost of borrowing.

    The Act requires:

    -   All payday lenders to be licensed
    -   Lenders to include all charges consumers are required to pay in the
        total cost of borrowing
    -   Lenders to allow borrowers to cancel payday loan agreements during a
        cooling-off period
    -   Operators to contribute to a public education fund on payday lending.


    "This new Payday Loans Act is yet another important step the McGuinty
government is taking to protect Ontario consumers," said Ted McMeekin,
Minister of Government and Consumer Services.
    "This 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.


    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

                                                      Disponible en français


                           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.

    Payday Loans Act, 2008

    On June 9, 2008 the Ontario Legislature passed this significant
legislation to:

    -   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, prosecutions, and suspensions
        and revocation 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 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 will 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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