The government of Ontario and PEI are in the process of revoking the license within its province of Cash Store Financial Services (one of the biggest cash advance stores in the country). Payday lenders provide customers with short-term cash, and have been criticized for charging high fees.
The Ministry of Consumer Services within Ontario and PEI alleges the company broke the Payday Loans Act, which limits the fees that can be charged by payday loan companies.
According to the Ministry, Cash Store has charged customers fees higher than the maximum allowed — no more than $21 for every $100 borrowed — or charged prohibited fees. In Ontario, consumers who tried to take out a payday loan at Cash Store locations were required to take out the money, not in cash, but on a prepaid debit card. Cash Store allegedly charged additional fees — up to $18 to activate the card, $8 a month to keep it active and $10 to load it again — on top of the $21 fee per $100. Other than the fee cap, there is no maximum interest rate that these companies can charge, according to the Ministry of Consumer Services.
It was reported that a person who took out a loan of $300 would need to pay after a 2-week period $369. This equates to an interest rate of 600% per year. By the way, loan sharks have a history of charging 60% in interest.
The new regulations will force lenders to make the terms of their loan very clear, and it will impose a cap of $25 in fees for every $100 borrowed. The province will also be able to shut down operations that don’t follow the rules.
We at OCCA are thrilled about this proposed new legislation.
Too many people knock on our door with one or more of these kinds of loans.
Consumers who are cash poor or have poor credit looking for a quick loan to help pay a credit card bill or even mortgage fall victim to payday lenders. In most cases, these people won’t have the money from their next pay cheque to pay the payday loan when it comes due, and the interest racks up like what I’ve illustrated with the $300 loan.
The new Ontario Premier, Katherine Wynne and Katharine Tummon, the Director of Consumer, Labour and Financial Services for PEI is helping to drive the new regulations. It may not be long until we can call it legislation.
If you are considering a Payday lender loan, call OCCA Consumer Debt Relief first to help resolve your unsecured debt. Don’t take on another loan that comes with over the top interest to pay off an existing loan. This will not solve your problem.
If you have payday loans or have questions about how payday lenders operate, please visit OCCA Consumer Debt Relief online at www.occa.ca, or call 1-855-873-6222. We offer a free financial assessment and provide expert advice and solutions for debt relief. We can help!.
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