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Payday loans are short-term and unsecured loans that have to be paid on the next payday. These loans have become popular because it is easy to qualify for them and they are available in just one day. However, there have been many complaints about high interest rates and charges. Thus, various provincial governments in Canada have passed legislation to regulate this industry. Among these is British Columbia, whose actions have been praised by the Canadian Payday Loan Association.

Maximum allowable fees

The legislation follows the changes that have been made in May 2007 to the Canadian Criminal Code that provided the provincial governments with the authority to oversee the payday loan industry. Among the provisions of this legislation is the establishment of the maximum charges, which has been set at 23 percent of the principal and this includes interest charges and other fees. It has been observed that some payday loan companies in British Columbia have been charging as high as 30 percent for 14-day loans, which represents a 782 percent annual rate.

Licensing and other requirements

The government of British Columbia is also requiring payday loan companies to get a license from the Business Practices and Consumer Protection Authority. The lending companies will also not be able to provide more than two loans for each individual and the value of the loan cannot exceed more than half of what the borrower will be receiving on his or her next pay cheque. They are also required to display in their shops the interest rates that they charge. Aside from that, payday loan companies are no longer given unrestricted access to the bank account of the borrower and they cannot directly collect from the employer of the borrower.

Reaction of the Canadian Payday Loan Association

The Canadian Payday Loan Association (CPLA) has congratulated the provincial government in its efforts to regulate the industry. Although the CPLA is an industry organisation, it has taken the stand that there is a need to regulate the lending companies. Thus, the CPLA has been cooperating with British Columbia in developing the regulations and legislation. This organisation has created its own Code of Best Business Practices that members has to comply with.

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