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Payday loans are usually criticised for charging high interest rates and for preying on consumers who are having financial difficulties. To protect your consumer rights, it is advisable to be aware of the laws governing payday loans and the companies offering them.

Several provinces in Canada have released legislation on payday loans

Several provinces have established the regulations governing the licensing of payday loan companies. To ensure that your consumer rights are protected when you are getting a payday loan, it would be advisable to familiarise yourself with the laws on payday loans in your particular area. It would worthwhile to ensure that the company you are dealing with is licensed to do business. Effective November 1, 2009, all payday loan companies need to be licensed by the Business Practices and Consumer Protection Authority.

Allowable charges

The maximum limits on the default charges when you are late in repaying the loan have also been established. The laws also specify the maximum effective annual percentage rate when all charges and fees are added together. It should be noted that each province has its own laws and it would also be advisable to check on your specific location.

Certain practices that are not allowed

You will also have to familiarise yourself with those practices that are not permitted and certain rights of borrowers. For example, depending on the province you are in, you may have a day or two in which to cancel the loan without incurring penalties. You may also repay the loan before it is due without any additional charge. Meanwhile, one example of a prohibited practice is providing a loan that is more than half of the borrower's income. Another example is the collection of payments directly from the employer of the borrower.

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