Hi. Welcome to Redeem the Commute. I’m Ryan, your host for the Money Course.
The Payday Loans Act helps protect people who take out payday loans. We learned last week the legal maximum they can charge in Ontario is $21 per $100, or over 500% APR. imagine what they were charging before the law imposed a maximum! This industry shouldn’t exist, it’s so clearly made to take advantage of the poor, those unfamiliar with the financial system, and without good credit. It takes a bad situation and makes it way worse.
Here are some of the rules imposed by this Ontario alw:
Under the act:
- you can’t be charged more than $21 for every $100 that you borrow
- you can’t be sold or offered any goods or services other than the payday loan
- you have 2 business days to cancel a contract for a payday loan without any penalty (e.g., paying a fee) and without having to give a reason
- “rollover” loans are not allowed (this means you can’t roll what you owe on a payday loan into a second payday loan. This is because you can’t get another payday loan from the same lender before paying your first loan in full)
And there are rules for the companies. They have to:
- be licensed with the Government of Ontario and follow the rules set by the Payday Loans Act
- include specific information on the first page of your contract
- the amount you are borrowing
- the number of days that your loan is for
- what you will pay to borrow the money
- never ask for or accept payment by automatic deduction from your paycheck (assignment of wages )
- display a poster and give out a flyer that explain the cost of taking out a payday loan over time
And they can’t:
- contact you more than 3 times a week (not including regular mail) or on holidays
- contact your spouse, family, household members, relatives, friends, neighbours, or acquaintances at any time
- process a post-dated cheque or pre-authorized debit more than once if it will result in your financial institution charging you any fees, like overdraft or fees for insufficient funds (if a lender does this, you are entitled to recover these fees from the lender and would not pay the cost of borrowing the loan)
- use threatening or intimidating language
- use excessive or unreasonable pressure
It’s a good start, but believe it or not they want to go much further.
The bible is very clear about this, as well. Here’s just a handful of verses against usury, or exploitative lending:
Deuteronomy 23:19-20 ESV
“You shall not charge interest on loans to your brother, interest on money, interest on food, interest on anything that is lent for interest. You may charge a foreigner interest, but you may not charge your brother interest, that the Lord your God may bless you in all that you undertake in the land that you are entering to take possession of it.
“If your brother becomes poor and cannot maintain himself with you, you shall support him as though he were a stranger and a sojourner, and he shall live with you. Take no interest from him or profit, but fear your God, that your brother may live beside you. You shall not lend him your money at interest, nor give him your food for profit.
When govenrments and the Bible agree, clearly this kind of predatory lending is just something to be completely avoided no matter who you are!
Question: What other rules do you think should be in place for payday lenders?