Payday loan rule changes
New laws covering payday loans have come into effect. Alberta will now have the lowest fee for payday loan borrowing in Canada - $15 per $100 borrowed. In addition, all services and costs – mandatory or optional – must be included in the fee.
Lenders are also prohibited from:
- actively soliciting individuals through direct contact by email, phone, etc.
- charging a fee to cash a payday loan cheque they’ve issued to a customer
- soliciting, negotiating or concluding an agreement for other credit with a borrower while a payday loan is outstanding
- using, disclosing or selling borrower information except for the purposes of providing, administering, or collecting a payday loan
Lenders are required to offer instalment payment plans. Specifically:
- lenders must allow borrowers to repay the loan over a term of between 42 and 62 days
- the instalments must be scheduled for each pay period during the term
- instalments must be substantially the same (i.e. within $10 of each other) – this will prevent lenders from setting up unbalanced instalment payments that would defeat the purpose of requiring instalment plans
Lenders are required to the following rules related to pre-authorized debit attempts:
- Under the new regulations, lenders cannot repeatedly attempt to withdraw pre-authorized debit amounts when a payment has defaulted, nor can they charge large fees to borrowers when pre-authorized debits repeatedly fail.
- After a pre-authorized debit does not go through, a lender may make one additional attempt to obtain repayment via pre-authorized debit.
- The amount of this additional attempt must be the same as the initial attempt, plus the allowed $25 NSF fee and any interest because of the default.
- The additional attempt must be made within 30 days after the payday lender was notified that the initial attempt was unsuccessful.
Note: This will not prevent a borrower from making additional/alternative attempts where a lender has consent from the borrower for a specific amount on a specific date.
Information for borrowers
Consumer tipsheet on payday loans (0.4 MB)
Why Alberta made these changes
These changes are meant to protect vulnerable Albertans from excessive borrowing costs.
Why aren’t payday loans being banned altogether?
Many low-income Albertans have limited access to affordable credit and as such, a well-regulated payday loans industry is in everyone’s best interest, especially during these tough economic times. An outright prohibition on payday lending could drive consumers towards online alternatives that are unregulated or based outside of Canada, providing government with a limited opportunity to protect consumers.
Information for payday lenders
Payday loans regulation (0.3 MB)
Alberta now has the lowest payday lending rate in Canada.
Aug 2, 2016