British Columbia: Changing the rules for payday loans

[cashlenders]

Last week the Legislature saw several new bills being introduced, however for this week’s report I would like to discuss a prior bill that comes into effect on Nov. 1, 2010.

Changes to B.C.’s Business Practices and Consumer Protection Amendment Act have resulted in new regulations for payday loans.

A payday loan has been defined as an unsecured loan for an amount less than $1,500 borrowed for a maximum of 62 days.

Further, the regulations will prohibit lenders from engaging in practices that unreasonably increase the borrower’s debt load, including rollovers that require borrowers to pay significant extra fees for extending the time to pay a loan.

Also prohibited will be the request for an assignment of wages, or collections from a borrower’s employer.

Lenders will not be permitted to charge more than 23 per cent of the amount borrowed in interest and fees, and lending more than 50 per cent of a borrower’s take-home pay or requiring repayment before the borrower’s next payday will also be prohibited actions. Payday loans businesses must also be licensed by Consumer Protection B.C.

In addition to these restrictions, payday loan borrowers will also have new rights as well, including the right to cancel a payday loan by the end of the following day without charge by returning the money borrowed.

Payday lenders must also publicly display rates and fees.