A guide for payday lenders
Learn about the rules for running a payday loan business.
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In Ontario, the Payday Loans Act, 2008 is the main law governing payday loans. The General Regulation and Administrative Penalties Regulation contain additional rules.
This guide explains many of the rules you must follow as a payday lender. You must comply with all of the requirements in the act and the regulations — not just the ones summarized in this guide.
If you do not comply with all of the requirements, you could lose your licence or face other enforcement action. Learn more about compliance and enforcement.
Payday loan agreements
A payday loan agreement defines the rights and obligations of both the lender and the borrower. It also includes important information for borrowers.
Content of the agreement
You must make sure that all payday loan agreements include the information set out in section 18 of the General Regulation. For example, you must include:
- information about borrowers’ rights
- a table on the first page of the agreement that provides cost of borrowing information
- the cost of borrowing expressed as an annual percentage rate (APR)
The information must be clear, understandable and easy to see.
Refer to sections 29 and 37 of the Payday Loans Act, 2008 and section 18 of the General Regulation for more information about payday loan agreements.
Restrictions on agreements
As a payday lender, you cannot:
- charge more than $15 per $100 borrowed, including all fees and charges directly or indirectly connected to the payday loan agreement
- offer or provide (including on behalf of someone else) any additional goods or services in connection with the payday loan agreement, such as insurance
- enter into a payday loan agreement if the advance is more than 50 per cent of the borrower’s net income per loan
- enter into a payday loan agreement that ends before the borrower is next scheduled to receive income (in most cases, this is the date of the borrower’s next paycheque)
- extend a loan agreement past the original termination date
- enter into a new payday loan with a borrower who has an outstanding payday loan balance with you — this means rollover loans are prohibited
- use the information in an application for a payday loan, any documentation relating to a payday loan application or the payday loan agreement itself for any purposes other than providing a payday loan
Refer to sections 32, 35 and 36 of the Payday Loans Act, 2008 and sections 16.2, 17, 23, 27 and 34 of the General Regulation for more information about restrictions on payday loan agreements.
Copy of the agreement
When you enter into a payday loan agreement with a borrower, you must immediately give them a copy of that agreement.
If the borrower requests an extra copy at any time up to a year after the loan agreement ends, you must give it to them:
- for free the first time they request it
- within the first day of receiving the request or the next day that you are open for business
Refer to section 29 of the Payday Loans Act, 2008 and section 20 of the General Regulation for more information about providing a copy of the agreement.
If you enter into three or more payday loan agreements with a borrower within a 63-day period, the third agreement (and any subsequent agreements) must provide for an extended payment plan (instalment payments). You must also follow these rules:
- instalment payments must be spread equally over a minimum number of the borrower’s pay periods
- instalment payments must not exceed the amount specified in section 25.1 of the General Regulation
- if a borrower makes a prepayment, you must:
- adjust all future scheduled instalments and spread them equally over the remaining term of the agreement
- give the borrower an updated agreement in writing
- the cost of borrowing, when converted to an annual percentage rate, must be less than the criminal rate of interest as defined in the Criminal Code of Canada (60 per cent), which is calculated differently than the annual percentage rate
Refer to section 25.1 of the General Regulation for more information about instalment payments.
Providing the advance
Before entering into a payday loan agreement, you must:
- tell the borrower about all their options for receiving the loan advance from you (for example, in cash or applied to a debit card)
- provide them with the loan advance in the option they choose
Contacting the borrower’s employer
If a borrower consents, you may contact their employer (or employees of that employer) before the borrower enters a payday loan agreement. The contact must be only to confirm the borrower’s employment, length of employment, employment income, occupation or business address.
Refer to sections 16.1 and 26 of the General Regulation for more information about providing the advance and contacting the borrower’s employer.
Once you enter into an agreement
You must provide the loan advance to borrowers immediately after they enter into the payday loan agreement.
For remote payday loan agreements, such as online loans, you have one hour to make the loan advance accessible to the borrower. Learn more about the rules for remote payday lenders.
If you provide all or part of the loan advance in a form other than cash (for example, the loan advance is applied to a debit card) you must tell borrowers they can:
- immediately receive the loan advance or the outstanding balance in cash and at no charge, if they request it
- make their request for cash verbally or in any other way
If you do not follow these rules, a borrower is only required to repay the loan advance and does not have to pay the cost of borrowing.
Refer to section 29 of the Payday Loans Act, 2008 and sections 21 and 22 of the General Regulation for more information about the requirements after you enter payday loan agreements.
You must accept payment from a borrower, whether a full payment or partial payment:
- at any time, if they are making payment by one of the methods allowed in the agreement
- without prepayment charge or penalty
No repeat processing charges
You cannot try to process the same payment more than once (such as a pre-authorized debit) if additional attempts will result in the borrower having to pay fees, such as non-sufficient funds (NSF) fees or other charges.
If you attempt to withdraw funds from a borrower’s account more than once and the borrower is charged NSF or other fees:
- the borrower is not required to repay the cost of borrowing
- you can be required to pay for any NSF or other fees (after the first attempt)
This rule applies even if you are unaware of any fees payable by the borrower.
Refer to section 31 of the General Regulation for more information about obtaining payments from borrowers.
General restrictions on charges
As a payday lender, you cannot:
- charge an interest rate of greater than 2.5% per month (non-compounded), on the outstanding principal of a payday loan in default
- impose any default charges on the borrower, except for:
- reasonable legal costs you incur in collecting the payday loan
- a fee no greater than $25 for a dishonoured cheque, dishonoured pre-authorized debit, or other dishonoured instrument of payment (in addition, this fee may only be charged once, regardless of the number of times a payment instrument is dishonoured)
- request, require or accept payment that is taken directly from a borrower’s paycheque (also known as an assignment of wages)
- request or require payment of any part of the cost of borrowing or the loan advance before the end date specified in the agreement — this includes processing any cheques or pre-authorized debits
- certain exceptions apply for payday loan agreements with extended payment plans (see section 25.1 of the General Regulation for more information)
Refer to sections 31, 32.1, 33 and 34 of the Payday Loans Act, 2008 and sections 28 and 30.1 of the General Regulation for more information about restrictions on charges.
Contact with borrowers and other persons
The General Regulation contains rules about who you can contact when trying to collect an amount owing under a payday loan agreement. These rules help protect borrowers and their privacy.
As a payday lender, you cannot:
- collect or attempt to collect from a person who is not the borrower. If the person you contact informs you that they are not the borrower, you must stop contacting them unless you took all reasonable steps to make sure that the person you contacted is the borrower
- contact or attempt to contact the borrower’s spouse, family or household members, relative, friend, neighbour or acquaintance, about the borrower’s payday loan
The General Regulation also contains rules on how you conduct yourself when contacting a borrower, whether that contact is to collect an outstanding amount or for any other reason:
- telephone calls are restricted to certain times of the day and are not allowed on holidays
- borrowers cannot be contacted more than three times in a seven-day period
- you cannot publish or threaten to publish the borrower’s failure to pay
- you cannot use threatening, profane, intimidating or coercive language
- you cannot use undue, excessive or unreasonable pressure
- you cannot communicate or attempt to communicate in a way that results in charges to the borrower (for example, long-distance charges)
- you cannot communicate in a manner or with a frequency that can be considered harassment
Refer to sections 26 and 32 of the General Regulation for more information about prohibited practices.
Forfeit of cost of borrowing
As a payday lender, if you do not comply with certain rules, a borrower can refuse to pay you the cost of borrowing or demand a refund of any payment they made to you (other than the amount of the loan advance). For example, they can do this if you:
- exceed the cost of borrowing of $15 for each $100 borrowed
- fail to make the loan advance immediately available, or available within one hour if you are a remote lender
- use an application, documentation or agreement relating to a payday loan for any purposes other than providing a payday loan (such as for providing other goods or services)
- request or require early payment of the loan advance or the cost of borrowing before the end of the term of the payday loan agreement (certain exceptions apply for payday loan agreements with extended payment plans)
- charge an interest rate greater than 2.5% per month (non-compounded), on the outstanding principal of a payday loan that is in default
- process a cheque, pre-authorized debit or any other payment more than once where doing so results in a charge to the borrower
- impose a fee of more than $25 for a dishonoured payment
- attempt to impose a dishonoured-payment fee more than once in relation to a payday loan agreement
- allow the term of the payday loan agreement to end before the borrower is next scheduled to receive income
- fail to give the borrower a written payday loan agreement or one that contains all the information specified in the act and General Regulation
If the borrower demands a refund of the cost of borrowing on the grounds that you failed to comply with the Payday Loans Act, 2008, you must give them the refund within the time limits specified in the General Regulation. Failure to do so is an offence.
Refer to sections 6, 29, 31, 32, 32.1, 35 and 44 of the Payday Loans Act, 2008 and sections 16.1, 18, 21-24, 27, 28, 30-31 and 34 of the General Regulation for more information about when a borrower can refuse to pay you the cost of borrowing.
Posters and educational material
Cost of borrowing poster
You must display a poster outlining the cost of borrowing in English at each of your offices. The poster must:
- be visible to borrowers immediately when they enter the office
- include only the specific information itemized in subsection 14(3) of the general regulation
Refer to section 14 of the General Regulation for more rules about the cost of borrowing poster.
Approved educational material
You must also display the Registrar-approved educational poster and provide the educational handout at each of your offices.
The educational poster must be visible immediately to anyone who enters the office, and the handout must be provided to anyone interested in a payday loan.
The handout must be at least standard letter size — 8.5 inches x 11 inches.
Download the educational materials
Refer to section 5 of the General Regulation for more information about Registrar-approved educational material.
Calculate the cost of borrowing as an annual percentage rate (APR)
You must show the cost of borrowing expressed as an annual percentage rate (APR) in all payday loan agreements, cost of borrowing posters and advertisements. The APR illustrates what the annual rate would be, if actually charged to a borrower for a payday loan.
Use this formula to calculate the cost of borrowing as an APR for a payday loan:
APR = [C ÷ (T × A)] × 100
C = Total cost of borrowing for the payday loan
T = Term of the payday loan agreement, in years
A = Principal amount loaned to the borrower under the payday loan agreement (excludes the cost of borrowing)
Sample APR calculation
You are providing a payday loan of $500 to a borrower. The maximum cost of borrowing that you can charge is $15 per $100 borrowed. Let’s assume that the borrower will repay the payday loan, including the total cost of borrowing ($575), on their next pay date in 2 weeks (14 days). What is the cost of borrowing expressed as an APR for this payday loan?
Identify each of the variables in the formula APR = [C ÷ (T × A)] × 100.
- The principal amount of this payday loan (“A”) is $500
- The total cost of borrowing (“C”) for this payday loan is $75 (or $15 per $100 borrowed)
($500 ÷ $100 = 5. $15 × 5 = $75)
- The term of this agreement in years (“T”) is 0.0383561
(14 day loan period ÷ 365 days in a year = 0.0383561)
Calculate the APR using the formula above.
APR = [C ÷ (T × A)] × 100
= [$75 ÷ (0.0383561 × $500)] x 100
= [$75 ÷ $19.18] × 100
= 391 per cent
Include the APR in the payday loan agreement.
The cost of borrowing expressed as an APR for this payday loan agreement is 391 per cent.
Refer to sections 14, 15, 18 of the General Regulation and section 55 of Ontario Regulation 17/05 made under the Consumer Protection Act, 2002 for more information about including the APR in cost of borrowing posters, advertisements and payday loan agreements.
Rules for remote payday lenders
If you offer a remote payday loan (like an online loan or a loan arranged over the phone), you must:
- immediately tell any potential borrowers about the:
- information contained on the cost of borrowing poster
- information on the licence for the main office
- available educational material (handout and poster) and immediately provide it upon request
- ensure the borrower can access the agreement online and is able to retain and print it, before entering into the agreement
- ensure that, before the loan advance is delivered, the borrower consents to entering into the loan agreement in a way that allows you to prove the borrower consented
- make the loan advance accessible to the borrower within one hour of entering into the agreement
Additional rules may apply
There are additional rules that apply to remote payday lenders.
Refer to sections 4, 5, 14, 18 and 21 of the General Regulation for more information about the rules for remote payday lenders.
Apply for or renew a payday lender licence
The Payday Loans Act, 2008 requires all payday lenders and payday loan brokers to be licensed.
The Registrar issues licences and provides a certificate of licence for each location of the licensed payday lender. A payday lender licence is valid for one year and must be renewed annually.
Refer to Part II and sections 20-21, 24 and 25 of the Payday Loans Act, 2008 and sections 4, and 9-11 of the General Regulation for more information about payday loan lender licences.
Applying for a licence
To get a payday lender licence, you must:
- complete the application
- pay the required fees
- be at least 18 years of age, if applying as an individual
- as a corporation:
- appoint officers and directors who are at least 18 years of age
- appoint at least one officer or director who lives in Ontario
- have at least one office that is physically located in Ontario, even if you only offer remote payday loans — please note that a personal residence is not considered an office
- have a separate bank account for your business’s payday loan activities
Your certificate of licence
Once you are issued a licence to operate as a payday lender, you must post a certificate of licence in each of your offices so it is immediately visible to anyone who enters.
Renewing your licence
Your licence is valid up to the expiry date and must be renewed before it expires to continue operating as a payday lender.
- If the Registrar received your application and renewal fee before the expiration date, your existing licence will continue to be valid until the Registrar approves your renewal application.
- If you don’t pay the application fee by the expiration date, your licence will not be renewed and your business cannot continue to operate. You must submit a new application to get a new licence.
Updating the Registrar
You need to notify the Registrar in writing within five days of any of the following changes to:
- your business address
- for a corporation or partnership:
- the officers or directors
- the name and address of the officer or director living in Ontario
- any of the information included in an application for a licence or renewal of a licence
- the bank account required in subsection 11(1) of the General Regulation
Refer to section 22 of the Payday Loans Act, 2008 and section 8 of the General Regulation for more information about updating your information with the Registrar.
Offices, records and advertising
You can only operate offices and branches at the addresses listed on the licence certificates.
Municipalities have the authority to restrict the location of payday lenders through licensing by-laws. If you operate an office at a location prohibited by municipal by-law, you are in violation of the Payday Loans Act, 2008 and your licence may be suspended or revoked.
It is your responsibility to make sure you comply with municipal by-laws.
Refer to section 24 of the Payday Loans Act, 2008 and section 4 of the General Regulation for more information about your office location.
You must maintain all documents and records relating to your payday loan activity, including, but not limited to:
- all payday loan applications
- payday loan agreements
- pre-authorized debits
- bank account statements
You must keep these documents and records:
- separate from documents and records relating to any other lines of business
- at the office for at least two years from the end of the term of the payday loan agreements to which the documents and records relate
Refer to section 12 of the General Regulation for more information about documents and records.
You must maintain a separate bank account for your payday loan business, including the receipt and disbursement of funds. You cannot use the account for anything other than payday loan activities.
The account must be:
- opened in Ontario
- registered in your legal name
- in either a:
- bank or authorized foreign bank (see section 2 of the Bank Act)
- credit union (see the Credit Unions and Caisses Populaires Act, 1994)
Refer to section 11 of the General Regulation for more information about maintaining a payday loan business bank account.
If your advertisements about payday loans (both verbal and written) mention the cost of borrowing, the loan amount advanced, the repayment of the loan, or the term of a payday loan agreement, then specific additional information must also be included.
For example, the ads must include the:
- maximum allowable cost of borrowing
- cost of borrowing expressed as an annual percentage rate
This information must be clear, understandable and prominent, and in a form that allows the borrower to keep it.
Refer to section 37 of the Payday Loans Act, 2008 and section 15 of the General Regulation for more information about advertising.
Compliance and enforcement
Consumers can submit complaints about payday lenders to the Ministry of Public and Business Service Delivery.
If a complaint is filed against your business, the ministry may request additional information from you. By law, you must provide the requested information to the ministry.
Learn more about the consumer complaint process.
The Registrar under the Payday Loans Act, 2008 and anyone designated by the Registrar, can inspect your business to:
- make sure you are complying with the law
- deal with complaints
An inspector is allowed to access all documents, records and other items that are relevant to the inspection, including those in electronic form.
If asked, you must assist the inspector. You cannot:
- obstruct an inspector
- withhold, conceal, alter or destroy documents, records or other items relevant to the inspection
After an inspection, the inspector will review their findings with you and explain the next steps you must take.
The inspector may also issue a Notice of Contravention, outlining any contraventions they observed and requesting that you address them within a specified timeframe.
Refer to section 47 of the Payday Loans Act, 2008 for more information about inspections.
The Registrar’s compliance and enforcement powers
In addition to inspections, the Registrar under the Payday Loans Act, 2008 has additional powers to ensure compliance with the act. For example, the Registrar can:
- request that you provide information about your business (such as copies of letters, forms, payday loan agreements or financial information)
- order you to amend, restrict or stop using materials that are believed to be false, misleading or deceptive
- propose to suspend, revoke or place conditions on your licence
- propose to refuse to issue or renew your licence
If you fail to comply with the Payday Loans Act, 2008 and the Registrar serves you with a Notice of Proposed Order or a Notice of Proposal:
- you have the right to request a hearing before the Licence Appeal Tribunal
- the request for a hearing must be made within 15 days of the issuance of the Notice of Proposed Order or Proposal
- if you do not request a hearing, the Order will be issued by the Registrar and become legally binding
In some cases, you do not have a right to a hearing. For example, if you fail to meet basic requirements for a licence (e.g., failing to pay the fee), the Registrar must refuse your application and there is no opportunity to appeal.
If the Registrar proposes to suspend or revoke your licence and the Registrar considers it in the public interest to do so, the Registrar may suspend your licence immediately. (You may appeal the order; however, the order remains in effect until at least 15 days after the Licence Appeal Tribunal receives the written request for a hearing.)
Refer to sections 9-19, 23, 46, 47, 47.1 and 53 of the Payday Loans Act, 2008 and section 13 of the General Regulation for more information about the Registrar’s powers.
You may be ordered to pay administrative penalties of up to $3,000 in respect of certain contraventions, including:
- failing to post the cost of borrowing poster or your certificate of licence (see posted signs and educational material)
- failing to include certain information in your payday loan agreement (see payday loan agreements and providing the advance)
- accepting an assignment of wages from a borrower (see general restrictions on charges)
If an administrative penalty is imposed, you have the right to appeal. This must be done by filing a notice of appeal with the ministry within 15 days after you receive the Order of Administrative Penalty.
Refer to sections 59-62 of the Payday Loans Act, 2008, sections 35 and 36 of the General Regulation, and Ontario Regulation 209/09 — Administrative Penalties for more information about administrative penalties.
Charges and offences
If it appears you are not complying with the Payday Loans Act, 2008, the regulations or an order made under the act, the Director designated by the Minister of Public and Business Service Delivery may apply to the Superior Court of Justice for an order, directing you to comply.
You can also be charged with an offence for:
- not complying with the Payday Loans Act, 2008 or its regulations
- providing false information under the act
- failing to comply with any order made against you under the act
If you are convicted, you can be fined up to $50,000 and/or imprisoned for up to two years less a day. The same applies to officers and directors who fail to take reasonable care to prevent a corporation from committing an offence and are convicted.
Corporations and other entities can be fined up to $250,000 upon conviction.
Refer to sections 54 and 55 of the Payday Loans Act, 2008 for more information about charges and offences.
Consumer Beware List
If you don’t comply with the Payday Loans Act, 2008 your business name and details will be published on the Consumer Beware List.
The Consumer Beware List is a public list of businesses that have had compliance or enforcement action taken against them. Information about a business remains on this list for 21 to 27 months.
Learn more about the Consumer Beware List
Other services — cheque cashing
The limit on the fee for cashing government cheques is the lesser of:
- $2 plus 1 per cent of the face value of the cheque
- for a $500 government cheque, the limit on the fee for cashing the cheque is $7
- for a $1,000 government cheque, the limit on the fee for cashing the cheque is $10
If you require a consumer to purchase a good or service in order to cash a government cheque, the purchase price of the good or service must be included in the fee you charge for cashing the government cheque.
You must also provide a receipt to the consumer that includes:
- a statement that the cheque was a government cheque
- the face value of the cheque
- the amount of the fee that you charged the consumer for cashing the cheque
- a description of any other services or goods provided to the consumer in relation to cashing the cheque
- the balance that you paid to the consumer on cashing the cheque
- the date when you cashed the cheque
- your business name, address, telephone number, and other contact information, such as fax number and e-mail address (if applicable)
- information for contacting the ministry
Refer to sections 71.1 and 71.2 of Ontario Regulation 17/05 under the Consumer Protection Act, 2002 for more information about cheque cashing.
If you have any questions about this guide, please contact us for assistance:
Registrar, Payday Loans Act, 2008
Ministry of Public and Business Service Delivery
56 Wellesley Street West, 16th Floor
Toronto, Ontario M7A 1C1