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Difference between revisions of "Payday Loans"
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Certain finance companies make small, short-term, high-interest loans that go by a variety of names: payday loans, cash advance loans, post-dated cheque loans, for example. Typically, the borrower writes a personal cheque, post-dated by two weeks and payable to the lender for the amount they wish to borrow plus a fee. The company then gives the borrower the amount of the cheque minus the fee. | Certain finance companies make small, short-term, high-interest loans that go by a variety of names: payday loans, cash advance loans, post-dated cheque loans, for example. Typically, the borrower writes a personal cheque, post-dated by two weeks and payable to the lender for the amount they wish to borrow plus a fee. The company then gives the borrower the amount of the cheque minus the fee. | ||
In the past, these loans were made on such terms that once all the interest, fees and charges were factored in, the result was often an effective rate of interest exceeding the maximum rate of 60% per year set by [https://www.canlii.org/en/ca/laws/stat/rsc-1985-c-c-46/latest/rsc-1985-c-c-46.html#sec347_smooth section 347] of the ''Criminal Code'' (see the section on Interest and the Cost of Borrowing Money). Because the courts will generally not enforce an illegal contract term, the lenders had trouble enforcing the loans. The criminal justice system in British Columbia was not used to curtail payday lending, possibly for fear of driving borrowers into the hands of loan sharks. Consequently, payday lenders used to operate in a legal grey zone. | In the past, these loans were made on such terms that once all the interest, fees and charges were factored in, the result was often an effective rate of interest exceeding the maximum rate of 60% per year set by [https://www.canlii.org/en/ca/laws/stat/rsc-1985-c-c-46/latest/rsc-1985-c-c-46.html#sec347_smooth section 347] of the ''Criminal Code'' (see the section on [[Interest and the Cost of Borrowing Money]]). Because the courts will generally not enforce an illegal contract term, the lenders had trouble enforcing the loans. The criminal justice system in British Columbia was not used to curtail payday lending, possibly for fear of driving borrowers into the hands of loan sharks. Consequently, payday lenders used to operate in a legal grey zone. | ||
In 2007 the ''Criminal Code'' was amended to allow the provinces to set up regulatory regimes under which they could license lenders to make loans which have: | In 2007 the ''Criminal Code'' was amended to allow the provinces to set up regulatory regimes under which they could license lenders to make loans which have: | ||