The Scenario
A consumer takes out a $500 payday loan to cover an unexpected expense. The lender charges $75 in fees (consistent with the $15 per $100 cap). The consumer is unable to repay at the end of the two-week term and considers taking out another payday loan from the same lender to cover the first.
Rights Analysis
The Payday Loans Act, 2008 caps the total cost of borrowing at $15 per $100 and prohibits rollovers and concurrent loans from the same lender. The $75 fee at origination is at the statutory cap. A second loan from the same lender to cover the first would likely violate the rollover prohibition in section 34.
The Act also provides a two-business-day right of cancellation at origination: the borrower may return the principal and cancel without any cost. After the two-day window, the borrower is bound by the agreement but the lender is still restricted from offering another loan from the same institution.
Possible Options for the Consumer
Options include negotiating a repayment plan with the current lender, seeking a lower-cost loan from a bank or credit union, consulting a non-profit credit counsellor, or reviewing whether the original loan complied with the Payday Loans Act.
A complaint may be filed with Consumer Protection Ontario if the lender is unlicensed, charges more than the statutory maximum, or otherwise violates the Act. The Ministry of Public and Business Service Delivery enforces the licensing requirements.