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Payday Loans Regulation in British Columbia
(March 5, 2009)
Mr. Bruce Cran
President
Consumers’ Association of Canada
Dear Mr. Cran:
I am pleased to announce approval of British Columbia’s new Payday Loans Regulation, to take effect on November 1, 2009.
The Regulation works in conjunction with the Business Practices and Consumer Protection Act – Part 9 Licensing, and the Business Practices and Consumer Protection (Payday Loans) Amendment Act, 2007. Together, they form a regulatory framework for licensing payday lenders, establishing maximum charges for payday loans and regulating other measures that provide protection for consumers. An overview of the regulatory requirements is attached. Questions about the Payday Loans Regulation may be directed to Anne Preyde, Director of Policy and Legislation, at: 250 3562932.
The Regulation will require that all payday lenders, including those doing business by internet and telephone, have a licence issued by the Business Practices and Consumer Protection Authority (BPCPA). Please visit the BPCPA website at:
www.bpcpa.ca to access additional information. The BPCPA website will be updated with information on the licensing process in the coming months.
I have forwarded a request to the Government of Canada to designate British Columbia for purposes of section 347.1 of the Criminal Code, which allows designated provinces to set permissible charges for payday loans. This process is expected to take about eight months to complete and must be done prior to the legislation coming into force on November 1, 2009.
I appreciate your contribution to the process of developing a regulatory framework for payday lenders and ask for your help in providing this information to your members or other interested persons.
Yours sincerely,
John van Dongen
Solicitor General
Business Practices and Consumer Protection Act and Pay Day Loans Regulation
Overview of Requirements
Note: This overview is not an official version of the law. Please see the Business Practices and Consumer Protection Act and the Payday Loans Regulation for actual requirements.
Licensing:
- Effective November 1, 2009, all payday lenders, including internet and telephone lenders, must have a licence issued by the Business Practices and Consumer Protection Authority (BPCPA).
- Licence fees are $1,500 per year for a head office or primary location, and $750 per year for each secondary location.
- Licence applicant must submlt the information set out in the Regulation as well as those required by the director of the BPCPA.
Permissible Charges:
- The maximum amount that may be charged for a payday loan is 23% of the loan principal (e.g. 23% of a $500 loan is $115). This must include all interest charges and fees for the loan.
- In addition, maximum charges on default of repayment of a loan are:
- Interest of 30% per annum on the outstanding principal
- A one-time fee of $20 for a dishonoured cheque or dishonoured preauthorized debit.
Required Disclosure:
- Payday lenders must have the posters near the entrance of the business displaying the information required by the Regulation, including the lender charges for a payday loan, and the total cost of borrowing for a sample loan. Smaller signs must also be posted at the location where the loan is negotiated. Internet lenders must have similar notices on their website, and telephone lenders must provide the information over the telephone.
- Loan agreements must fully disclose all information as set out in the Act and Regulation.
Examples of Regulated and Prohibited Practices:
- A borrower has the right to cancel a loan by returning the principal of the loan by the end of the business day after the day that the borrower receives the first advance.
- A borrower may make early repayments at any time, and at no additional charge.
- If the loan is loaded in a cash card, a borrower may request payment in cash for amounts of $25 or less remaining on the cash card.
- If a borrower is taking a third loan in a two month period, the lender must spread repayment over two or three pay periods.
- A lender must not issue a new loan to a borrower that already has a loan with that lender.
- A lender must not extend a loan with additional charges or issue a new loan to pay out an existing loan.
- A lender must not issue a loan greater then 50 % of the borrower’s income.
- A lender must not require or request that the borrower take insurance on the loan or that the borrower purchase other goods and services with a payday loan.
- Assignment of wages or collection of the payment from a borrower’s employer is prohibited.
- A lender must not require repayment before the next payday.
- A lender must not get unrestricted access to a borrower’s bank account or accept cheques that are payable to someone other that the lender.
- A lender must not offer prizes as enticements to take a payday loan.
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