Payday loans more affordable but still very risky

Do you need money on the spot? Can not borrow from the bank, from a friend? The payday loan is your only option? Since last summer, it should be more affordable.

Quebec has amended the Consumer Protection Act (CPA) and several new provisions govern these lenders.

Specifically, most offer their services on the web: you complete a questionnaire, provide your banking information, proof of salary, and within hours, the money is deposited in your bank account.

Usually, the contract provides that the lender, such as loansrequest.ca, pretexpress911 (there are dozens, because many disappear after a few months or years and new ones appear regularly), remits a payment on the day of your pay.

An example of a loan

A $ 300 loan from mynetxpay.ca will be repaid in six installments of $ 90.21. Your total disbursement is $ 541.23, for a fee of $ 241.23 and an annual interest rate of 32%. You’ll understand: it’s very, very expensive.

At reports many testimonials from people who are caught in a domino effect: after the deduction of the payday lender, there is not enough money for other payments. The consumer must then assume costs, penalties and additional interests. Sometimes several tens of dollars …

It’s a good thing that in Quebec, case law ensures that the annual interest on payday loans can not exceed 35%, she says (in some provinces, it’s over 60%!). But it’s already higher than store credit cards, which range from 25% to 29%.

Changes

Since last August, lenders can no longer charge brokerage fees to their clients. Some ended up with dozens or even hundreds of dollars in fees for a $ 1,000 loan (the average payday loan would play in the $ 750).

In addition, if the interest rate exceeds the Canada Bank’s official discount rate (currently 1.75%) by 23 percentage points, or 23.75%, the CPA provides for a stricter framework for lenders. .

For example, they must give the borrower a written calculation of their debt ratio so that they can make their budget. And if this ratio exceeds 45%, the contract is considered excessive. The consumer can then reduce the fees or simply request cancellation of the contract within 10 days.

The Office of Consumer Protection receives between 150 and 200 complaints a year from all types of high cost lenders. There has been no increase since the changes to the law. One in three Canadians lives from paycheque to paycheque, according to the Canadian Payroll Association.