It’s almost Canada Day! And to add to the celebrations, on July 1, 2018 the Ministry of Government and Consumer Services will roll out new consumer protection laws that will benefit all of us. Even if you’re not directly affected, stronger consumer protection is a good thing for everyone. Consumer Protection Ontario has announced that there will be increased fairness and visibility with how collection agencies and payday loan/cheque cashing companies operate in Ontario.
Highlights of the Coming Changes: Effective July 1, 2018
Collection agencies must now include a disclosure form in the first notice that they send to you. This disclosure form is a reminder that there are laws in place to protect you. The form includes information about your rights and what to do if the agency has broken the law. If you’re receiving collection calls and you know your rights, you can take swift action to ensure that your rights are not violated.
Payday Loan Companies
The biggest changes regarding consumer protection laws impacts payday loan companies.
1. Extended Payment Plans
If you’ve borrowed more than three times from the same payday loan company over a period of 63 days, you must be allowed a longer period of time to pay back the debt. Multiple loans in a short period of time indicates a financial struggle, so lenders must now offer you an extended payment plan. But keep this in mind: Allowing more time to pay back the loan may ease the immediate strain but you need to ask yourself if this is a good long-term solution.
2. Loan Caps
Payday loan companies will only be able to lend up to 50% of your net income (take home pay). That means if your two-week paycheque is $500, you will only be able to borrow up to $250. How does that help you? Placing an upper limit on borrowing will reduce the chances that you will overextend yourself and will also place a limit on the lender by drawing a line in the sand.
3. Interest Disclosure
The cost of borrowing must now be disclosed in Annual Percentage Rate (APR) terms. Why is this important? Because when you borrow money, you need to know how much it’s going to cost you! Payday loan borrowing is very expensive, and seeing the interest rate may be an eye-opener that may have you changing your mind about getting the loan. Start looking for that APR rate.
4. Advertising Guidelines
Posters and advertising will show a sample loan as $500, not $300. This will reflect a typical example of borrowing—again, showing a real-life example of how consumers actually use these loans.
Cheque Cashing Services
1. Fee Caps
Starting July 1st, the maximum fee for cashing government cheques will be capped at $2.00, plus 1% of the cheque amount or $10.00—whichever is less.
2. Receipt Requirement
Cheque cashing companies will have to provide a receipt when cashing government cheques.
You should also be aware that you can cash a Government of Canada cheque for FREE at any federally regulated financial institution in Canada. If you do not have a bank account, you can still cash a Government of Canada cheque at regulated banks for free, as long as the face value is less than $1,500.00 and you show proper ID. If you are refused, you can lodge a complaint with the FCAC.
Why all the changes? The government is trying to take steps to ensure that consumers are not taken advantage of, that they are very aware of the cost of their borrowing and that they are not victims of predatory lending.
Questions to Ask Yourself
Are you using a cheque cashing service because you don’t have a bank account?
It is against the law for a bank to refuse to open up a bank account for you—this applies in almost every case. To open up a bank account, you don’t need to have a job; you don’t need to make a deposit right away; and you can have a very poor credit rating (and even have gone through bankruptcy). All you need to do is show proper ID. The Financial Consumer Agency of Canada (FCAC) lists your rights on their website. Open up a bank account today if you don’t already have one, and start cashing your cheques there instead.
Are you using payday loans because you’ve run out of financial options?
Individuals often use payday loan companies as their “last-resort” for borrowing. If you’re maxed out on everything and you’re running low on cash, it is true that payday loans can provide a solution for that one moment in time; however, it’s not a good long-term plan.
According to the Ministry’s own website: “A payday loan is the most expensive form of consumer loan in Ontario.” In addition to this, the repayment terms are difficult to manage and it is exceedingly easy to fall into a borrowing cycle that is hard to escape…often leading to multiple loans.
If you are a regular customer at payday loan companies and you’re stuck in a never-ending cycle of borrowing, you may need some help. There are solutions out there that will help you pay off debt quickly and usually at 0% interest.
One great answer is to seek out non-profit credit counselling. At Credit Canada Debt Solutions, thousands of individuals have already been helped. Our certified counsellors provide a free professional assessment of your current financial situation and share all of the possible solutions available to you. You are reminded of your rights and the route to take to correct any wrongs. And with our new debt calculator, we can even tell you when you’ll be debt-free. And it’s all done for free. You can call us at 1-800-267-2272 to talk about all of this and more.
Consumer protection laws are getting better every year, and the government is working hard to protect you and your money. Knowing the law, exerting your right to be protected under the law, and getting on track with a good repayment plan are all important. Give us a call and then go out and enjoy the Canada Day celebrations!
P.S. Collection agencies can’t call you on holidays. So if you get a call on July 1st, you know who to call on July 2nd.