The Ontario government is proposing changes that would provide additional protection for payday loan borrowers by capping interest rates and fees on defaulted loans, ensuring that workers and families who use payday loan services can keep more of their hard-earned money.
The changes were included in the COVID-19 Economic Recovery Act, 2020.
“Our government remains committed to protecting Ontarians during these unprecedented times, now and in the future,” said Lisa Thompson, Minister of Government and Consumer Services. “These proposed amendments to the Payday Loans Act, 2008, are intended to provide some much-needed relief to some of Ontario’s most vulnerable consumers.”
Proposed amendments to the Payday Loans Act, 2008, would cap the interest rate that lenders can charge on payday loans that are in default. Lenders would not be permitted to charge interest in excess of 2.5 per cent per month (non-compounded), providing rate relief to borrowers unable to repay their loans on time.
The government would also establish a maximum fee of $25 that may be charged by lenders for dishonoured or bounced cheques or pre-authorized debits. This measure would protect borrowers from having to pay high fees while already facing financial hardship.
“Throughout COVID-19, and beyond, our primary objective has been to ensure the people of Ontario have what they need to provide and care for their families and loved ones without additional stressors,” said Minister Thompson.
If passed, the province says this would be the first time Ontario has taken action to protect borrowers in default from annual interest rates as high as 60 per cent and to establish a maximum fee that may be charged for dishonoured payments.