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Payday loans are permitted in Canada under the section 347.1 of the Canada Criminal Code, as long as the province of the borrower has sufficient provincial legislations related to the provisioning of these loans. If no such legislations exist (New Brunswick, Newfoundland and Quebec) then the payday loans are limited through the usury laws, with any effective interest rate of above 60% per annum being considered a criminal act.
The criminal Code of Payday Advance Canada was amended in the year 2006, in order to permit the Canadian provinces to regulate the payday loan industry.
British Columbia - Since November, 2009 payday loan regulation have been enforced. The maximum charges for payday loans have been restricted at 23% of the principal amount. The borrower has the right to cancel a loan by the end of the day on which the loan agreement was signed without giving any additional charges. A borrower can have only 1 loan at a time. The lenders are prohibited from lending above 50% of the borrower’s salary. All the lenders are regulated by Business Practices and Consumer Protection Authority and have to be registered with the same.
Saskatchewan - In June, 2010, Saskatchewan government announced regulations similar to that implemented in
British Columbia. The companies that offer payday loans have to pay a licensing fee of $2000 for each location. The payday loans act 2012 was implemented in Saskatchewan in January, 2012.
Manitoba - They have the most restrictive rates for any Canadian province restricted at 17% for 2 weeks period. Additionally if the same customer takes out any subsequent loans within a particular period of time the rates are limited to 5%.
Ontario - They implemented the Payday Loans Act, 2008 in order to limit the fee being charged on payday loans to about $21 per $100 borrowed for 2 week duration. The effective annual interest rate comes out to be 14299%, while the annual simple interest rate is approximately 548%.
New Brunswick - The province of New Brunswick laid out a framework for licensing payday lenders in 2008but has not determined the maximum rate of interest. Until this is done, the federal government will not be able to provide an exemption to this province under the Canadian Criminal Code section 347.1, thus making the payday loans illegal at any interest rates above 60% per annum.
Nova Scotia - Initially payday loans were permitted in Nova Scotia at 31% rate, but have been reduced to 25%.
Prince Edward Island - The have imposed a limit on the fee charged for the loan at $25 per $100 borrowed for 14 day period. The annual interest rate comes out to be 33519%, whereas the equivalent simple interest rate is limited at 652%.
Quebec and Labrador and Newfoundland – these provinces have prohibited payday loans outright. Quebec has chosen to cap the interest on all loans to a 30% annual interest, whereas Labrador and Newfoundland haven’t enacted any legislation on this matter, thereby leaving the restrictions to the federal government’s 60% cap.