What you need to know

What you need to know

For information about your payday loan select from the options below.

 

• Expensive way to borrow money
• Less expensive options
• Maximum fees
• Defaulting
• Collection practices
• Debt repayment
• Pre-contract disclosure requirements
• Payday loan laws

 

Expensive way to borrow money

A payday loan is a high cost, small, short term loan provided without security (no collateral) to a borrower. The loan must be no more than $1,500 and have a term of less than 62 days.

Be aware of the total annualized borrowing rate (ABR) of a loan before you agree to take the loan. The ABR calculation should include all of the lender’s fees or charges connected to the loan – interest charges and application, set up, administration or other fees. Even a high rate credit card’s APR will likely be significantly cheaper that the ABR calculated based on a $17 fee to borrow $100 for a payday loan term. For example, the ABR to borrow $100 at a $17 fee for one week is 866% per annum, which is significantly higher than a typical 28% per annum credit card.

Loans are payable on or after your next regular pay date. Loan agreements must be in writing, dated and signed by the borrower.

You should immediately receive and keep a copy of all payday loan agreements and associated documents, including pre-authorized debit agreements.

Payday loans are limited to half (50%) of your take-home pay and only one loan is allowed at a time. Lenders need a copy of your pay stub and/or bank statement showing evidence of your net pay prior to providing a loan.

Lenders providing payday loans to Saskatchewan residents must be licensed with FCAA. Do not borrow from unlicensed lenders.

Things to remember when using payday loans:

1. Know the costs – frequent use adds up over time.
2. Don’t take out a second payday loan to pay off the first one.
3. If you change your mind, you have until the end of the next business day to return the money and cancel the loan.
4. Read the fine print.
5. Loans are due on your next regular payday.
6. Use a licensed Saskatchewan lender. 

Less expensive options

You may want to consider other less expensive options to borrow money, which can include:

• Consider a lower cost short term loan from a local Credit Union or a line of credit from your bank. Often a borrower can access short term funds at rates far closer to the prime lending rate. Your bank or Credit Union may also offer credit counseling without charge.
• Your employer may be willing to provide an advance or partial advance on your pay.
• Negotiating a payment plan or deferral with your other creditors. It may be in a creditor's best interest to agree to a payment plan with you, even if it means smaller payments over an extended time period.
• A cash advance on your credit card may be much cheaper than using a payday loan. Credit card APR is typically far lower than the ABR used by most payday lenders.

 

Maximum fees

Lenders are allowed to charge up to $17 for every $100 advanced, which means a payday loan of $300 can cost $351 ($300 x 17% = $51). By signing a pre-authorized debt agreement, $351 will come out of your bank account on your next payday.

This amount must include all fees whatsoever that may be directly or indirectly connected to your loan, including:

• interest;
• loan administration or processing fees;
• application fees;
• brokerage fees.

 

Defaulting

If you default on a payday loan, a payday lender may charge you:

• default interest, up to a maximum of 30% per annum, on the loan principal amount in default;
• an NSF charge, up to a maximum of $25, if your cheque or pre-authorized debit was dishonoured.

You may only be charged one NSF charge per loan agreement, no matter how many of your cheques or pre-authorized debits were dishonoured.

You cannot be charged any other fees, penalties or costs by a payday lender for defaulting on a payday loan.

A lender cannot charge you additional fees to “rollover” or refinance your loan, or to extend your loan.

 

Collection Practices

If you give a lender permission to get payment directly from your bank account by way of a pre-authorized debit (“PAD”):

• The lender can make an initial PAD attempt for the amount set out on the PAD Agreement on the date set out on the PAD Agreement.
• If the initially attempted PAD is dishonoured the lender can try one more time, as long as the retry occurs within 30 days of learning of the initial try was returned and is for the exact same dollar amount as the initial try.

The lender CANNOT make more than two attempts to access your bank account using a PAD to get payment for a loan.

Lenders must also follow collection practices as outlined in The Collection Agents Act.

This means (in part) that a lender attempting to collect past due amounts may not:

• collect any additional amount over what is owed or charge any additional fees for collection efforts;
• charge you for the cost of a telephone call or telegram made for collection purposes;
• use any forms that look like official court documents;
• make telephone calls or personal calls of such a nature or frequency that it harasses you, your spouse or any other family member;
• make telephone calls or personal calls for the purpose of demanding payment of a debt on a Sunday or holiday, and all calls on other days must be between the hours of eight o’clock in the morning and nine o’clock in the evening;
• give you false information, either directly or indirectly;
• give or threaten to give your employer, or the employer of any member of your family, information that may adversely affect employment or employment opportunities of yourself, your spouse or any other family member;
• make a demand for payment without indicating the name of the payday lender, the balance of the account and the identity and authority of the person making the demand;
• make telephone calls or personal calls in such a way as to harass others, in an effort to locate you.

 

Debt Repayment

If debt is becoming overwhelming for you, it may be beneficial for you to seek some further assistance.

Credit counseling agencies that offer free or low-cost assistance include:

Credit Counselling Canada
401 Bay Street, Suite 1600
Toronto, ON M5H 2Y4
Phone: 1-866-398-5999
Email: contact@CreditCounsellingCanada.ca
 

Pre-contract disclosure requirements

You have the right to certain information before signing any loan documentation. A lender must provide a separate pre-contract disclosure statement in writing that:

• indicates that a payday loan is a high-cost loan;
• includes an explanation of all amounts, fees, rates, penalties or other charges that you may have to pay;
• provides notice of your right to cancel the payday loan, without reason or cost, at any time before the end of the business day following the date on which you signed the payday loan agreement;
• includes a cancellation form that you may use to give written notice that you want to cancel the payday loan agreement;
• includes a receipt form that is used to acknowledge receipt of what you have paid or any amount you return when cancelling the payday loan agreement; and
• provides contact information for Credit Counselling Canada.

 

Payday loan laws

The Payday Loans Act of Saskatchewan applies to payday loans offered to persons in Saskatchewan. This means, in most cases, if you are in Saskatchewan when you obtain your payday loan, then the Act applies to your loan.

Generally, the Act applies to your payday loan where:

• You enter the loan at a lender’s physical storefront location anywhere in Saskatchewan.
• You enter the loan on the internet while you are anywhere in Saskatchewan.
• You enter the loan over the phone or by fax while you are anywhere in Saskatchewan.

The Act will not apply to your payday loan if you are outside of Saskatchewan when you enter the payday loan.

Note: there are a few exceptions to the rules set out above. If you are unsure whether the Act applies to your payday loan, please contact our office for clarification.

Caution: just because the Act applies, doesn’t mean everyone is following it!

Ensure that the payday lender is licensed to operate in Saskatchewan before taking out a loan with the company. Licensed lenders must comply with the Act which protects borrowers in important ways. A list of licensed lenders can be found on our website.