Payday Lenders Turning to Canada

Wed, 20 May 2009

Payday lenders are increasingly focusing their attentions on the Canadian market after a series of generous fee caps were approved by state governments. With the payday loan industry subject to increasing levels of regulation in the United States, companies in the 15 states which have effectively prohibited payday loans are turning to the $2 billion Canadian short-term credit market.

To date, four provinces in Canada have decided on fee caps that will come into effect later this year. However, the caps are nowhere near the prohibitive levels of American states, with British Columbia and Ontario permitting fees of over $60 for a $300 loan repayable over 14 days. That figure is nearly 15 times the sum charged by a credit card company over a similar period.

Outside of these states, the average cost in regulated states stands at $45 for a $300 loan over two weeks, whilst an independent regulator in Nova Scotia approved a fee cap of $93 per two-week $300 loan. Quebec is the only Canadian state to have effectively prohibited payday loans, with a maximum annual interest rate on 35 per cent for any loan, compared to the APR for Nova Scotia which equates to around 800 per cent.
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