Defaulting on a Payday Loan
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 $50, 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.
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.
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