Ontario payday loan companies will have to use standardized contracts and hang large posters in their stores spelling out fees under new rules designed to make the lending process more transparent to the consumer.
The new regulations, introduced Monday by Government Services Minister Gerry Phillips, also calls for lenders to give advance payments to consumers immediately after signing the contract.
Payday loans, which typically do not require credit checks, are short-term loans with high annual rates of interest. People in need of loans leave cheques post-dated for their next paydays in the amount of the loan and additional fees.
The Ontario government estimates there are between 1,300 and 1,400 short-term loan outlets across Canada. As many as 700 payday lenders are located in Ontario.
The provinces were recently handed the power to manage the payday loans industry under recently passed federal legislation. British Columbia, Manitoba, Saskatchewan and Nova Scotia have all introduced new legislation to regulate the industry.
"Now that the federal government has chosen to hand this responsibility to the provinces, Ontario is acting to provide appropriate consumer protection measures for payday lending," Phillips said in a statement.
Phillips also noted the Ontario government is asking the public to submit responses on whether the industry needs to be more tightly regulated.
A Statistics Canada study found that families with little savings were the most likely to seek out a payday loan. The federal agency said that families with $500 or less in the bank were 2.6 times more likely to have used payday loans than those with between $2,000 and $8,000.
