Payday lenders skirt loan charge limits

CBC News has learned some payday lenders in Ontario are skirting the law that limits how much interest they can charge borrowers, by sneaking in extra fees.

A provincial law passed in 2009 capped the interest charged by payday loan companies at $21 per $100 borrowed, but the provincial government has received more than 80 complaints about excess payday loan fees in the past year.

Consumer Services Minister John Gerretsen said some companies are using additional fees to get more money out of borrowers.

"Rather than being given cash when a borrower made one of these loan arrangements, they would be given a debit card," he said.

"They could access the money…immediately, but they, in effect, would be charged a fee for accessing the debit card, for activating the debit card."

Some companies charge as much as $18 to access the card, on top of the interest they are already charging.

Ontario New Democrat Howard Hampton said consumers "are being ripped off," and added the Liberals should have known this would happen.

"Frankly, they were told that their regulation was too weak and has too many loopholes," he said.

"If you don't put in language that there cannot be other fees and other deductions and other transactions, then you simply leave the door open to these outfits to do by the side door what they're not permitted to do by the front door, and that's exactly what they did."

The provincial government is now moving to tighten those loopholes.

"We heard those complaints, we noted it was happening, and we're rectifying the situation at this time," Gerretsen said.

Under the proposed changes, borrowers could not be charged fees, either directly or indirectly, that increase the cost of borrowing for a payday loan over the legal limit.

The proposed regulatory amendment would also clarify that borrowers must receive access to the full amount of the advance under the payday loan agreement, without deduction, at the time of entering into a payday loan agreement.

The province would not say which payday lenders were the subjects of the complaints. No charges have been laid.