Do You Issue Loans For Less Than $5000?

Businesses that issue loans to customers for $5,000 or less should be aware that the Ontario Ministry of Consumer Services (MCS) is proposing an amendment to the regulations under the Payday Loans Act, 2008 which, read literally as drafted, would result in those businesses being designated payday lenders. That, in turn, carries registration requirements and imposes significant restrictions on activities that surround such loans. MCS is asking for submissions to be made on the proposed draft by September 30, 2013.

The Ontario government passed the Act in 2008 to regulate small principal, short-term, high-interest loans. It defined "payday loans" in broad terms: "an advancement of money in exchange for a post-dated cheque, a pre-authorized debit or a future payment of a similar nature", but then it excluded other types of loans such as lines of credit and credit cards. Section 2(1) of the Act then provides that the Act applies in respect of all payday loans if the