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Payday loans are on the rise in terms of popularity. In Ontario alone, it is estimated that there are 750 payday loan companies operating. It's a great way to get some quickly needed cash, and since you've ensured that you could pay it back come payday, it really seems like a great idea at the moment. What shocks many first-time lenders when it comes to getting payday loans is the different fees that come with it. Not only that, there are also additional penalties and fines thrown at you in case a problem occurs with the loan. This can be stressful and frustrating all at the same time. People who have gone through problems with payday loans vouch for this, and many of them go through the trouble of putting their credit in jeopardy, while experiencing humiliation with their friends and family.

Although these people are responsible for their actions, there have also been cases of payday loan lenders violating the rights of its borrowers. In some cases, the court waould find out that aside from the initial interest rate placed on the loan, the other fees and charges when added all together would amount to as much as 80 percent of the loan. This made the law makers aware of the unfair practices some payday loan lenders and brokers do on their customers. In this case, some new laws have been established to regulate the interest rates of payday loans.

The regulation of payday loan interest rates in Canada

Since the revelation of the overwhelmingly high interest rates placed on borrowers by some payday loan companies, the Criminal Code of Canada has regulated the interest rates. The court has decided that all these other additional fees such as broker's fee, administration fee, collection fee, and others are actually interest costs. All of these fees when added all together must not exceed one-third of the amount of the loan. Under the revised law, payday loan lenders are not allowed to charge more than 60 percent interest on the loan. It is important that you add up all of the fees placed on your payday loan to determine the amount of interest placed on your loan. If your calculation exceeds the 60 percent regulated interest rate on a payday loan, report it at once to the Financial Consumer Agency of Canada, and they will assist you with which government office to get in touch with in your area.

Other regulations on payday loan lenders

Another thing to consider when planning to take out a payday loan is whether the payday loan lender is licensed under Canadian law or not. It is illegal under the Criminal Code of Canada for a lender or a broker to be operating without a license. Be sure to verify if the payday loan lender or broker you plan to get the money from is licensed or it it has the right accreditation.

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