Canadian Payday Loan Association Welcomes Federal Legislation Allowing Provinces to Regulate Industry

The Canadian Payday Loan Association (CPLA) says it welcomes legislation introduced today by the Canadian government that grants provinces the authority to regulate payday lending.

"Today's legislation will ensure consumer protection and the ongoing viability of this important industry," said Michael Thompson, President of the CPLA. "The federal government has played a vital leadership role in recognizing the importance of this issue and acting quickly to give provinces the authority to regulate the payday loan industry."

The CPLA will now work closely with individual provinces as they prepare legislation. "The Governments of British Columbia, Alberta, Saskatchewan, Manitoba, New Brunswick and Nova Scotia have all committed to introducing regulations as soon as possible. We will immediately begin work with these governments to ensure legislation is passed that protects consumers and ensures the ongoing viability of the payday loan industry," said Thompson.

The CPLA represents 850 of the 1,350 stores offering payday loans to approximately 2 million Canadians every year.

The CPLA was founded in 2004 with a mandate to protect consumers, seek government regulation, and ensure ethical behaviour in the industry. It launched the world's toughest voluntary code for the payday loan industry, the Code of Best Business Practices, and ensures its members comply with the Code through the independent Office of the Ethics and Integrity Commissioner (see story) for the Canadian Payday Loan Association.

The Canadian Payday Loan Association (CPLA) Code of Best Business Practices
source: CPLA

A payday loan is an unsecured short term loan to meet unexpected cash needs. Payday loans are for occasional use only and should not be used to cover continual shortfalls in a persons budgetary requirements. People who have ongoing problems meeting their financial obligations should be consulting credit counselors. CPLA Members are committed to providing credit counseling references.

As a condition of membership, all Members of the CPLA must abide by the following Code of Best Business Practices and display this Code prominently in their places of business.

No Rollovers
A Member will not grant a customer an extension of an outstanding payday loan for a fee or advance a new payday loan to pay out their existing payday loan.

Multiple Loans
A Member shall not grant multiple payday loans to a customer that in total exceed what the Member initially approved the customer to borrow.

Default and Post-Maturity Interest Charges
A Member shall not charge a penalty fee and/or NSF fee that exceeds an amount set from time to time by the Association. Interest on each $100 of a payday loan in default will not exceed $0.90 per week for the first thirteen weeks and $0.50 per week thereafter.

Credit Counseling
A Member must advise customers who have defaulted twice within one year of credit counseling services, and offer to forgo accrual of interest if the customer obtains credit counseling.

Collateral
A Member may not take title to chattels or assets of a borrower as security for repayment of payday loans.

Collection Practices
A Member will collect past due accounts in a fair, lawful and professional manner. Members are prohibited from taking an assignment of wages.

Loans to Certain Customers
A Member shall not grant payday loans to customers on the basis of social assistance payments received by that customer.

Amount Loaned
A Member shall not grant a payday loan that exceeds $1500.

Term of Loan
A Member shall not grant a payday loan with a term that exceeds 31 days.

Record Keeping
A Member will keep and maintain records of financial transactions with their customers in accordance with standards established by the Association.

Right to Rescind
A customer shall have the right to rescind a payday loan at no cost on or before the close of the following business day.

Privacy Protection
Members are prohibited from using personal and confidential information for marketing or other purposes unrelated to the payday loan without the consent of the customer and will comply with all privacy laws.

Selling Other Goods or Insurance
A Member is prohibited from requiring a customer to obtain insurance as a condition of taking out a payday loan.

Advertising Standards
Members will follow the advertising standards as established by the Association and must also comply with all Provincial laws governing advertising.

Disclosure to Customer
A Member shall use plain language in their documentation, will disclose all the fees, costs and interest in a clear manner and will prominently indicate the high-cost nature of the payday loan on all loan documentation.

Education and Awareness Campaigns
Members shall prominently display the Code of Best Business Practices, the CPLA logo showing membership in the Association, credit counseling and CPLA educational brochures, and information on how customers can contact the Association with complaints or comments.

Member Non–Compliance
The Association will ensure Members comply with all elements of the Code. A Member will report to the Association any violation of this Code by any other Member.

Responding to Consumer Complaints
A Member must respond diligently to all complaints of their customers. If a customer is not satisfied with redress of their complaint they are invited to contact the Association action line at 1–800–413–0147 or by email at inquiry@cpla-acps.ca. The Association will investigate and take any appropriate and necessary action to resolve customer complaints.