Ontario enforcing new payday loan rules

Ontario's new rules forcing payday lenders to clearly post their interest rates and fees went into effect in the province on Wednesday.

Lenders must hang large posters in their stores spelling outtheinterest rates, brokerage fees and cheque-cashing feescharged for every $100 in loans.

The payday outlets will also have to use a standardized credit agreementdisclosing the details of a borrower's payday loan.

Government Services Minister Gerry Phillips said the rules should help people understand exactly what's involved when they use one of the estimated 700 payday lenders in Ontario.

"Our government introduced new protections to offer Ontarians who use payday loans more transparency and fairness," the minister said.

Phillips said the regulations will help consumers develop a better understanding of the costs involved before entering into a credit agreement.

"We believe all Ontarians have the right to know exactly what's involved and our government is acting to protect that right when it comes to payday loans," he said.

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 loans are particularly attractive to working Canadians who either live paycheque to paycheque or who run out of money before payday. Regular financial institutions are not interested in giving out $500 loans for two-week periods.

Manitoba, Nova Scotia and Saskatchewan have passed legislation to tighten the rules for payday lenders. A similar bill in British Columbia has passed first reading.

In May, the federal government passedlegislation to giveprovinces and territories the power to regulate what payday loan companies charge.