Bill 54 2008
An Act respecting payday loans
Her Majesty, by and with the advice and consent of the Legislative Assembly of the Province of Ontario, enacts as follows:
Interpretation and Application
1. (1) In this Act,
"Minister" means the Minister of Government and Consumer Services or such other member of the Executive Council to whom administration for this Act is assigned under the Executive Council Act; ("ministre")
"officer" includes the chair and any vice-chair of the board of directors, the president and any vice-president, the secretary and assistant secretary, the treasurer and assistant treasurer and the general manager and assistant general manager of the corporation, or a partner or general manager and assistant general manager of a partnership, any other individual designated as an officer by by-law or resolution or any other individual who performs functions normally performed by an individual occupying such office; ("dirigeant")
"payday lender" means a person who is licensed under this Act to make payday loans; ("prêteur sur salaire")
"payday loan" means a loan of $3,000 or less with a term of two months or less; ("prêt sur salaire")
"prescribed" means prescribed by the regulations made under this Act; ("prescrit")
"provincial offence" means an offence under an Act of the Legislature or under a regulation made under the authority of an Act of the Legislature; ("infraction provinciale")
"Tribunal" means such tribunal as is prescribed or established by the regulations made under this Act. ("Tribunal")
(2) Without limiting the generality of the definition of "payday loan" in subsection (1), the making of payday loans may correspond, more or less, to the following description:
1. The lender requires the borrower to provide proof that he or she has an established source of income, such as wages or benefits.
2. The amount of the loan and the repayment date of the loan are connected, directly or indirectly, to the amount of the borrower's income and the next regularly recurring date on which the income will be received.
3. The lender requires the borrower to provide a guarantee of access to funds belonging to the borrower in an amount that covers the value of the loan plus any interest or other fees charged by the lender.
4. The guarantee referred to in paragraph 3 may be a cheque, whether present-dated or post-dated, or another guarantee, such as an authorization to debit a bank account belonging to the borrower.
5. The lender provides the borrower with cash in an amount that is equal to the amount of the loan.
6. On or near the borrower's next regularly recurring date for receiving income, payment of the loan comes due and the lender is entitled to access funds belonging to the borrower by exercising the guarantee referred to in paragraph 3 unless the borrower arranges for payment of the loan in some other way.
2. This Act does not apply in respect of,
(a) financial products or services regulated under the Insurance Act, the Credit Unions and Caisses Populaires Act, 1994, the Mortgage Brokers Act or the Loan and Trust Corporations Act; or
(b) prescribed professional services that are regulated under another Act.
Registrar and deputies
3. The Minister shall appoint a Registrar for the purposes of this Act and may appoint Deputy Registrars, one of whom may act as Registrar during the Registrar's absence or inability to act.
4. The Registrar may,
(a) conduct public education programs and provide information to the public on any aspect of payday loans and related subjects, such as credit generally; and
(b) enter into agreements relating to any matter respecting co-operation on the regulation of payday lenders and payday loans with a person or entity of another jurisdiction who has responsibilities in that jurisdiction with respect to the regulation of payday loans or consumer protection generally.
Duty to report
5. (1) The Registrar shall report annually to the Minister on his or her activities over the previous year with respect to the application of this Act and on the payday loan industry generally.
Contents of report
(2) Without limiting the generality of subsection (1), the Registrar's report shall include,
(a) aggregate data on the cost of payday loans, borrower use of payday loans and payday loan default;
(b) information on complaints made under this Act and the resolution of those complaints;
(c) information on action taken under this Act against payday lenders;
(d) recommendations of the Registrar, if any, for improvements to the regulation of payday loans and payday lenders; and
(e) such other matters as the Registrar considers advisable or as the Minister may require.
Report to be tabled
(3) The Minister shall submit the report to the Lieutenant Governor in Council and shall table the report in the Legislative Assembly as soon as reasonably possible.
6. (1) No person shall offer or make payday loans or hold themself out as a payday lender unless the person is licensed under this Act.
(2) No person shall offer or make payday loans or hold themself out as a payday lender unless the person maintains at least one office in Ontario at which the public is invited to deal.
Application for licence
7. (1) A person may apply to the Registrar for the issuance or renewal of a licence.
(2) A person who applies for the issuance or renewal of a licence shall,
(a) pay the prescribed fee;
(b) provide a street address and a mailing address for the office required under subsection 6 (2);
(c) provide a declaration, in a form approved by the Registrar, that lists all of the person's convictions for relevant offences, within the meaning of subsection (3),
(i) under a law of Canada for which a pardon under the Criminal Records Act (Canada) has not been issued or granted,
(ii) under a law of Ontario or of another province or territory of Canada, and
(iii) under a law of another jurisdiction for which a pardon has not been issued or granted;
(d) provide a declaration described in clause (c) for every officer of the applicant;
(e) provide consent for the Registrar to collect information on any matter mentioned in clause (c) in respect of the applicant and every officer of the applicant;
(f) provide evidence satisfactory to the Registrar that the person possesses the prescribed minimum working capital;
(i) the name of each person that beneficially owns or controls 10 per cent or more of the equity shares issued and outstanding at the time of the application,
(ii) such information on its corporate structure and governance as is prescribed; and
(h) provide such other things as may be prescribed.
(3) For the purposes of subsection (2), a relevant offence is one in which fraud is an element of the offence.
Refusal of licence
(4) If an applicant does not meet the requirements set out in subsection (2), the Registrar shall refuse to grant or renew the licence.
Notice of refusal
(5) The Registrar shall give the applicant written notice of a refusal under subsection (4), setting out the reasons for the refusal.
No right to hearing
(6) An applicant is not entitled to a hearing in respect of the Registrar's refusal under this section.
8. (1) An applicant that meets the requirements set out in subsection 7 (2) is entitled to the issuance or renewal of a licence unless, in the Registrar's opinion, one of the following applies and the matter is relevant to the applicant's fitness to hold a licence:
1. The applicant or an interested person in respect of the applicant is carrying on activities,
i. that are in contravention of this Act or the regulations, or
ii. that will be in contravention of this Act or the regulations if the applicant is issued a licence or a licence is renewed.
2. The past conduct of the applicant or of an interested person in respect of the applicant affords reasonable grounds to believe that the applicant will not carry on business in accordance with the law and with integrity and honesty.
3. The applicant or an employee or agent of the applicant makes a false statement or provides a false statement in an application for the issuance or renewal of a licence.
4. The applicant cannot reasonably be expected to be financially responsible in the conduct of its business or to maintain the prescribed minimum working capital, having regard to the financial position of the applicant or the financial position of an interested person.
5. The applicant has been convicted of an offence or is liable to pay a fine for a provincial offence that has not been paid.
6. Any of paragraphs 1 to 5 applies in respect of an officer of the applicant.
7. A ground exists that is prescribed as a ground that may disentitle an applicant to a licence under this section.
(2) The Registrar may require an applicant or an officer of the applicant to provide, in the form and within the time period specified by the Registrar,
(a) information specified by the Registrar that, in the Registrar's opinion, is relevant to determining whether the applicant is disentitled to a licence under subsection (1); and
(b) verification, by affidavit or otherwise, of any information described in clause (a).
(3) For the purposes of subsection (1), a person is an interested person in respect of an applicant if, in the opinion of the Registrar,
(a) the person has or may have a beneficial interest in the applicant's business;
(b) the person exercises or may exercise control either directly or indirectly over the applicant; or
(c) the person has provided or may have provided financing either directly or indirectly to the applicant's business.
Refusal to issue or renew licence
9. The Registrar may propose to refuse to issue or renew a licence if, in his or her opinion,
(a) the applicant is not entitled to a licence under subsection 8 (1); or
(b) the applicant fails to provide anything required by the Registrar under subsection 8 (2).
Suspension or revocation of licence
10. The Registrar may propose to suspend or revoke a licence,
(a) for any reason that he or she could propose to refuse to issue or renew the licence under clause 9 (a);
(b) if the licensee is in breach of a condition of his or her licence; or
(c) if the licensee is in breach of a provision of this Act or the regulations.
11. (1) A licence is subject to such conditions as are consented to by the applicant or licensee, applied by the Registrar under subsection (2), ordered by the Tribunal or prescribed.
(2) On issuing or renewing a licence, or at any other time, the Registrar may propose to apply such conditions to the licence as he or she considers appropriate.
Right to hearing when licence refused, revoked, etc.
12. (1) An applicant or licensee is entitled to a hearing before the Tribunal if the Registrar proposes to,
(a) refuse to issue or renew a licence under section 9;
(b) suspend or revoke a licence under section 10; or
(c) apply conditions to a licence under subsection 11 (2) to which the applicant or licensee has not consented.
Notice of Registrar's proposed action
(2) If the Registrar proposes to take any action described in clauses (1) (a) to (c), he or she shall serve written notice on the applicant or licensee setting out the reasons for the proposed action and informing the person of the right to a hearing before the Tribunal.
Affected person's response
(3) A person who is entitled to a hearing may request a hearing before the Tribunal within 15 days after service of a notice under subsection (2).
Form of request
(4) A request under subsection (3) shall be in writing and the applicant shall provide a copy of it to the Registrar at the same time as it is given to the Tribunal.
If no hearing requested
(5) If a person entitled to a hearing does not request one in accordance with subsection (3), the Registrar may take the proposed action.
If hearing requested
(6) If a hearing is requested, the Tribunal shall hold the hearing and may by order direct the Registrar to carry out the Registrar's proposed action or may substitute its own order with respect to the issuance, renewal, suspension, revocation or conditions of a licence, as the case may be.
(7) The Registrar, the applicant or licensee and such other persons as the Tribunal may specify are parties to a hearing under this section.
(8) An order of the Tribunal takes effect immediately, but if a licensee appeals the order, the Tribunal may grant a stay until the disposition of the appeal.
13. (1) If the Registrar proposes to suspend or revoke a licence under section 10 and he or she considers it in the public interest to do so, the Registrar may by order immediately suspend the licence.
Expiry of order
(2) If a hearing is requested under subsection 12 (3), an order made under subsection (1) expires 15 days after the written request for a hearing is received by the Tribunal.
(3) Despite subsection (2), the Tribunal may extend an order made under subsection (1),
(a) if the hearing commences within the 15-day period referred to in subsection (2), until the Tribunal makes its order; and
(b) if the hearing does not commence within the 15-day period and the Tribunal is satisfied that the conduct of the licensee delayed the commencement of the hearing,
(i) until the hearing commences, and
(ii) once the hearing commences, until the Tribunal makes its order.
14. A person whose licence is refused, revoked or refused renewal may reapply to the Registrar for a licence only if,
(a) the time prescribed to reapply has passed since the refusal, revocation or refusal to renew; and
(b) the person satisfies the Registrar that new or other evidence is available or that material circumstances have changed.
Initial disclosure statement
15. (1) Every payday lender shall deliver an initial disclosure statement for a payday loan to the borrower at or before the time that the payday loan is made in a manner that ensures that the borrower is able to retain the statement.
Contents of statement
(2) The initial disclosure statement shall disclose, clearly, comprehensibly and prominently,
(a) the annual percentage rate for the loan;
(b) fees for which the borrower is or may become liable;
(c) rights that the borrower has under this Act, including, but not limited to, the right to complain to the Registrar under section 30 and how to go about making a complaint;
(d) that it is not an offence to,
(i) supply a payday lender with a guarantee of access to funds that are not available, such as a cheque or debit authorization drawn on an account with insufficient funds, or
(ii) default on the loan; and
(e) any other prescribed information.
16. (1) If a borrower pays or is liable to pay a fee to the payday lender, the payday lender shall account for the fee in the annual percentage rate.
(2) Despite subsection (1), fees for which a borrower is not necessarily liable, such as a fee charged in respect of a cheque supplied by a borrower that is drawn on an account with insufficient funds, need not be included in the annual percentage rate.
(3) The Minister may make regulations prescribing the fees that a payday lender may charge a borrower.
Maximum percentage rate
17. The maximum annual percentage rate that a payday lender may charge for a payday loan is 35 per cent.
Maximum amount of loan
18. (1) No payday lender shall make a payday loan to a person in an amount that is greater than 25 per cent of,
(a) the net wages that the person will receive on his or her next regularly recurring pay day that falls after the day the loan is made; or
(b) the net income that the person will receive from another source on the next regularly recurring day for receiving that income that falls after the day the loan is made.
(2) For the purposes of clause (1) (b), examples of other sources of income include, but are not limited to, employment or government benefits.
(3) A payday lender may reasonably estimate the amount set out in subsection (1) based on an examination of the person's pay records or other income records for the two regularly recurring days for receiving pay or other income that immediately precede the day the payday loan is made.
Requiring security prohibited
19. (1) Subject to subsection (2), no payday lender shall require or accept any security from a borrower for a payday loan, including, but not limited to,
(a) assignment of wages;
(b) the title of a motor vehicle;
(c) property; and
(d) custody of a bank card and the personal identification number required to access funds using the card.
Exception – guarantee of funds
(2) For greater certainty, requiring a borrower to provide a guarantee of access to funds in an amount equal to the value of the loan plus the annual percentage rate shall not be considered requiring security for the purposes of subsection (1).
(3) For the purposes of subsection (2), a guarantee of access to funds may be a cheque, whether present-dated or post-dated, or another guarantee, such as an authorization to debit a bank account belonging to the borrower.
No interest on default
20. No payday lender shall impose or collect interest on a payday loan that is in default.
No back-to-back loans
21. No payday lender shall make a payday loan to a person if the person,
(a) has previously been granted a loan by any payday lender and the loan is outstanding; or
(b) has repaid, in full, a loan to any payday lender,
(i) in the preceding seven days, or
(ii) since the borrower's last regularly recurring date for receiving income.
No charge for extension
22. No payday lender shall impose any charge or penalty for extending the term of a payday loan.
23. A borrower is entitled to pay, in part or in full, the outstanding balance of a payday loan at any time and no payday lender shall impose a prepayment charge or penalty when a borrower makes a prepayment.
Payday Lenders - Duties
Minimum working capital
24. A payday lender shall maintain, at all times, the prescribed minimum working capital.
Documents and records
25. A payday lender shall keep the prescribed documents and records in the locations and for the time periods as may be prescribed.
Privacy of borrowers
26. (1) No payday lender shall use information collected from or about a borrower or prospective borrower for the purposes of directing marketing at the borrower.
(2) No payday lender shall disclose information collected from or about a borrower or prospective borrower with any person unless required to do so by the regulations made under this Act.
(3) Subsections (1) and (2) do not apply if the borrower has provided his or her consent, in writing, to the use or sharing of information collected from or about him or her, but no payday lender shall make the making of a payday loan contingent on the giving of such consent.
Requiring arbitration prohibited
27. No payday lender shall, at any time, require or ask a borrower to enter into an arbitration agreement.
28. No payday lender shall make false, misleading or deceptive statements in any advertisement, circular, pamphlet or material published by any means relating to payday loans.
Order of Registrar re: false advertising
29. (1) If the Registrar believes on reasonable grounds that a payday lender is making a false, misleading or deceptive statement in any advertisement, circular, pamphlet or material published by any means, the Registrar may do one or more of the following:
1. Order the payday lender to cease using such material.
2. Order the payday lender to retract the statement or publish a correction of equal prominence to the original publication.
Right to a hearing
(2) A payday lender who receives an order of the Registrar under subsection (1) is entitled to appeal the order to the Tribunal and section 12 applies, with necessary modifications, to an order under this section in the same manner as it applies to a proposal by the Registrar under section 12.
(3) An order of the Registrar under subsection (1) takes effect immediately, but if a payday lender appeals the order, the Tribunal may grant a stay until the disposition of the appeal.
Pre-approval of advertising material
(4) If the payday lender does not appeal an order under this section or if the order or a variation of it is upheld by the Tribunal, the payday lender shall, if required to do so by the Registrar, submit all statements it intends to include in any advertisement, circular, pamphlet or material to be published by any means to the Registrar for approval before publication for such period as the Registrar specifies.
Complaint to Registrar
30. (1) The Registrar may receive a complaint from any person alleging that a payday lender has failed to comply with this Act or the regulations or has breached a condition of a licence.
(2) For the purposes of receiving complaints, the Registrar shall establish and maintain a toll-free telephone number and may establish such other methods of receiving complaints as he or she considers advisable.
Request for information
(3) On receiving a complaint, the Registrar may request, in writing, information in relation to the complaint from any licensee.
(4) A request for information under subsection (3) shall indicate the nature of the complaint.
Duty to comply with request
(5) A licensee who receives a written request for information shall promptly provide the information to the Registrar.
Registrar may decline
(6) The Registrar may decline to deal with a complaint if, in the Registrar's opinion, the complaint is frivolous, vexatious or not made in good faith.
(7) If the Registrar declines to deal with a complaint under subsection (6), the Registrar shall give notice of the decision to the complainant and shall specify the reasons for the decision.
(8) In handling a complaint, the Registrar may do any of the following, as appropriate:
1. Attempt to mediate or resolve the complaint.
2. Give the licensee a written warning that if the licensee continues with the activity that led to the complaint, action may be taken against the licensee.
3. Refer the matter, in whole or in part, to a facilitator.
4. Begin proceedings under section 10 to suspend or revoke the licence of the payday lender against whom the complaint was made.
5. Take any other action as is appropriate in accordance with this Act.
Rules for facilitations
(9) The Registrar may establish rules concerning facilitations under this section, and a facilitator shall comply with any applicable rules.
(10) A facilitation shall not take place without the participation of the complainant and the licensee shall attend any meetings required by the facilitator.
(11) The facilitator shall attempt to resolve the complaint and, at the end of the facilitation, shall communicate to the Registrar the results of the facilitation.
Registrar's authority not affected
(12) This section does not prevent the Registrar from exercising his or her authority under any other provision of this Act in respect of a licensee against whom a complaint has been made, whether or not the Registrar has dealt with the complaint under this section.
Borrowers - Rights
31. Nothing in this Act shall be interpreted to limit any right or remedy that a borrower may have in law.
No waiver of substantive and procedural rights
32. (1) The substantive and procedural rights given under this Act apply despite any agreement or waiver to the contrary.
Limitation on effect of term requiring arbitration
(2) Without limiting the generality of subsection (1), any term or acknowledgment in an agreement between a payday lender and a borrower that requires or has the effect of requiring that disputes arising out of the agreement be submitted to arbitration is invalid in so far as it prevents a consumer from exercising a right that a borrower may have to make an application to the Tribunal under section 34 for an order requiring a payday lender to refund an unlawfully charged fee.
Recovery of unlawful fee
33. (1) If a payday lender has charged a fee or an amount in contravention of this Act or received a payment in contravention of this Act, the borrower who paid the charge or made the payment may demand a refund by giving notice within one year after paying the charge or making the payment.
Form of notice
(2) The notice may be expressed in any way, as long as it indicates the intention of the borrower to demand the refund and complies with any requirements that may be prescribed.
Delivery of notice
(3) The notice may be delivered by any means and, if it is given other than by personal service, the notice shall be deemed to be given when sent.
Payday lender to provide refund
(4) A payday lender who receives a notice demanding a refund shall provide the refund within the prescribed period of time.
Application to Tribunal
34. (1) If a payday lender does not comply with subsection 33 (4), a borrower may apply to the Tribunal for an order requiring the payday lender to refund the amount in question.
Where no hearing required
(2) The Tribunal is not required to afford a payday lender a hearing under this section if the Tribunal has previously found, in a hearing under section 12, that the payday lender charged a fee or an amount in contravention of this Act or received a payment in contravention of this Act with respect to the borrower who applies for relief under subsection (1).
(3) If the Tribunal orders a payday lender to refund an amount under this section, the Tribunal may also order exemplary or punitive damages or such other relief as it considers proper.
35. (1) A person is guilty of an offence if the person,
(a) provides false information in an application under this Act;
(b) fails to comply with an order, direction or other requirement under this Act; or
(c) contravenes or fails to comply with any provision of this Act or the regulations.
(2) An officer of a corporation is guilty of an offence if he or she fails to take reasonable care to prevent the corporation from committing an offence mentioned in subsection (1).
Penalties – individuals
36. (1) Every individual convicted of an offence under this Act is liable to a fine of not more than $50,000, to imprisonment for a term of not more than two years less a day, or both.
Same – corporations
(2) Every corporation convicted of an offence under this Act is liable to a fine of not more than $250,000.
37. The Lieutenant Governor in Council may make regulations,
(a) prescribing professional services regulated under another Act to which this Act does not apply;
(b) prescribing fees that are payable in respect of the issuance or renewal of licences;
(c) prescribing the term of validity of a licence;
(d) prescribing the information on an applicant's corporate structure and governance for the purposes of subclause 7 (2) (g) (ii);
(e) respecting applications for the issuance or renewal of a licence, including prescribing things that a person applying for the issuance or renewal of a licence must provide under clause 7 (2) (h);
(f) prescribing grounds that may disentitle an applicant to a licence;
(g) prescribing the contents of an initial disclosure statement;
(h) prescribing the minimum working capital that shall be maintained by a payday lender;
(i) governing the documents and records that must be kept by licensees, including the manner and location in which they are kept and the time periods for retaining such information and authorizing the Registrar to specify the location at which they must be kept;
(j) prescribing documents, records or information that must be provided to the Registrar, respecting the time and manner in which they must be provided and requiring that specified information may be verified by affidavit;
(k) prescribing any matter or thing that may be or is required to be prescribed in this Act and respecting any matter that is required by this Act to be done in accordance with the regulations.
Same – Tribunal
38. (1) The Lieutenant Governor in Council may make regulations,
(a) prescribing a Tribunal for the purposes of this Act;
(b) establishing a Tribunal for the purposes of this Act.
(2) Regulations establishing a Tribunal under clause (1) (b) may provide for any matter necessary to the effective functioning of the Tribunal, including, but not limited to, governing the appointment of members and their remuneration, the appointment of a chair and vice-chairs, the organization and administration of the Tribunal and the practices and procedures of the Tribunal.
Mortgage Brokers Act
39. On the later of the day that section 58 of the Mortgage Brokerages, Lenders and Administrators Act, 2006 comes into force and the day that this section comes into force, clause 2 (a) of this Act is repealed and the following substituted:
(a) financial products or services regulated under the Insurance Act, the Credit Unions and Caisses Populaires Act, 1994, the Mortgage Brokerages, Lenders and Administrators Act, 2006 or the Loan and Trust Corporations Act; or
Commencement and Short Title
40. This Act comes into force on a day to be named by proclamation of the Lieutenant Governor.
41. The short title of this Act is the Payday Loans Act, 2008.
The Bill enacts a new Act entitled the Payday Loans Act, 2008.
The Act governs payday loans, which are defined as loans in an amount of $3,000 or less that are made for a term of two months or less.
The Act imposes licensing requirements on persons who make payday loans and it establishes procedures for revoking and suspending licences, subject to appeal provisions.
Offences and regulatory requirements are provided for, as is a process for dealing with complaints.