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Archived - Is a payday loan right for you?
FCAC publication helps Canadian consumers understand payday loans
OTTAWA, October 3, 2012 – The Financial Consumer Agency of Canada (FCAC) has updated its information on payday loans to help Canadian consumers get the facts they need when considering a payday loan as a way to borrow money.
"FCAC's material provides Canadians with timely and objective information on the questions and facts they may want to consider before deciding whether a payday loan is the right option for them," says Ursula Menke, FCAC Commissioner. "Over the past couple of years, there have been a number of changes to provincial and territorial regulations on payday loans, which are now reflected in our publications."
A payday loan is a short-term loan or a cash advance that you promise to pay back from your next paycheque. Payday loans are more expensive than most other forms of credit and will not solve your financial problems if you are already short of cash. It may seem like a quick and easy way to get money when times are tight, but fees on payday loans are generally much higher than those for other forms of credit, and can quickly make your financial situation worse.
"Payday Loans: An Expensive Way to Borrow" explains what a payday loan is and how it works. It outlines the cost of a payday loan compared to other ways of borrowing and what to watch out for when applying for a payday loan over the Internet, or if you cannot pay your payday loan back on time. If you feel that a payday loan is right for you, this publication suggests what you should consider before applying for one and describes your rights as a consumer.
The new publication complements FCAC's "Considering a Payday Loan? 10 Questions to Ask" tip sheet, which suggests that consumers consider whether they really need the money, whether there is another way that they can manage until their next paycheque and whether there are cheaper alternatives. It also suggests that consumers ask a payday lender what the associated costs are, what kinds of charges may apply if the loan is not paid off on time, whether the loan can be cancelled and how to do so. Finally, it lists the contact information for all provincial and territorial consumer affairs offices so that consumers can find the rules that apply to payday lending in their own province or territory.
FCAC has also produced two video Tip Clips designed to help raise Canadian consumers' awareness of the cost of Automated Teller Machine (ATM) fees—it can be more than $8 per transaction—and highlighting the fact that you can cash a Government of Canada cheque for free. FCAC's Tip Clips are available on the FCACan YouTube channel.
With educational materials and interactive tools, the Financial Consumer Agency of Canada (FCAC) provides objective information about financial products and services to help Canadians increase their financial knowledge and confidence in managing their personal finances. FCAC informs consumers about their rights and responsibilities when dealing with banks and federally regulated trust, loan and insurance companies. FCAC also makes sure that federally regulated financial institutions, payment card network operators and external complaints bodies comply with legislation and industry commitments intended to protect consumers.
You can reach us through the FCAC Consumer Services Centre by calling toll-free 1-866-461-3222 (TTY: 613-947-7771 or 1-866-914-6097) or by visiting our website: itpaystoknow.gc.ca.
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