If you are comparing online payday loans in Ontario, start with the law rather than the marketing. Ontario sets detailed rules for payday lenders, including what they may charge, how much they may advance relative to income, what must appear in the agreement and what borrowers can do if something goes wrong.
What is the legal maximum fee for a payday loan in Ontario?
Ontario's maximum allowable cost of borrowing is $14 for each $100 advanced. The cost-of-borrowing limit includes fees and charges directly or indirectly connected with the payday loan agreement. A separate default charge of up to $20 for a dishonoured payment instrument may apply if a payment is returned; that is not an extra application or administrative fee.
| Amount borrowed | Maximum borrowing cost | Total repayment if paid as agreed |
|---|---|---|
| $100 | $14 | $114 |
| $300 | $42 | $342 |
| $500 | $70 | $570 |
| $1,500 | $210 | $1,710 |
These examples show the maximum permitted borrowing cost for a qualifying Ontario payday loan when it is repaid as agreed. Default interest, a permitted dishonoured-payment charge, and fees charged by your own financial institution are separate considerations if repayment fails.
Rules for licensed payday lenders in Ontario
Licensed payday lenders in Ontario must follow both the Payday Loans Act, 2008 and the General Regulation. Important borrower protections include:
- ✓Licence required. A lender or payday-loan broker must hold an Ontario licence. Remote and online payday lenders are not exempt from the licensing requirement.
- ✓Maximum advance and term. Ontario's payday-loan cost provisions apply to an advance of $1,500 or less with a term of 62 days or less.
- ✓50% net-income limit. A lender cannot enter into a payday loan agreement if the advance exceeds 50% of the borrower's net income per loan.
- ✓No rollovers. A lender cannot make a new payday loan to a borrower who still has an outstanding payday loan with that lender, and the lender cannot simply extend the original termination date.
- ✓Two-business-day cancellation. A borrower may cancel the payday loan agreement within two business days without a penalty and without giving a reason, following the statutory process.
- ✓No wage assignment. A lender cannot request or accept an assignment of wages as payment for a payday loan.
- ✓Limits after default. Default interest is capped at 2.5% per month, non-compounded, on outstanding principal. A dishonoured payment fee cannot exceed $20 and may be charged only once for that payment instrument.
- ✓Extra protections for repeat borrowing. If a borrower enters into three or more payday loan agreements with the same lender within a 63-day period, Ontario requires an extended payment plan for the third and subsequent agreements.
How to verify if an online lender is licensed in Ontario
Before providing banking information or accepting a loan, verify the business in Ontario's official licence directory. The Government of Ontario lets consumers search payday lenders and payday-loan brokers by business details or licence number.
- Open Ontario's business licence search.
- Select the payday lender / loan broker licence type.
- Search the business name or licence number and confirm the status.
- Make sure the legal name in the loan agreement matches the licensed business.
Ontario also warns that some websites presenting themselves as lenders may actually be lead generators that collect application information and sell or pass it to another company. Checking the legal entity and licence helps you know who is actually offering the credit.
Can an Ontario payday lender contact your employer?
Ontario places limits on employer contact. With the borrower's consent, a payday lender may contact an employer before the payday loan agreement to confirm employment, length of employment, employment income, occupation or business address. Ontario also restricts harassment and third-party contacts when collecting an amount owing.
What happens if you cannot repay on time?
If a payday loan goes into default, Ontario permits a lender to charge up to 2.5% per month, non-compounded, on the outstanding principal. A lender may also charge up to $20 once for a dishonoured cheque, pre-authorized debit or other dishonoured payment instrument. Your financial institution may charge its own NSF or overdraft fee as well.
Unpaid debt may also be assigned or referred to a collection agency, may lead to legal action and may affect a credit report depending on how the debt is reported. If you know you will have difficulty repaying, contact the lender before the due date and review lower-cost debt-management options.
Safer financial alternatives to payday loans in Ontario
The Financial Consumer Agency of Canada (FCAC) describes payday loans as an expensive way to borrow and recommends considering lower-cost options before taking one. Depending on your situation and eligibility, alternatives can include:
- ✓A loan or line of credit from a bank or credit union.
- ✓Overdraft protection on a chequing account.
- ✓A credit-card cash advance, after comparing the fee and interest cost.
- ✓Asking a bill provider or lender about a payment deferral or revised due date.
- ✓An employer pay advance, or help from family or friends, where appropriate.
FCAC's published example for a $300 loan over 14 days shows a $42 payday-loan cost at the $14-per-$100 cap, compared with materially lower illustrative costs for a line of credit, overdraft protection or a credit-card cash advance. The best alternative depends on your eligibility, timing and total cost.
Frequently asked questions
Can an Ontario payday lender contact my employer?
With your consent, the lender may contact your employer before the loan agreement only to confirm employment, length of employment, employment income, occupation or business address. Ontario also limits abusive or harassing communications.
What happens if I cannot pay back my loan on time?
Default interest may be charged at up to 2.5% per month, non-compounded, on outstanding principal. A lender may charge up to $20 once for a dishonoured payment instrument. Collection activity or legal action may follow if the debt remains unpaid.
Can I cancel a payday loan in Ontario?
Yes. You generally have two business days to cancel a payday loan agreement without a penalty and without giving a reason, provided you follow the cancellation requirements.
Do online payday lenders need an Ontario licence?
Yes. Ontario requires payday lenders and payday-loan brokers to be licensed. This applies to online and remote payday lenders doing business in Ontario.
What is the maximum payday loan amount in Ontario?
Ontario's payday-loan cost rules apply to advances of $1,500 or less with terms of 62 days or less. In addition, a lender cannot advance more than 50% of a borrower's net income per loan.
Official sources and further reading
- Consumer Protection Ontario — Payday loan: your rights
- Government of Ontario — A guide for payday lenders
- Ontario Payday Loans Act, 2008
- Ontario Regulation 98/09 (General)
- Financial Consumer Agency of Canada — Payday loans
Considering an Ontario payday loan?
Review the cost, repayment date and alternatives before you apply. Mr. Payday Easy Loans Inc. is a direct lender serving Ontario under licence #4716300.
Related Mr. Payday resources
Ontario Payday Loans · Rates & Fees · Borrower’s Rights · All blog articles