New Laws Governing Saskatchewan Cash Advance Take Effect

by Curtis White on January 4, 2012

The provincial government has announced the onset of new laws regulating the Saskatchewan cash advance industry. The new laws are intended to make the cash advance process more transparent while reducing fees and interest incurred by consumers. The laws are Saskatchewan’s first legislation specific to the payday-loan industry.

Roger Sobotkiewicz, director of the payday-loans division of the Saskatchewan Financial Services Commission, commented to the The StarPhoenix: “It’s part of a cross-Canada trend. Several other provinces have just put in similar legislation or are putting in similar legislation. I think the [payday loan] industry jumped onto the radar screen across Canada at the same time and all the provinces have sort of worked together to move legislation ahead.”

Alberta, B.C., Manitoba, Nova Scotia, and Ontario already have regulations in place governing the payday loan industry. Payday lenders in Saskatchewan were previously regulated under the Trust and Loans Corporation Act, but the new legislations are intended to be more specific and comprehensive.

For example, the new laws specify that providers of payday loans must display “very large signs” that are easily visible when entering the premises, which list all of the fees accompanying any payday loan. That is meant to “allow borrowers to shop around,” Sobotkiewicz explained.

Also prominent in the new regulations is a tighter cap on loan fees, which must not amount to more than 23 percent of the principal amount borrowed, or $23 on every $100. Under the previous regulations, some lenders could go over the 23 percent cap by altering the loan fees when necessary.

The new laws also specify that lenders and borrowers must enter into a written agreement, which includes full written disclosure indicating that the payday loan is a high-cost form of lending. This information must be provided prior to documents being finalized.

Payday lenders also must explain to the borrower that he or she has a right to cancel the loan within one business day of entering into the agreement, with only an obligation to repay the principal amount within the grace period. There also are new restrictions on the number of times lenders can attempt to make a pre-authorized debit, as well as prohibitions against rollover loans and allowing a borrower to take out concurrent loans.

Under the new licensing requirements for payday loan outlets, lenders also must pay an annual fee of $2,000 for each location they operate. Whether the new licensing fee will slow the proliferation of payday lending sites is yet to be seen.

Sobotkiewicz recommended that borrowers do their own research and become informed of their rights before seeking out a payday loan.

“What we encourage is for borrowers to go to our website, sfsc.gov.sk.ca, because we have information about things borrowers should consider before entering into payday loans,” Sobotkiewicz said. “If they feel their rights weren’t respected, by all means contact us. We would like to know about it.”

The new laws governing payday loans in Saskatchewan were first announced in the summer of 2011, but required federal exemption from a Criminal Code governing interest rate caps before taking effect with regards to a Saskatchewan cash advance.