Compelling evidence that any further government intervention would very misguided – as competition, not regulation, is the key for payday loans.

A new bill has been proposed amending the Consumer Protection Act to modify the maximum costs for Payday Loan lenders.

More commentary on the recent Ontario Payday Loan panel recommendations.

The Manitoba government gives itself official authority to cap loan rates for the payday loan business.

There are times when we cannot just wait for payday to come to fulfill certain financial obligations, especially emergency-related expenditures. With no option to wait for cash for several days more or too embarrassed to borrow money from family or friends, employed Canadians have payday loans to turn to.

Payday loans are short-term loans with small values intended to cover a borrower’s immediate or pressing expenses until the next payday. It is also referred to as a salary cash advance (to differentiate from a credit card cash advance). The loan is guaranteed against the security of the next payday’s salary. Payday loans can be granted from $100 up to a thousand Canadian dollars.

Borrowers can avail of payday loans in payday loan stores or private lending offices. Basic requirements include identification, proof of employment and required salary bracket (payslip or payment stubs), a bank account, and recent bank statements. The borrower writes out a check equivalent to the amount of the loan plus interest as guarantee. On the date of maturity, the borrower is expected to return to the lending facility to pay the loan. If not, the lender can withdraw the check guarantee against the borrower’s account.

Payday loans are quick to be granted but they often incur huge interest rates when compared against a longer-term loan. This is due to the short payment turnaround (two weeks) and the compounding interest computation, where interests accumulated daily become part of the principal, further increasing the interest rate.

But taking into account that payday loans are smaller in value and quickly processed, the interest rate is often ignored just so quick cash can be had. This is okay as long as the borrower pays the loan the next payday or as scheduled, otherwise, the quick cash would balloon into a huge financial obligation.