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Beware of Unlicensed Online Payday Lenders: Watch for These Warning Signs

According to the Canadian Payday Loan Association, nearly 2 million Canadians use payday loans each year, and that number is rising.

Payday loans are short-term loans usually up to $1,500 that can help individuals get through a rough spot. They are called payday loans because typically, they are paid back on the next pay day. Oftentimes, people use these types of loans to pay for things if they run out of money before their next paycheck.

Payday lenders are supposed to be regulated by provincial governments, and those who operate from a physical location typically are. However, with the rise of Internet usage, several new payday loan companies are popping up online, and the majority of them aren’t licensed.

Unfortunately, because these lenders aren’t licensed, they don’t follow provincial rules designed to protect borrowers. It also means that if they do conduct unlawful business practices, there is nothing the government can do to help you.

This is why it’s extremely important for you to do your research before choosing a payday lender. You should only use online payday lenders that are licensed. Using licensed lenders provides consumers with some added legal protections from predatory lending practices, such as interest rate caps, disclosure requirements and cancellation options.

The rise of harassment

At SolveYourDebts.com, we have seen many of our clients becoming increasingly harassed by unlicensed payday lenders. Provincial governments are also seeing an increase in complaints from consumers about inappropriate behaviour from payday lending businesses that are not licensed to operate in the province. These complaints include reports of intimidating collection practices and aggressive communication methods.

Some consumers have reported that unlicensed payday lenders have contacted them at their place of employment or contacted their employer or coworkers when they fall behind in their payments, which is against the law.

Many unlicensed online lenders, such as this one, will ask for family references during the application process. While this may seem normal, our clients have reported that these lenders are now calling their friends and family daily to harass them for money owed.

How to find a licensed payday lender in Atlantic Canada

While it’s best to avoid a payday loan company altogether (check out these 5 alternatives to payday loans), sometimes they are necessary if you need a bit of cash until your next paycheck. Ideally, you should only take out a payday loan if you know for sure you can pay it on your next pay day.

When searching for a payday loan company, you want to be sure that they are licensed in your province. There are a few ways to determine if a payday lender is licensed:

  • Choose a payday lender that has a storefront location instead of choosing an online provider.
  • Contact your provincial or territorial consumer affairs office to verify that a particular lender has a license to operate in your province.
  • Ensure that any company you’re using has posted their permit in their store window and/or on their website. Typically licensed lenders will have regulations outlined in the footer of their website.
  • Ask the payday lender you’re working with if they are licensed in your province; if they are, ask for their business registration number. Licensed lenders should have no problem providing this information.

Know your rights

When it comes to using payday lenders, it’s a good idea to find out your province or territory’s payday lending rules by contacting your provincial or territorial consumer protection office before taking out a loan. This way you can be sure that the lender is following the regulations.

We’ve re-capped the rules and regulations in each of the Atlantic provinces:

You should also know that unlicensed lenders are not legally allowed to charge interest on loans, so if you have borrowed money from an unlicensed lender, you are only obligated to pay back the principle amount that you borrowed.

That being said, unlicensed lenders are unlikely to stop harassing you until they receive all of their money back, and unfortunately there’s not much you can do to stop them.

Things to keep in mind when using payday loans 

  • Be careful when providing your banking information to a payday lender, as they will have access to funds in your account.
  • Beware of lenders that ask you to pay an upfront fee – you should never pay this.
  • Read the fine print and understand the agreement that you’re signing. The payday lender will ask you to sign an agreement that shows your loan costs, including interest, fees and the due date. Read this document carefully before signing it and ask the payday lender about anything you don’t understand.

For more helpful information on how to protect yourself from payday loan companies, visit the government of Canada website.

Warning signs of unlicensed online payday lenders

  • No fine print on fees, terms or conditions in the footer of their website
  • No registration number or permit on their website
  • No local address or phone number on their website
  • Communication from the company is riddled with spelling errors and poor grammar
  • Unprofessional business acumen, including threatening language

Tips on dealing with unlicensed payday lenders

If you’ve found yourself the victim of an unlicensed payday lender with predatory collection practices, the best thing to do is to try and pay back the loan immediately. This is the only way that they will stop harassing you.

The government’s authority to act is limited when a lender is not provincially licensed, but there are laws against harassment. If you’re being harassed by a payday lender and feel like there is no way out, contact the police or RCMP. There is legislation that protects borrowers and their families from harassment.

A spokesperson for the RCMP in Nova Scotia, said there have been no public complaints about payday loans in 2021, but he encouraged complainants to come forward with concerns.

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