Canadians of all financial background who has low to moderate incomes are those who usually opt for one hour payday loans. However, today well-earning Canadians are also accessing this loan. Most of these borrowers who apply for payday loans are well aware that they are expensive but they are either unaware of the true cost of borrowing or have no other financial options.
Despite high cost and risk of predatory lending, more and more Canadian citizens are opting for payday loans. In order to raise awareness and put an end to predatory lending, considerable steps have been taken by the government and various fair banking campaigns are launched. They are also seeking to amend the criminal code by reducing the maximum interest rate from 60% to 30%.
In the recent few years, the payday loan market in Canada has become more lenient. Currently, all lending restrictions are decided by provinces instead of the central government. In Canada, this loan won favour in the mid-1990s, as banks stopped offering short term loans and consumers had to turn elsewhere for access to short term credit. Later in 2007, the government removed payday lending from the jurisdiction of the criminal code and allowed each province to decide its own restrictions on penalties and fees.
The maximum interest charged in Quebec has also been reduced to 30%, while in Alberta, British Columbia and Ontario the maximum that can be charged on one hour payday loans has been set to $15 for every $100. In Ontario, payday lenders are regulated to reveal the actual interest rate. In Prince Edward Island a maximum cost of $25 per $100 loan is charges and has no cap on penalties. With more accurate knowledge it will be much easier for consumers to make an informed decision.