Explanatory Note

This bill requires payday lenders to be licensed and imposes certain restrictions and obligations on them for the protection of borrowers, including

• prohibiting the lender from charging more than the maximum allowed by an order of the Financial Institutions Commission to be charged as a cost of credit, for the renewal, extension or replacement of a loan, or for a default under a loan;
• prohibiting the taking of security, including an assignment of wages;
• requiring the lender to provide specified information to the borrower in a clear and understandable manner; and
• requiring the lender to post signs setting out an itemized list of the cost of credit for a representative payday loan.

In addition, the bill imposes recordkeeping requirements on payday lenders, and enables officials to carry out investigations of payday lenders.

The bill also gives borrowers certain rights in relation to a payday loan, such as

• the right to cancel the loan within 48 hours after receiving the initial advance;
• the right to cancel the loan if he or she was not properly notified of the 48-hour cancellation right; and
• the right to a refund if he or she was overcharged.

BILL M 206 – 2006
PAYDAY LENDING ACT, 2006

HER MAJESTY, by and with the advice and consent of the Legislative Assembly of the Province of British Columbia, enacts as follows:

Part 1 -- Interpretation and Application

Definitions

1 In this Act:

"applicant" means an applicant for a licence or for renewal of a licence under this Act;

"commission" means the Financial Institutions Commission established under section 201 of the Financial Institutions Act;

"director" has the same meaning as in the Consumer Protection Act;

"investigator" means a person appointed as an investigator under section 33;

"licence" means a licence issued under this Act, unless the context requires otherwise;

"minister" has the same meaning as in the Consumer Protection Act;

"payday lender" means a person who offers, arranges or provides a payday loan;

"payday loan" means, subject to the regulations, a loan of money with

(a) an initial advance of no more than $1,500, and

(b) an initial term, despite any extension or renewal, no longer than 62 days;

"replacement loan" means

(a) a payday loan arranged or provided by a payday lender as part of a series of transactions or events that results in the borrower's debt under another payday loan previously arranged or provided by that payday lender being repaid in whole or in part, and

(b) a transaction or series of transactions specified in the regulations; and

"wages" includes

(a) salary, and

(b) periodic payments in respect of loss of future income or loss of earning capacity.

Application limited

2 This Act does not apply to a loan that was made before this Act came into force, except to the extent that it relates to an extension or renewal made or granted after this Act came into force.

Part 2 -- Licensing

Licence required

3 A person must not offer, arrange or provide a payday loan from a location except under authority of a licence issued to the person or the person's employer for that location.

Use of name

4 A payday lender must not offer, arrange or provide a payday loan under a business name or style that differs from the business name or style specified in the payday lender's licence.

Application or renewal of licence

5 A person may apply, in a form approved by the director, for

(a) a licence authorizing the person to offer, arrange or provide payday loans at a location specified in the licence, or

(b) a renewal of a licence.

Separate licence for each location

6 A person who wishes to offer, arrange or provide payday loans at more than one location must apply for a separate licence for each location.

Application requirements

7 When applying for a licence or a renewal of a licence, the applicant must provide

(a) any information required by the application form or prescribed by regulation; and

(b) any additional information requested by the director.

Licence fee

8 Before a licence is issued or renewed by the director, the applicant must pay the licence or renewal fee specified in the regulations.

Bond or security required

9 (1) Before a licence is issued by the director, the applicant must provide the government with

(a) a bond to secure the performance of obligations under this Act and the regulations, or

(b) a deposit of cash or securities acceptable to the director.

(2) The terms, conditions and amount of the bond or other security must be satisfactory to the director and must meet the requirements of the regulations.

Licence not transferable or assignable

10 A licence is not transferable or assignable.

Terms and conditions of licence

11 (1) A licence is subject to any terms or conditions

(a) imposed by the director, if he or she considers it in the public interest to do so, at the time of issuance or renewal, or at any other time by written notice to the holder of the licence; and

(b) prescribed by regulation.

Duration of licence

12 (1) A licence ceases to be valid

(a) one year after the day it is issued, or

(b) if it is renewed, on the next anniversary date of its issuance, unless it is renewed further.

(2) Despite subsection (1), if a payday lender applies for a renewal of his or her licence before it would otherwise cease to be valid under that subsection, the licence continues to be valid until

(a) it is renewed, or

(b) the payday lender is served with a copy of the director's decision to refuse to renew the licence.

Refusal to issue licence

13 (1) The director may refuse to issue a licence to an applicant if

(a) the applicant has been convicted of an offence under

(i) this Act,

(ii) the Criminal Code (Canada), or

(iii) any other Act that, in the opinion of the director, involves a dishonest action or intent;

(b) the applicant is an undischarged bankrupt;

(c) the applicant provides incomplete, false, misleading or inaccurate information in support of the application;

(d) a licence issued to the applicant

(i) under this Act, or

(ii) by an authority responsible for issuing licences with respect to the lending of money in any jurisdiction,

is suspended or has been cancelled, or the applicant has applied for a renewal of such a licence and the renewal has been refused;

(e) the applicant fails to meet any qualifications or satisfy any requirement of this Act or the regulations;

(f) in the director's opinion, the applicant will not carry on business according to law and with integrity and honesty; or

(g) in the director's opinion, it is not in the public interest to issue a licence to the applicant.

(2) The director may refuse to issue a licence to

(a) a corporation, if a director or officer of the corporation could be refused a licence under subsection (1), or

(b) a partnership, if a member of the partnership could be refused a licence under subsection (1).

(3) The director must provide written reasons for a decision to refuse to issue a licence.

Refusal to renew, cancellation or suspension

14 (1) Subject to subsection (2), the director may refuse to renew or may cancel or suspend a payday lender's licence

(a) for any reason for which the director may refuse to issue a licence under section 13;

(b) if the payday lender fails to provide information required by the director or prescribed by regulation, or provides incomplete, false, misleading or inaccurate information to the director;

(c) if the payday lender contravenes or fails to comply with this Act or the regulations; or

(d) if the payday lender contravenes or fails to comply with a condition of the licence.

(2) Before refusing to renew, canceling or suspending a licence, the director must notify the payday lender in writing

(a) that the director intends to refuse to renew, or may cancel or suspend the licence, and the reasons therefor; and

(b) that the lender may, within 14 days after being served with the notice,

(i) make a written submission to the director as to why the renewal should not be refused or the licence should not be cancelled or suspended, or

(ii) contact the director to arrange a date and time for a hearing before the director.

(3) The director may extend the 14-day period under subsection (2) (b).

(4) If the payday lender does not make a written submission or arrange for and attend a hearing under subsection (2) (b), the director may take the action stated in the notice.

(5) After considering a written submission or holding a hearing, the director may refuse to renew, or may cancel or suspend the licence.

(6) A decision to cancel or suspend a payday lender's licence takes effect when notice of the decision is served on the lender, or on the date specified in the decision, whichever is later.

(7) The director must provide written reasons for a decision to refuse to renew, or to cancel or suspend a licence.

Appeal

15 (1) A decision of the director to refuse to issue or renew a licence, or to cancel or suspend a licence, may be appealed to the Supreme Court by the person who applied for or held the licence.

(2) An appeal to the Supreme Court must be made by filing an application with the court within 14 days after a copy of the director's decision is served on the person appealing.

(3) As soon as practicable after filing an application with the Supreme Court, the person appealing must serve a copy of the application on the director.

(4) The Supreme Court may

(a) confirm the director's decision, or

(b) allow the appeal, on any terms and conditions the court considers appropriate, and

(c) make any order as to the costs that the court considers appropriate.

Injunction

16 (1) The director may apply to the Supreme Court for an injunction restraining a person from offering, arranging or providing payday loans without a licence.

(2) The Supreme Court may grant the injunction against the person if it is satisfied that the person offered, arranged or provided a payday loan without a licence or there is reason to believe that the person will do so.

Service and delivery of documents

17 (1) A notice, decision or other document to be delivered or served on a person by the director under this Act must be delivered or served

(a) by delivering a copy of it to the person or to an officer or employee of the person;

(b) by sending a copy of it by registered mail, or by another service that provides the sender with proof of delivery, to the person at the last address appearing in the director's records for the person or the person's business; or

(c) in any other manner prescribed by regulation.

(2) A notice, decision or other document sent to a person in accordance with subsection (1) (b) is deemed to have been received on the date shown on the confirmation of delivery obtained from the Canada Post Corporation or other delivery service.

(3) Despite subsections (1) and (2), a notice, decision or other document is sufficiently delivered or served if it actually came to the attention of the person for whom it was intended within the time for its delivery or service under this Act.

Part 3 -- Obligations and Prohibitions

Cost of credit limited

18 (1) A payday lender must not, in relation to a payday loan,

(a) charge, or require or accept the payment of, or

(b) arrange for or permit any other person to charge, or require or accept payment of

any amount or consideration that would result in the total cost of credit, or any component of the cost of credit, of the loan being greater than the maximum allowed by or under an order of the commission.

(2) If a payday lender contravenes subsection (1),

(a) the borrower is not liable for any amount charged as a cost of credit for the payday loan; and

(b) the payday lender must reimburse the borrower, in cash, immediately upon demand by the borrower or the director, for

(i) the total of all amounts paid, and

(ii) the value of any other consideration given

in respect of the borrower's cost of credit for the payday loan.

(3) Subsection (2) applies in addition to any penalty that the payday lender may be subject to under any other Act.

Initial disclosure required

19 (1) At the time of making the initial advance under a payday loan or providing the borrower with a cash card or other device that enables the borrower to access funds under a payday loan, the payday lender must give to the borrower

(a) a document, in a form satisfactory to the director, that

(i) states the date and time of day that the initial advance is being made or the card or other device being provided,

(ii) states that the loan is a high-cost loan,

(iii) gives notice of the borrower's right to cancel the loan within 48 hours after receiving the initial advance or the card or other device,

(iv) includes a form of notice that the borrower may use to give written notice that he or she is canceling the loan, and

(v) includes a form of receipt that the payday lender must use to acknowledge receipt of what was paid or returned by the borrower upon canceling the loan; and

(b) any other documents or information prescribed by regulation.

(2) Subsection (1) applies in addition to any other document or information that the payday lender must disclose to the borrower under any other Act.

(3) Documents and information required to be given under this section must be clear and understandable, and the required information must be prominently displayed.

Cancellation permitted

20 (1) A borrower may cancel a payday loan within 48 hours, excluding Sundays and other holidays, after receiving the initial advance or a cash card or other device enabling the borrower to access funds under the loan.

(2) In addition to cancellation permitted under subsection (1), a borrower may cancel a payday loan at any time if

(a) the payday lender did not notify the borrower of his or her right under subsection (1) to cancel the loan, or

(b) the notice of the right to cancel given to the borrower does not meet the requirements of section 19.

Cancellation procedure

21 (1) In this section, "payday lender" includes an officer or employee of the payday lender at the location at which the payday loan was arranged or provided.

(2) To cancel a payday loan under section 20, the borrower must

(a) give written notice of the cancellation to the payday lender, and

(b) repay, by cash, certified cheque or money order or in a prescribed manner, the outstanding balance of the initial advance, less any cost of credit that was paid by or on behalf of the borrower or deducted or withheld from the initial advance.

(3) For the purpose of subsection (2) (b),

(a) if the initial advance was made in the form of a cheque, a return of the unnegotiated cheque to the payday lender is to be considered a repayment of the initial advance;

(b) if the initial advance was made in the form of a cash card or other device that enabled the borrower to access funds under the loan, returning that card or device to the payday lender is to be considered a repayment of the initial advance to the extent of the cash or credit balance remaining on the card or device.

(4) Upon the cancellation of a payday loan under this Part, the payday lender must immediately

(a) give the borrower a receipt, in the form referred to in subsection 19 (1) (a) (v), for what the borrower paid or returned to the payday lender upon canceling the loan, and

(b) reimburse the borrower, in cash, for all amounts paid, and the value of any consideration given, by or on behalf of the borrower as the cost of credit for the loan, less any amount deducted or withheld from the initial advance or from the repayment of it under subsection (2) (b).

Effect of cancellation

22 The cancellation of a payday loan under this Part extinguishes every liability and obligation of the borrower under, or related to, the payday loan agreement.

No fee on cancellation

23 A payday lender must not

(a) charge, or require or accept the payment of, or

(b) arrange for or permit any other person to charge, or to require or accept the payment of,

any amount or consideration for, or as a consequence of, the cancellation of a payday loan under this Part.

Other rights not affected

24 The cancellation rights under this Part are in addition to, and do not affect, any other right or remedy the borrower has under the payday loan agreement or at law.

No security to be taken

25 A payday lender must not require, take or accept, directly or indirectly,

(a) real or personal property,

(b) an interest in real or personal property, or

(c) a guarantee

as security for the payment of a payday loan or the performance of an obligation under a payday loan agreement.

Wage assignments prohibited

26 (1) In this section, "assignment of wages" includes an order or direction by an employee to pay all or any part of his or her wages to another person.

(2) An assignment of wages in not valid if it is given in consideration of a payday loan or an advance under a payday loan, or to secure or facilitate a payment in relation to a payday loan.

(3) A payday lender must not request or require a person to make an assignment of wages in relation to a payday loan.

Limits on charges

27 (1) A payday lender must not, in relation to a transaction or series of transactions involving a replacement loan or the extension or renewal of a payday loan,

(a) charge or require or accept the payment of, or

(b) arrange for or permit any other person to charge or to require or accept the payment of,

any amount or consideration except as permitted by or under an order of the commission.

(2) If a payday lender contravenes subsection (1),

(a) the borrower is not liable for any amount charged

(i) for the extension or renewal of the loan or as a cost of credit relating to the extension or renewal, or

(ii) as a cost of credit in relation to the replacement loan; and

(b) the payday lender must immediately reimburse the borrower, in cash, upon demand by the borrower or the director, for

(i) the total of all amounts paid, and

(ii) the value of any other consideration given

for the extension or renewal of the payday loan or as a cost of credit for the replacement loan.

(3) Subsection (2) applies in addition to any penalty that the payday lender may be subject to under any other Act.

Concurrent loans prohibited

28 (1) A payday lender must not offer, arrange or provide a payday loan to a borrower who is indebted to the lender under an existing payday loan, unless the new loan is a replacement loan and, immediately after the initial advance under the new loan is made, the borrower is no longer indebted under the existing loan.

(2) If a payday lender contravenes subsection (1),

(a) the borrower is not liable for any amount charged as a cost of credit for the new loan; and

(b) the lender must reimburse the borrower, in cash, immediately upon demand by the borrower or the director, for

(i) the total of all amounts paid, and

(ii) the value of any other consideration given

in respect of the borrower's cost of credit for the new loan.

(3) Subsection (2) applies in addition to any penalty that the payday lender may be subject to under any other Act.

Joint liability for refund

29 If a payday loan is arranged by one payday lender and provided by another payday lender, both lenders are jointly and severally liable to the borrower for any amount to be refunded or reimbursed to the borrower under this Act.

Information to be posted

30 A payday lender must post signs at each location at which the lender is licensed to offer, arrange or provide payday loans. The signs must be posted prominently and in accordance with the regulations, and must clearly and understandably set out, in the form prescribed by regulation,

(a) all components of the cost of credit, including all fees, charges, penalties, interest and other amounts and consideration for a representative payday loan transaction; and

(b) any other information prescribed by regulation.

Records to be kept

31 A payday lender must maintain records in accordance with the regulations, including records of all payday loans that it offers, arranges or provides, and all payday loan agreements that it enters into.

Part 4 -- Investigations

Records to be made available

32 A payday lender must

(a) make the records that he or she is required to maintain under this Act or the regulations available, at the place where they are maintained, for investigation, examination or audit by a consumer services officer or a person authorized by the director; and

(b) if the records are not maintained in British Columbia, pay to the minister, upon receiving a statement from the director, the amount charged by the director for expenses incurred in inspecting, examining or auditing the records at the place where they are maintained.

Investigators

33 The director may appoint a person as an investigator to conduct investigations, inspections, examinations, audits or tests under this Act.

Investigation

34 (1) In this section, "investigation" includes an investigation, inspection, examination, audit or test.

(2) Subject to any conditions imposed by the director, an investigator may carry out any investigation reasonably required to

(a) determine compliance with this Act, the regulations, or the terms and conditions of a licence;

(b) verify the accuracy or completeness of a record, or of other information provided to the director or investigator; or

(c) perform any other duty or function that the director or investigator considers necessary or advisable in the administration or enforcement of this Act.

(3) In order to perform a duty or function related to an investigation under subsection (2), the investigator may, at any reasonable time and without a warrant, enter

(a) any business premises of a payday lender; or

(b) any other premises or place where the investigator has reasonable grounds to believe that records relevant to the administration or enforcement of this Act are kept.

(4) An investigator must show his or her identification if requested to do so in the context of an investigation.

(5) The payday lender or person in charge of the place being investigated or having custody or control of the relevant records must

(a) produce or make available to the investigator all records and property that the investigator requires for the investigation;

(b) provide any assistance or additional information, including personal information, that the investigator reasonably requires to perform the investigation; and

(c) upon request, provide written answers to question asked by the investigator.

(6) In order to access records that are maintained electronically at the place being investigated, the investigator may require the payday lender or person in charge of the premises or the relevant records to produce the records in the form of a printout or to produce them in an electronically readable format.

(7) The investigator may use equipment at the place being investigated to make copies of relevant records, and may remove the copies from the place of investigation for further examination.

(8) An investigator who is not able to make copies of records at the place being investigated may remove them from the place to make copies and, as soon as practicable, must return the original records to the person or place from which they were removed.

(9) A person must not hinder, obstruct or interfere with an investigator conducting an investigation under this section.

Copies as evidence

35 A document certified by the director or an investigator to be a printout or copy of a record obtained under this Act

(a) is admissible in evidence without proof of the office or signature of the person purporting to have made the certificate; and

(b) has the same probative force as the original record.

Authorization to enter

36 (1) A justice, upon being satisfied by information on oath that

(a) an investigator has been refused entry to any premises or place to carry out an investigation under section 34; or

(b) there are reasonable grounds to believe that

(i) an investigator would be refused entry to any premises or place to carry out an investigation under section 34, or

(ii) if an investigator were to be refused entry to any premises or place to carry out an investigation under section 34, delaying the investigation in order to obtain a warrant on the basis of the refusal could be detrimental to the investigation

may at any time issue a warrant authorizing an investigator or any other person named in the warrant to enter the premises or place and carry out an investigation under section 34.

(2) A warrant under this section may be issued upon application without notice.

Part 5 -- Financial Institutions Commission

Maximums set by commission

37 (1) The commission must, by order, set the maximum

(a) cost of credit, or establish a rate, formula or tariff for determining the maximum cost of credit, that may be charged, required or accepted in respect of a payday loan;

(b) amount, or establish a rate, formula or tariff for determining the maximum amount, that may be charged, required or accepted in respect of the extension or renewal of a payday loan or in respect of a replacement loan; and

(c) amount, or establish a rate, formula or tariff for determining the maximum amount, that may be charged, required or accepted in respect of a default by the borrower under a payday loan.

(2) The commission may, by order, fix the maximum amount, or establish a rate, formula or tariff for determining the maximum amount, that may be charged, required or accepted in respect of any component of the cost of credit of a payday loan.

(3) In making an order under this section, the commission may consider

(a) the operating expenses and revenue requirements of payday lenders in relation to their payday lending business;

(b) the terms and conditions of payday loans;

(c) the circumstances of, and credit options available to, payday loan borrowers generally, and the financial risks taken by payday lenders;

(d) the regulation of payday lenders and payday loans in other jurisdictions;

(e) any other factors that the commission considers relevant and in the public interest; and

(f) any data the commission considers relevant.

Order must be just and reasonable

38 An order made under this Part must be one that the commission considers just and reasonable in the circumstances, having regard to the facts and date considered.

Mandatory periodic review

39 (1) The commission must review its existing orders under this Part at least once every three years.

(2) After a review under subsection (1), the commission must make a new order that replaces existing orders.

Discretionary review

40 (1) Whenever the commission is satisfied that circumstances in the payday lending industry have changed substantially, or that new evidence has come to its attention that may affect an existing order made under this Part, the commission may review any existing order.

(2) After a review under subsection (1), the commission must make a new order that replaces existing orders.

Notice and hearing

41 (1) Before making an order under this Part, the commission must give public notice and hold a public hearing in respect of the subject matter of the order.

(2) At a hearing under this section, the commission may define the status and rights of any person wishing to make a submission or to provide or challenge evidence provided to the commission.

(3) The commission may refuse to admit evidence or receive a submission that, in the commission's opinion, is not relevant to the subject matter of the hearing.

Notice of order

42 As soon as practicable after the commission makes an order under this Part, the director must give written notice of the order to every payday lender who holds a licence or whose application for a licence is under consideration by the director.

Commission may make recommendations

43 The commission may make recommendations to the minister on matters in respect of payday loans and payday lenders.

Part 6 -- General

Director may issue guidelines

44 To assist payday lenders in developing payday loan agreements that are clear and understandable, the director may issue guidelines about the form of such agreements.

Power to make regulations

45 (1) The Lieutenant Governor in Council may make regulations referred to in section 41 of the Interpretation Act.

(2) Without limiting subsection (1), the Lieutenant Governor in Council may make regulations as follows:

(a) defining "payday loan", or extending or limiting the meaning of that expression, for the purposes of this Act;

(b) exempting credit grantors or classes of credit grantors from the application of any provision of this Act;

(c) respecting licences, including

(i) the form and content of applications for licences and renewals of licences,

(ii) qualifications of, and requirements to be met by, applicants and payday lenders,

(iii) information and records to be provided to the director by applicants and payday lenders,

(iv) licence fees and licence renewal fees,

(v) the form of a licence, and

(vi) the terms and conditions of a licence;

(d) respecting bonds and other security, including

(i) the terms, conditions and amount of a bond or other security, and

(ii) the forfeiture of a bond and other security, and disposition of proceeds of forfeiture;

(e) defining "cost of credit", or extending or limiting the meaning of that expression, for the purposes of this Act;

(f) for the purpose of section 17, respecting the manner of giving or serving notices, decisions and other documents;

(g) for the purpose of subsection 19 (1) (b), respecting documents and information that a payday lender must provide to a borrower;

(h) for the purpose of subsection 22, specifying whether a liability or obligation is, or is not, related to a payday loan agreement;

(i) for the purpose of section 27, specifying transactions, or classes of transactions, as replacement loans;

(j) for the purpose of section 30, respecting the posting of signs, and the form and content of information to be placed on the signs;

(k) for the purpose of section 31, respecting the records to be maintained by payday lenders, including the length of time for which and location at which records must be retained;

(l) respecting the information, including personal information, that payday lenders are required to provide to the director and the times, form and manner in which the information is to be provided;

(m) respecting any other matter the Lieutenant Governor in Council considers necessary for the administration of this Act.

 
Explanatory Note

This bill requires payday lenders to be licensed and imposes certain restrictions and obligations on them for the protection of borrowers, including

• prohibiting the lender from charging more than the maximum allowed by an order of the Financial Institutions Commission to be charged as a cost of credit, for the renewal, extension or replacement of a loan, or for a default under a loan;
• prohibiting the taking of security, including an assignment of wages;
• requiring the lender to provide specified information to the borrower in a clear and understandable manner; and
• requiring the lender to post signs setting out an itemized list of the cost of credit for a representative payday loan.

In addition, the bill imposes recordkeeping requirements on payday lenders, and enables officials to carry out investigations of payday lenders.

The bill also gives borrowers certain rights in relation to a payday loan, such as

• the right to cancel the loan within 48 hours after receiving the initial advance;
• the right to cancel the loan if he or she was not properly notified of the 48-hour cancellation right; and
• the right to a refund if he or she was overcharged.