While a payday loan lender is able to impose interest as well as administrative fees, commissions, and other ancillary charges in a loan’s terms, he is limited in other areas. Legally, Canadian lenders are unable to :
Force a borrower to buy insurance in order to secure a loan;
Ask for collateral or security for the loan;
Ask for a post-dated check that is more than the repayment amount;
Issue another payday loan if the borrower stills owes money to the lender;
Set the repayment date before the next payday;
Charge a penalty for early repayment of the loan;
Require that the borrower agree to a wage assignment (for instance, ask that the borrower sign an agreement that permits an employer to make deductions for a default); or
Approve a rollover, or a second payday loan, to pay for the initial financing.
Payday Loans – What a Lender is Not Allowed to Do
In addition to the aforementioned “don’ts” for securing a loan, lenders must also abide by the rules established by the Creditor’s Conduct Act during any collection proceedings. For example, payday lenders are forbidden to:
Make collection calls to the borrower;
Contact the borrower if he has asked, in writing, that the lender contact his attorney;
Use any documentation that resembles a form used in court;
Use intimidating or threatening language; or
Provide misleading information about the borrower.
However, payday lenders may turn over a defaulted amount to a collection agency for the collection of the debt. The lender, by law, can sue you for the amount that is owed on the payday loan plus court fees and interest. If you should receive notice that you are being sued, you are strongly advised to contact an attorney.