Overview associated with the legislation
Typically, the debtor writes a individual cheque, post-dated by a couple of weeks and payable towards the lender for the quantity they would like to borrow along with a cost. The organization then gives the debtor the total amount of the cheque without the charge.
These loans were made on such terms that once all the interest, fees and charges were factored in, the result was often an effective rate of interest exceeding the maximum rate of 60% per year set by section 347 of the Criminal Code (see the section on Interest and the Cost of Borrowing Money) in the past. The lenders had trouble enforcing the loans because the courts will generally not enforce an illegal contract term. The justice that is criminal in British Columbia had not been utilized to curtail payday financing, possibly for anxiety about driving borrowers in to the fingers of loan sharks. (more…)