It has been proven that Canadians need companies that can provide quick loans
in Canada to help them cope with expenses that were unexpected. Each year, at least two million Canadians borrow between $100 and $1,500 in unsecured, short-term loans. People can apply for these loans either online, or in one of the 1,400 offices located throughout Canada.
In the 1990s, a need emerged for small loans on a short-term basis. Payday loan companies started to appear as a result. The reason the need emerged was because people were no longer able to ask their employers for salary advances because most payroll functions were outsourced. People in need of small loans could not get little amounts of money from banks either. These two factors created a niche that the payday loan business now fills.
Payday loan companies will only work with people who can prove their employment and have a personal checking account. According to the Canadian Payday Loan Association, just over half of the borrowers are women and the rest are men. Most borrowers have average incomes. In addition, the Canadian Payday Loan Association says that borrowers understand how much the short-term loans cost, but they are glad that the service exists when they need it.
People who borrow from payday loan companies usually put the money toward unexpected expenses that strain the family budget, such as medical expenses. These loans should not be used monthly to help a family make ends meet. To prevent this practice, the government put regulations in place that keep loan companies from rolling over debt month to month. When a customer borrows money, he or she is required to write a check post dated for his or her next payday. This check will pay back the loan, plus any interest accrued. Typically, people do not seek payday loans unless all other options are exhausted.
Regulations and Guidelines
The federal government and supplementary regulations in eight provinces govern payday loan companies. In addition, the Canada Payday Loan Association claims more than half the country's payday loan companies as members. It developed a Code of Best Business Practices and expects members to adhere to it. The association asks its members to give customers who seem to be struggling with financial difficulties information on credit counseling services. Consumer protection groups feel that this approach helps people deal with emergencies without putting themselves into personal debt.