Hi,

I wonder if someone can guide me to the right direction. I live in Toronto, Canada and I took out a pay day loan for $700. On the my payday I was supposed to pay it back but due to some financial reason I could not pay it back. They want $1200 now. It has been 5 months and till now they have been calling me and I have not replied as I did not have the capacity to pay back.

I got a voice mail today that I need to get in touch with them otherwise my file will be sent to court. From the paperwork I signed and I do have copies, I did sign one document which would aasign my wage to them. I have not received anything from my HR till date. I am presently under 1 wage garnishment from another company for which I have paid off 90% off.

I have 2 questions:

Will they take me to court and what are my options?

If my wages are garnished, how much much would have to pay. I know presently I am getting a 20% deduction from my net pay. Is there a law in Ontario that stipulates a certain amount if there is currently a wage assignment and another one kicks in.

Right advise will be greatly appreciated!!

I would read through the papers you signed and look for their interest rate if your going to try and dispute it. Payday loans are dangerous, the terms can sound good unless you can't pay it back the next payday.

In Ontario the maximum wage garnishment is 50% so they could take you to court and get their garnishment added to the one you have. If there is any way to pay them something like 2-300 from your next check, do it and maybe they will stop the interest if you call after making a big payment.

I don't know, just an idea.

Pay day loan companies in Ontario are regulated by Ontario's Consumer Protection Act (CPA) and Canada's Interest Act. The maximum rate of interest in Canada is 60%. Any charge in excess of this amount is usuary and a criminal act. The CPA defines interest or the cost of borrowing as the difference between the amount you get and the amount you have to pay back whether this is expressed in the contract as interest, loan fees, insurance. Processing cost, etc.

What is 60% per annum. It is 5% per month. If you borrowed $700.00 for two weeks, the interest at 60% per annum is $10.50. Most of these payday loan places charge 25% of the amount of the debt or $175.00 over the 2 week period. This is an illegal amount of interest.

How do they get away this? The government does not prosecute them because the entire industry would be shut down leaving a huge number of people with no source of credit.

What do you do? Pay the pay day loan people the $700.00 plus $10.50 for every two weeks you have the money. Tell them exactly what you are doing and dare them to take you to court. I would like to see them prove that $175.00 interest over 2 weeks is not illegal. They will not take you to court because the risk is to high.

When you borrow from a payday lender, they often ask the borrower to sign a voluntary wage assignment. This document allows the payday lender to send this document to an employer in the event of default to obtain payment. These wage assignments are illegal in Ontario under the Wages Act. These companies are looking for stupid employers who do not know any better. An employer can only deduct from an employee's wages an amount ordered by a Court or a statutory deduction. If they process an invalid wage assignment, it is the employer's responsibility to compensate his employee not the payday loan company. Only credit unions and Caisse Poppulaires can legally use wage assignments in Ontario. I mention this only because you mentioned that your wages were being garnished by another company.

Lowtax4eva stated in her response that 50% is the maximum amount that can be garnished in Ontario. This is incorrect. The Wages Act states that 80% of wages are exempt leaving 20% for an ordinary debt. Only in case where the debt is for child support or maintenance can 50% be attached.

Make sure you employer does not honour the wage assignment used by the payday loan company!! If they think they have to, you would be doing them and your fellow employees a big service to correct them.

Finally, garnishments are not cumulative. If one creditor is getting 20%, the next one does not get another 20%. They must share 20%.

As you can tell, I have general dislike for loan sharks.

For more information email: [email protected] / [email protected]

The only "maybe" I would ask is tha if you signed an assignment of wages, does not that allow them to actually get more, since it is not being taken as a garnishment but you are actually "assigning" or agreeing to allow them to take your check or have it given to them for your debt??
Just guessing without actually seeing the agreement signed

In response to the reply of Fr_Chuck, a valid wage assignment may only assign that portion of wages that are not exempt from seizure being 20% in Ontario. Please see s. 7 of Ontario's Wages Act which provides the validity of Wage Assignments. If the payday loan firm and the employer wish to treat the document as a "voluntary assignment of wages", the debtor has the right under s. 13 of the Employment Standards Act to withdraw the "voluntary" assignment. If an employer deducts anything from wages other than statutory deductions or a court order or a legal wage assignment, it is the employer who must reimburse the employee not the party they sent the money to If an employer honours one of these bogus wage assignments, it is the employer who must make it right with their employee. The payday loan company will probably force the employer to take them to court to have the money returned. Employers usually will not do that and bite the bullet for their loss. This is what the payday loan firm hopes will happen.

First of all--you can direct them to cease and desist in calling you. Secondly, the employer cannot deduct anything,from your paycheque without your express written permission to the employer. Advise your employer you are making arrangements to pay them and do not authorize the deduction. The only way your employer can deduct anything is with a court order.
You would receive documents in the mail prior to this, and you can contest it. Once you contest it, you meet with the judge,let them know your situation and how you are prepared to handle it. Small regular payments. Do not let them bully you.
And stay away from them after this is cleared up.

The interest rates you are quoted are right but not applied correctly. Maximum consumer debt rate in Ontario is 60% this applies to consumer debt or late fees. Maximum payday loan rate is 21.9% of the term of the loan let say 3-90 days, if you decide within 2 days after getting the loan you made a mistake pay the principle and you are out.(buyers regret) Most payday loans have a clause stating you are responsible for any and all collection costs if you default. This is not a percentage it is physical costs like court costs, law fees, registered mail fees, process serving fees and so on. I have seen loans for $200 rack up to $500 because of fees and then interest on a loan. You need to stay in touch with these places because it means less work for them and they are lazy. The key is to pay something before the court is involved because at that point they do not care about your issues just the repayment of the loan. If you have grounds to contest do so but chances are you defaulted on your loan and the court will find for the payday loan company. Hope it helps...