How Payday lenders use the internet to evade the laws in Canada

The Canadian government is cracking down on payday lenders in their country.

 (photo credit: INGIMAGE)
(photo credit: INGIMAGE)

The Canadian government is cracking down on payday lenders in their country. Several regions in Canada have banned payday lenders from opening storefronts and obtaining business licenses. These municipal level regulations are meant to prevent people from falling victim to payday loan agreements which have obscenely high-interest rates and fees attached to them.

However, many payday lenders have figured out a way to avoid municipal level regulations. They simply create a completely online payday lending business where municipal regulations do not apply to them. Payday lenders, such as My Canada Payday, have full authority to market their lending services to the people of Brampton, Toronto, and other Canadian regions without any municipal oversight. When payday lenders are based exclusively online, municipal regulations would have no effect on My

Canada Payday or other online lenders because they’re unrestricted from offering payday loans in Toronto.

When lenders advertise payday loans in a specific Canadian location, this doesn’t mean the lenders are based there. It simply means the customers they’re targeting live in this region of Canada. These are typically low-income people who depend on fast loans in order to pay bills and emergency expenses. Sadly, these people become victimized by predatory online lenders who evade municipal regulations in order to strike a profitable deal for themselves.

If you go to a payday lending website, it may market itself in a particular city, province, or town. But there is no guarantee they’re based in any of these locations. You need to search through the fine print at the bottom of the page and see where they’re really located. In many cases, the lenders won’t even be from the same province. They’ll likely be based in a location where the lending regulations are laxer.

Furthermore, online lenders may not have business licenses in the same province where their loans are being marketed to people. Once again, you need to click on the Privacy Policy or Terms of Service link at the bottom of the lender’s website and search for their licensing information. Sometimes the lender won’t even have a license. You should only trust a company with a legitimate license in their province.

Canada does not have any laws against companies opening payday lending services online. You might assume federal agencies monitor these companies and their activities every day, but that is not always the case. The only time a government agency will

investigate an online payday lender is if enough people file complaints about their business practices. Otherwise, the government won’t even bother with oversight. Each Canadian province has its own set of rules which are designed to protect its citizens from payday lenders. These are rules which regulate the maximum amount of fees and penalties that can be charged to a borrower in that province. But there are several techniques that online lenders use to get around this. By offering loans to

people in different provinces, they don’t have to follow the same rules as traditional payday lenders in the same province.

Unlicensed Lenders

There’s a little secret you should know about unlicensed lenders. If you ever come across one and sign a loan agreement with them, you’re not obligated to pay them back. Canadian law states that all lenders must have a license. So, if you default on

your payday loan from an unlicensed company, they would have no legal grounds to take you to court because they’re already in violation of the law themselves. They’re banking on the hope that you’ll pay them hundreds or thousands of dollars in interest

payments on their small loan to you before you finally realize the truth.

If an unlicensed lender is truly shady, they’ll operate their business from the Cayman Islands or some other foreign location where no oversight exists on loans. Canadians may think they’re dealing with a local payday lender, but they’ll get referred to two or

three different websites over the course of their payday application. Before they even realize it, they’re doing business with a foreign lender who doesn’t need to follow Canadian laws.


Payday loans are not all bad. You just need to do your homework before applying for one. Find out everything you can about the lender and the specific terms of their loan. You’ll want a lender that is licensed, based in Canada, and has reasonable loan terms

that you can fulfill. If you can avoid getting stuck in debt from the high-interest rates, then you’ll be okay.