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Can I cancel a payday loan agreement?

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Can I cancel a payday loan agreement?

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Reviewed: 
January, 2017
Answer

You may be able to cancel your payday loan agreement, depending on when you signed the agreement and if the lender followed the rules.

Within 2 days

You can cancel a payday loan agreement at any time for 2 business days after you signed it. You have till the end of the second day to do this. For example, if you signed the agreement at 11 a.m. on a Wednesday, you have until end of day Friday, when the payday lender closes, to cancel the agreement.

If the payday lender is closed on the second day, you have until the end of the next day they are open after that. For example, if you took out the loan on Friday and they are closed Sunday, you have until the lender closes on Monday to cancel. But if you took out the loan on Saturday and they are closed Sunday, you still only have until Monday to cancel.

This 2-day period is called the cooling-off period. You always have a cooling-off period, even if your loan agreement doesn’t say so.

You don’t have to give a reason for cancelling.

You have to return the money you borrowed, but you don’t have to pay any fees or interest.

After 2 days

After the 2-day cooling-off period, you can only cancel the loan agreement if the payday lender didn’t follow the rules. For example, if they:

  • didn’t give you a copy of the agreement as soon as you signed it
  • didn’t give you the money as soon as you signed the agreement, if you made the agreement in a store
  • didn’t give you the money within 1 hour, if you made the agreement online or over the phone

You can also cancel if your loan agreement didn’t contain all the information it’s supposed to.

If the payday lender followed all the rules, you can’t cancel the loan agreement. You have to repay the amount you borrowed and the lender’s fee.

1. If you change your mind within 2 days

You must tell the payday lender you want to cancel your payday loan agreement within 2 days of signing the agreement. This is also called the cooling-off period. You always have a cooling-off period, even if your loan agreement doesn’t say so.

You don’t have to give the payday lender a letter saying you want to cancel the loan agreement, but it is a good idea to do this. You don’t need to give the lender any reason why you want to cancel it.

You must date and sign your letter. It also has to include the following information:

  • your name and address
  • the date
  • the name of the lending company and their address
  • the date of your contract
  • when you took the loan
  • how much you borrowed
  • that you want to cancel your loan agreement
  • your contact information

Get proof that the payday lender got your letter. If you give it yourself, get a receipt. You can also send it by registered mail, fax or email.

Keep copies of things like:

  • receipts
  • invoices
  • contracts
  • the letter you wrote to cancel your agreement
Reviewed: 
January, 2017
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2. If you change your mind after 2 days

After the 2-day cooling-off period, you can only cancel the agreement if the payday lender didn’t follow all the rules. The rules say they:

  • can’t charge more than $18 for every $100 you borrow
  • can’t offer you other services when you apply for a loan, like buying your gold or jewellery, or cashing your cheques
  • can’t give you a new loan until the first one is paid off
  • can’t contact you more than 3 times a week or on statutory holidays
  • can’t take money from your paycheque to pay the loan

Rules that they have to follow when making an agreement include:

  • the loan agreement must be in writing.
  • It must be printed in text that is big enough to read easily.
  • The loan agreement must have details like:
    • a 2-day cooling-off period, during which you can cancel the loan for any reason without paying any fees
    • the amount you are borrowing
    • how much the loan will cost you, called the total cost of borrowing
    • how many days you have to repay the loan

Rules that they have to follow as soon as you sign an agreement say that you have to get:

  • a copy of the agreement right away
  • the full amount of the money you want to borrow -- they cannot keep part of it to cover any fees or charges
  • the full amount as soon as you sign the agreement, if you make the agreement in store
  • the full amount within one hour of making the agreement, if you made the agreement by phone or online

If you borrow from a payday lender over the internet, you can fill out and agree to the loan agreement online. The lender must give you the money within 1 hour. Usually you can get it by picking it up at their store, or they can deposit it into your bank account.

If none of these reasons apply to your situation, you can’t cancel the loan agreement and you must repay the amount you promised to pay under the agreement.

If you can’t repay the loan, you should talk to a non-profit credit counsellor about your options.

Reviewed: 
January, 2017
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3. Repay the money you borrowed and get your receipt

When you cancel the agreement, you must give back the money you borrowed. If you cancel within 2 days, you don’t have to pay any fees or interest.

If you cancel after 2 days and the lender followed all the rules, you must repay the full amount you owe under the agreement plus any loan fees or interest.

But if you cancel after 2 days and the lender did not follow the rules correctly, then you don’t have to pay any loan fees.

If you can’t repay the loan, you should talk to a non-profit credit counsellor about your options.

Get back your post-dated cheques or debit forms

When you cancel a loan and repay the money, ask the lender for a receipt. They have to give you one. Also get the lender to give back any post-dated cheques or debit forms that you signed.

If the lender refuses to give you back your post-dated cheques or debit forms, you can complain to the Ministry of Government and Consumer Services. You should also talk to your bank, and ask them to block the payday loan company from taking money out of your account.

Reviewed: 
January, 2017
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4. Complain if you have a problem with the payday lender

There are rules for payday loans. For example, the payday lender:

  • can’t charge more than $18 in interest and fees for every $100 you borrow
  • can’t offer services like buying gold or jewellery, or cashing cheques at the time that you apply for a loan 
  • must put your loan agreement in writing and include the amount you are borrowing, how much you need to repay, and how many days you have to repay the loan
  • must say in your loan agreement that you have 2 business days to cancel the contract if you change your mind
  • must give you a copy of the loan agreement as soon as you sign it
  • must give you the money right away if you signed the agreement at their store
  • must make the money available to you within 1 hour if you made the agreement online or over the phone
  • can’t give you a new loan until the first one is paid off
  • can’t contact you more than 3 times a week or on statutory holidays
  • can’t take money from your paycheque to pay the loan

If you think a payday lender hasn’t followed the rules, you can file a complaint with the Ontario Ministry of Government and Consumer Services. Lenders who haven’t followed the rules may get a warning, receive a fine, or even lose their licence.

When you make a complaint, the Ministry will check what the payday lender did. They may take the lender to court if the lender didn’t follow the Payday Loans Act. If the lender is convicted, they may be ordered to repay some of your money to you. They may also have to pay a fine or even be sent to jail.

Reviewed: 
January, 2017
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Learn more about this topic
Financial Consumer Agency of Canada
Credit Counselling Canada
Consumer Measures Committee
Financial Consumer Agency of Canada

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