License
- A payday lender must prominently display the licence in the location for which the licence is issued
- If the payday lender does business by means of the internet, the payday lender must display the licence number and other identification, in a form approved by the director, prominently at, or near, the top of the introductory page of the website for Manitoba borrowers
Cost of a Payday Loan
- The maximum amount of a payday loan is 14 dollars for every hundred borrowed
If you borrowed $200 dollars it would cost $28 dollars and you would pay back $228
- If the loan is not paid on time, overdue interest of 30% per year can be charged.
- NSF Fee(bounced payment): payday lender is allowed to charge you the same amount they were charged by the bank, as a way to get their money back for that failed payment.
Borrowing Rules
- A Payday Loan cannot be more than $1,500
- A Payday Loan cannot be more than 62 days
- A Payday Loan can be no more than 30% of a borrower’s net pay
- How your net pay is determined: A person’s net pay is determined by the following formula:
MNI x 12 / 26.
- MNI: This stands for your Monthly Net Income from the month before you take out the payday loan. So, if you’re getting a loan in May, they’ll look at how much money you actually received in your bank account after all deductions in April.
- MNI x 12: This takes your net income from that one previous month and multiplies it by 12. This gives an estimate of your total net income for the entire year.
- / 26: Then, they divide that yearly estimate by 26. This is because there are typically 26 bi-weekly pay periods in a year.
So, the formula is basically:
(Your take-home pay from last month) x 12 (to estimate a year’s worth) / 26 (to estimate your pay for a typical two-week period).
This calculation is used to determine an estimate of your regular net pay for the purpose of the payday loan assessment. It uses your income from the recent past to get an idea of what you usually take home.
- A borrower must wait 7 days to reborrow from the day they paid their loan in full, or the payday lender can only charge 5%. This is why Payday lenders require you to wait 7 days in Manitoba. The Manitoba government implemented this “cooling-off period” to give borrowers time between loans to assess their financial situation and avoid continuous borrowing.
Prohibited Practices
A payday lender must not:
- Offer you any kind of prize or reward to get you to take out a payday loan
- Give another payday loan if you already have an outstanding loan with us
- Require or use a borrowers personal information for any purpose other than providing a payday loan
- Ask for collateral as security for a payday loan
- Require or accept an assignment of wages
- Make a payday loan contingent on the supply of other goods or services
This rule means a payday lender can’t force you to buy something else or use another one of their services as a condition for getting a payday loan.
For example, they can’t say, “We’ll give you the $100 loan, but only if you also sign up for our monthly credit monitoring service.” Getting the loan has to be a separate decision from buying anything else they might offer.
- Discounting a Payday Loan: “Discounting a payday loan” refers to a practice where the lender deducts the fees or interest charges before giving you the principal loan amount.
Here’s how it works:
- You need: Let’s say you need to borrow $300.
- The lender’s fee: The lender charges a fee, for example, $42 for the two-week loan.
- The “discount”: Instead of giving you $300 and then expecting you to repay $342, they “discount” the loan by deducting the $45 fee upfront.
- What you receive: You would only receive $258 ($300 – $42).
- What you repay: You are still obligated to repay the full $300 on your next payday.
Why is this called “discounting”? It’s called discounting because the cost of borrowing (the fee) is taken “off the top” or “discounted” from the principal amount before you receive it.