Payday lending in Ontario is regulated under the Payday Loans Act, 2008 and overseen by Consumer Protection Ontario. These regulations set out what a licensed lender can charge, how a loan must be structured, and what practices are prohibited outright. This page summarizes those regulations in plain language.
Licensing Requirements
- Every payday lender must hold a valid provincial licence for each location it operates from in Ontario, including online lending directed at Ontario residents.
- A lender must prominently display its licence at each storefront location.
- A lender doing business online must display its licence prominently near the top of its website's introductory page for Ontario borrowers.
- Borrowers can verify a lender's licence status through Ontario's public licence registry before providing any personal or banking information.
Cost of Borrowing
As of January 1, 2025, a federal amendment to the Criminal Interest Rate Regulations set a national maximum cost of borrowing for payday loans at $14 per $100 borrowed, superseding Ontario's prior provincial cap. This is the maximum a licensed lender can charge — no separate application, processing, or administrative fees are permitted on top of it.
1. Minimum and Maximum Repayment Period
2. Maximum Annual Percentage Rate (APR)
3. Representative Example of Total Loan Cost
- If a loan isn't repaid on time, a lender may charge default interest of up to 2.5% per month (non-compounding) on the overdue principal.
- A lender may charge a maximum $20 fee for a dishonoured payment (NSF).
Borrowing Limits
- A payday loan in Ontario cannot exceed $1,500.
- A lender must not issue a loan for more than 50% of the borrower's net pay.
- A payday loan term cannot exceed 62 days.
Split payment option: if a borrower enters into a third payday loan agreement with the same lender within a 62-day period, the lender must offer the option of repaying in installments rather than a single lump sum — 3 equal payments for borrowers paid weekly, biweekly, or twice monthly, or 2 equal payments for borrowers paid monthly.
Prohibited Practices
Under Ontario regulation, a payday lender is not permitted to:
- Require or request that a borrower purchase insurance in connection with the loan.
- Issue a new payday loan to a borrower who already has an outstanding payday loan with that lender.
- Request collateral or security of any kind for a payday loan.
- Require or accept an assignment of wages from the borrower.
- Use a borrower's personal information for any purpose other than providing the payday loan.
Rollovers Are Not Permitted
Ontario regulation prohibits two specific practices commonly referred to as "rollovers":
- Extending the loan for a fee: a lender cannot agree to extend the term of an outstanding loan in exchange for an additional fee on top of the interest already owed.
- Loan-to-pay-off-loan: a lender cannot issue a second loan and use its proceeds to pay off the borrower's first outstanding loan.
Discounting Is Not Permitted
"Discounting" refers to a lender deducting its fee from the loan amount before advancing funds to the borrower, rather than advancing the full amount and collecting the fee separately at repayment. This practice is prohibited in Ontario.
The Bottom Line
Ontario's regulations exist to make sure every borrower knows the licensing status of their lender, the exact cost of a loan before signing, and which practices are off-limits entirely. A licensed Ontario lender should be able to walk you through all of this clearly, in writing, before you sign anything. For a consumer-friendly breakdown of costs and examples, see our Ontario Payday Loan Rules page, or head straight to Get Approved.
This article is for general information and does not constitute financial or legal advice. For details specific to your situation, consult Consumer Protection Ontario's resources or a licensed financial advisor.