Payday loans capped in Ontario

The Ontario government has limited the amount of interest the payday loan industry can charge.

The new law, which came into effect Tuesday, sets a maximum of $21 in charges for every $100 borrowed.

Payday loans are typically short-term, high interest loans, which are targeted towards people who need a small sum of money before their next paycheque.

The move follows previous legislation which created a licensing system for the payday loan industry and increased regulation. Ontario is the fourth province to set a maximum cost of borrowing from payday lenders. Other provinces have set caps ranging from $23 to $31 for every $100 borrowed.

The industry has welcomed the changes, according to Stan Keyes, president of the Canadian Payday Loan Association.

He says regulation keeps payday loans viable and protects consumers.

There are between 600 and 700 payday loan operators in Ontario.