Is this payday loan even legal? Let's check.
Ontario caps what a payday lender can charge, gives you two days to cancel, and bans rolling one loan into another. Here's what the rules actually say — and what to do if a lender breaks them.
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In 30 seconds, here's what's true
- The most a payday lender can charge in Ontario is $14 for every $100 you borrow (lowered from $15 on January 1, 2025). On a $300 loan, that's $42 — no more.
- You can cancel a payday loan within 2 business days, for any reason, at no cost. The lender must let you out and return what you've paid.
- Lenders can't roll one loan into another or give you a second loan while the first is unpaid. They also can't lend you more than 50% of your net pay at once.
- If a payment bounces, the lender can charge a dishonoured-payment fee of at most $20 (down from $25 in 2025) — and only once, no matter how many times it's re-tried.
- If a lender breaks these rules, you may only have to repay what you actually borrowed — not the fees or interest — and the lender can be fined or lose its licence.
How the process works
Check the cost against the cap
Work out the fee on your loan: it can't be more than $14 per $100 borrowed. If you're being charged more than that, the lender is breaking Ontario's rules. Keep your agreement — it must show the cost as a yearly rate too.
Use your 2-day cancellation right
If you signed within the last 2 business days, you can cancel for free — no reason needed. Tell the lender in writing and return the principal. They can't charge you the cost of borrowing for cancelling.
Watch for rollovers and repeat loans
A lender can't roll your loan over or give you a back-to-back loan. If you've taken 3 loans within 63 days, you have the right to repay through an extended payment plan instead of all at once.
Confirm the lender is licensed
Every payday lender in Ontario must be licensed and must display it (in store or online). If you can't find a licence, treat that as a red flag and check with Consumer Protection Ontario.
Get help and find cheaper options
Complain to Consumer Protection Ontario if a lender breaks the rules. For the debt itself, a non-profit credit counsellor can help — and cheaper alternatives (a line of credit, overdraft, or a credit-card cash advance) cost a fraction of a payday loan's roughly 365% yearly rate.
What to do next
- Check the fee is no more than $14 per $100 borrowed.
- If within 2 business days, cancel in writing for free.
- Confirm you weren't given a rollover or a second concurrent loan.
- Confirm any bounced-payment fee is $20 or less, charged only once.
- Verify the lender's Ontario licence is displayed.
- Ask for an extended payment plan if you've had 3 loans in 63 days.
- Keep your loan agreement and all payment records.
- Start a free PLAIN session to check your rights and plan next steps.
Common myths
| Myth | Reality |
|---|---|
| Payday loans have normal interest rates. | No — at $14 per $100 over two weeks, the cost works out to roughly 365% a year. They're the most expensive common credit in Ontario. |
| The fee can be whatever the lender wants. | It's capped at $14 per $100 borrowed in Ontario, plus at most a one-time $20 fee if a payment bounces. |
| Once I sign, I'm locked in. | You have 2 business days to cancel for free, for any reason — just return the principal and tell the lender in writing. |
| They can roll my loan over again and again. | Rollovers and back-to-back loans are banned in Ontario. After 3 loans in 63 days you can demand an extended payment plan. |
| A lender can take my whole paycheque. | A single payday loan can't be more than 50% of your net income, and lenders can't collect by an assignment of your wages. |
| If a payment bounces, they can charge me every time they re-try it. | The dishonoured-payment fee can be charged only once — $20 maximum — no matter how many times the payment is re-processed. |
| There's nothing I can do if a lender breaks the rules. | You can complain to Consumer Protection Ontario — and you may only owe the principal, not the fees, if they broke the rules. |
| An unlicensed lender is fine as long as I get the cash. | Payday lenders must be licensed in Ontario. Borrowing from an unlicensed one leaves you exposed and is a serious warning sign. |
Last reviewed June 2026
Written and reviewed by the founder of PLAIN, checked against primary government and legal sources. How we research these guides
Sources
PLAIN gives legal information, not legal advice. It is not a substitute for a lawyer or paralegal — and we'll point you to free ones. Laws change; we review these pages regularly, but always confirm current rules with a licensed professional.
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