Can I cancel a pay day loan agreement?

I took out a pay day loan, but I've changed my mind. Do I have the right to cancel the loan agreement?

Maybe. Ontario's Pay Day Loans Act, 2008 gives you the right to cancel a payday loan for any reason (or for no reason) within two days from when you received the written copy of the loan agreement and the cash advance, without penalty. If the lender is not open on the second day (for example, on a Sunday), you may cancel on the next day that the lender is open. This is called the "cooling off" period. You must notify the lender that you are cancelling the contract. You may give oral notice, but written notice would be better because you can keep a copy of the notice as proof that you cancelled the loan agreement.

If you cancel the agreement, you must return all money you received from the lender, and the lender must return all post-dated cheques and preauthorized debit forms that you gave them when you took out the loan.

If you are beyond the two-day cooling off period, you still have the right to prepay the loan in full at any time, without prepayment charge or penalty. In this case, you will have to pay the interest that has accumulated on the loan between when you took it out and the date of payment.

More information about your rights regarding pay day loans can be found at Payday Loans Bill of Rights produced by Ontario Ministry of Consumer Services. You can also learn more from our webinar, Hot Topics in Consumer Protection: Pay Day Loans Act, beginning at the 23:30 mark.

This Common Question was prepared by Community Law School (Sarnia-Lambton) Inc. in partnership with Your Legal Rights, a project of CLEO.

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