Cancelling a payday loan

The most a payday lender can charge you is 15% of the principal amount borrowed. That includes interest and other fees. If the lender charges you more, that gives you the right to cancel at any time.

You can cancel your payday loan for any reason — without penalty — within two business days of your first advance.

You have until the end of the day on the second day the lender is open after you get the loan. For example, say you take out a payday loan on Wednesday. You have until the end of the day Friday to notify the lender you’re cancelling. If the lender is closed on one of the two days, you have until the following business day.

Within the two-day cooling-off period, you can cancel for any reason. But if the lender doesn’t play by the rules, you can cancel at any time. Here are some examples of these rules:

• the lender didn’t tell you the full cost of the loan

• they didn’t tell you about your cancellation rights

• they didn’t include required information in your agreement

• they didn’t give you a cancellation notice or copy of your agreement when you signed

As well, the law sets out a number of things payday lenders are not allowed to do. You can cancel at any time if the payday lender:

• gives you a second payday loan while the first is still outstanding

• gives you a loan for more than 50% of your net income

• demands repayment before it’s due

• asks your employer to take payment from your wages

These are the steps to cancel a payday loan.

Step 1. Fill out the cancellation notice form

Step 2. Return the cancellation notice to the lender

Step 3. Repay the loan

Step 1. Fill out the cancellation notice form

When you sign the loan agreement, the lender must give you a cancellation notice form. To cancel, the first step is to fill out the form.

If the lender doesn’t give you a cancellation form, ask them for a copy. Their failure to give you the form gives you the right to cancel outside the two-day cooling-off period.

Step 2. Return the cancellation notice to the lender

Deliver the cancellation notice to the lender. If it’s within the two-day cooling-off period, you must deliver it by the end of the day on the second day the lender is open for business after getting the loan.

You can deliver the notice in person at the payday lender’s place of business, by email, by registered mail, by courier, or by fax.

If you don’t deliver it in person, notice is said to be given when it’s sent.

Step 3. Repay the loan

When you deliver the notice, you must also pay back the advances you received. If your advance was in the form of a cheque or cash card, you can return it to the lender. That is, unless you’ve cashed it or used any of the funds.

Once you’ve repaid the loan, the lender must give you a receipt for the amount returned. They must also return any post-dated cheques or pre-authorized debit forms you gave them.

We have more on this topic where we dig deeper into each of these steps. See our in-depth coverage of cancelling a payday loan.