The payday loan companies in Canada
It is estimated that the payday loan has made its entry into Canada in the first half of 1990 to meet consumer demand for a quick short-term credit. In 2004, an estimated 1 200 the number of outlets in the country, but the sector is growing fast and there is no simple means to count or official members . Moreover, there is no reliable data on profits or income of the sector: they vary between 170 million and one billion dollars annually, according to sources.
Payday lenders have adopted essentially one of three operating modes: the traditional model, the model of the broker or the model of the insurer. The first urge all operating costs, provide loans on their capital (in most cases their equity) and receive all interest and all costs. According to the model of the broker, payday lenders incur all operating costs, but capital is provided by a third financial institution. In this case, the company receives a brokerage fee, while the third lender collects interest and assume the risk of default. Depending on the model of the insurer, the companies incur all operating costs and require customers of fixed costs and a sort of insurance premium for each loan. The premium, which covers the cost of the loan and the default risk is assumed by an insurance company which is often the payday lender. According to one study, companies can use the models of the lender or broker lender insurance to minimize their risk of being prosecuted for demanding usurious interest rates under the Criminal Code .
Payday lenders may offer other services including check cashing, advances on tax refunds, money transfers, currency exchange services, bill payments or money orders. Some companies offer debit cards with balances equal to the amount of the loan and that can be used at any ATM in Canada. However, they get the bulk of their income through their services and payday loan check cashing.
