# What should we ask before offering employees emergency loans? > A vendor-neutral list of questions for HR and finance teams comparing emergency loan providers, covering borrowing costs, eligibility, data, communications and who handles repayment. Topic: Workplace Financial Wellness · Audience: employers and HR leaders Canonical URL: https://mybuffer.ca/blog/questions-before-offering-emergency-loans ## Key takeaways - Get every provider's answers in writing, especially on cost, credit decisions, employee data and repayment. - Ask for the APR and a worked example in dollars, because the dollar total is what employees will actually feel. - Credit decisions should sit with the provider, not the employer or managers, and approval shouldn't be guaranteed. - Know exactly what employee information comes back to the employer, since individual-level data creates real risks for the employment relationship. - Payroll-deduction models bring the employer into running the loan, so get your own advice before agreeing to any deduction arrangement. Offering emergency financial support is a bigger call than adding a discount program. If it goes well, employees have a safer option when the car breaks down or a pay period comes up short. If it goes badly, your name is next to a product that cost people more than they expected, or you've ended up in the middle of a debt between an employee and a lender. A lot of that gets decided before anything launches, by the questions you ask. Below is the list we'd want any employer to work through with any provider, including us. The questions are grouped by theme, with a note on why the trickier ones matter. Get the answers in writing. A provider that's confident in its model won't mind. ## What will it cost, and who pays? **What, if anything, will the employer pay, now or later?** Ask about setup, subscription, per-employee, implementation and exit fees, and whether any of them could show up at renewal. **What will an employee pay on a typical loan?** Ask for the annual percentage rate (APR) and a worked example in dollars: the amount borrowed, each payment and the total repaid. Most people find an APR on its own hard to picture. The dollar total is what employees will actually feel. **Are there conditional offers, like an interest-free period?** If so, ask exactly when the period starts, what qualifies, whether it can be used more than once and what applies afterwards. These offers can be useful, but only when the conditions are clear. **What other charges could an employee face?** Ask specifically about late, missed-payment and dishonoured-payment charges. Why this matters: Canada's Criminal Code sets the criminal interest rate at an APR above 35%, a threshold that took effect on January 1, 2025 ([Criminal Code, section 347](https://laws-lois.justice.gc.ca/eng/acts/C-46/section-347.html)). Payday loans are handled differently. In provinces that regulate them, the maximum cost is $14 per $100 borrowed, which works out to about a 365% annual rate on a two-week loan, [according to the Financial Consumer Agency of Canada](https://www.canada.ca/en/financial-consumer-agency/services/loans/payday-loans.html). In British Columbia, consumer credit above 32% APR counts as high-cost credit and the lender needs a separate licence ([Consumer Protection BC](https://www.consumerprotectionbc.ca/consumer-help/consumer-help-high-cost_credit_products/)). Knowing where a product sits on that range tells you a lot. ## Who decides, and based on what? **Who makes credit decisions?** It should be the provider. Not the employer, and not managers. **What does underwriting look at?** Credit scores alone can shut out people with thin or damaged credit files. Other factors, such as employment, income or bank transaction history, can give a fuller picture, but they involve more personal data. Ask what's used and why. **Is approval guaranteed?** It shouldn't be. Lending to everyone whether or not they can repay isn't kindness, so be cautious of marketing that suggests otherwise. **Who's eligible?** Get the criteria in writing, covering employment status, tenure, part-time or seasonal staff, and province. Then check they won't shut out the people you most want to help, or pull people in in a way that feels like pressure. **Does applying affect an employee's credit report?** A hard inquiry is visible to other lenders and can affect a credit score. A soft inquiry isn't visible to them and doesn't affect the score. Ask which one the provider uses at each stage. ## What happens to employee data? **What employee information does the employer give the provider, and why?** Ask for the minimum needed. **What, if anything, comes back to the employer?** You should know exactly what you'll see. Individual-level information about who applied, borrowed or fell behind creates real risks for the employment relationship. If you'll get aggregate reports, ask how small groups are kept from being identifiable. **Where is data stored and processed, and which privacy law applies?** In Canada that depends on the organization and the province. Alberta, BC and Quebec have private-sector privacy laws that apply instead of the federal PIPEDA in many situations, while PIPEDA still covers cross-border transfers and federally regulated businesses, as the [Office of the Privacy Commissioner of Canada explains](https://www.priv.gc.ca/en/privacy-topics/privacy-laws-in-canada/the-personal-information-protection-and-electronic-documents-act-pipeda/r_o_p/prov-pipeda/). Ask the provider which law it says applies, and where any data leaves Canada. ## How will it be explained to staff? **Who writes the employee communications, and can you review them first?** You'll want to [check for pressure, overpromising or anything that implies guaranteed approval](https://mybuffer.ca/blog/announce-loan-benefit-without-pressure). **What will managers be asked to do?** Ideally very little. They mention the benefit exists and point to where the information is. Managers shouldn't be asking anyone whether they've applied. **How does the provider explain borrowing risks to employees?** Look for plain statements that borrowing creates an obligation and that approval isn't guaranteed. ## Who handles repayment, and what if something goes wrong? **How are repayments collected?** Get the specific method. **Is the employer involved in repayment at all?** [Payroll-deduction models bring the employer into running the loan](https://mybuffer.ca/blog/zero-employer-cost-who-takes-risk), and provincial employment standards limit wage deductions. In BC, for example, an employer may honour a written wage assignment only for specific credit obligations, such as an advance of wages from the employer itself, and can choose not to (see the province's [Employment Standards Act interpretive guide](https://www2.gov.bc.ca/gov/content/employment-business/employment-standards-advice/employment-standards/forms-resources/igm/esa-part-3-section-22)). Get your own advice before agreeing to any deduction arrangement. **What happens if an employee can't pay?** Ask about hardship options, collections practices and whether any of it could reach the employer. **What happens if an employee leaves, or if you end the program?** Existing loans have to go somewhere. Ask what changes for the employee. ## Who is the provider, really? **Who's the lender, and is it licensed where your employees live?** Ask for the specific licences or registrations by province. **How are complaints handled?** Look for a named process and an outside body employees can go to. **What doesn't the provider do?** A good one will tell you its limits without being asked twice. ## Do you need every question? Probably not for every provider. But if a provider can't answer the cost, decision, data and repayment questions clearly and in writing, that tells you something. ## Questions and answers ### What should we ask about cost? Ask what the employer could pay now or later, including setup, subscription, per-employee, implementation and exit fees. For employees, ask for the APR and a worked example in dollars, the exact conditions of any interest-free period, and any late, missed-payment or dishonoured-payment charges. ### Who should make the credit decisions? The provider. Not the employer, and not managers. Approval shouldn't be guaranteed either, so be cautious of marketing that suggests otherwise. ### Does applying affect an employee's credit report? It depends on the inquiry. A hard inquiry is visible to other lenders and can affect a credit score, while a soft inquiry isn't visible to them and doesn't affect the score. Ask which one the provider uses at each stage. ### Do we need to ask every question? Probably not for every provider. But if a provider can't answer the cost, decision, data and repayment questions clearly and in writing, that tells you something. ## Sources and references 1. [Criminal Code, section 347 (criminal interest rate)](https://laws-lois.justice.gc.ca/eng/acts/C-46/section-347.html) · Government of Canada (Justice Laws) 2. [Payday loans](https://www.canada.ca/en/financial-consumer-agency/services/loans/payday-loans.html) · Financial Consumer Agency of Canada 3. [High-cost credit products](https://www.consumerprotectionbc.ca/consumer-help/consumer-help-high-cost_credit_products/) · Consumer Protection BC 4. [Provincial laws that may apply instead of PIPEDA](https://www.priv.gc.ca/en/privacy-topics/privacy-laws-in-canada/the-personal-information-protection-and-electronic-documents-act-pipeda/r_o_p/prov-pipeda/) · Office of the Privacy Commissioner of Canada 5. [Assignments - Act Part 3, Section 22 (Interpretive Guide to the Employment Standards Act)](https://www2.gov.bc.ca/gov/content/employment-business/employment-standards-advice/employment-standards/forms-resources/igm/esa-part-3-section-22) · Government of British Columbia *Product facts in this article were supplied by Buffer Financial Inc. This article is general information, not personal financial advice or an offer of credit.*