The new Criminal Interest Rate Regulations (the “Regulations”) amends section 347 of the Criminal Code (the “Code”) governing Canada’s criminal interest rate.
The Regulations have amended the criminal interest rate from 60% per annum to 35% per annum. It has also limited the cost of borrowing for payday loans to $14 per $100 borrowed. Provinces that have an approved payday loan regime higher than this rate will have to be amended to comply with the Code. The following lenders remain exempt from the new criminal interest rate:
- Commercial loans valued above $10,000 and up to $500,000, if the annual percentage rate (“APR”) does not exceed 48%
- Commercial loans above $500,000
- Pawn loans provided that the APR does not exceed 48% and the loan is valued at less than $1,000
The Regulations were implemented to prevent predatory lenders from taking advantage of vulnerable communities, including low-income Canadians, newcomers, and those with limited credit history. The lower criminal interest rate will come into force on January 1, 2025 to allow lenders time to adjust their operations. After this date, lenders in breach of the criminal rate will risk prosecution. For a more in-depth overview of the Regulations, read the Government of Canada notice here.
