On Jun. 19, CAN GVT issued rules re cost of borrowing for payday loan
CAN GVT issued the Criminal Interest Rate Regulations to combat predatory lending.
Follows CAN GVT Oct. 2023 consultation to combat predatory lending, see #187457.
Regulation Overview
Exempts lending practices from criminal interest rate where the loan types will not lead to predatory lending practices; imposes limit on cost of borrowing for payday loans.
Introduce exemptions for commercial loans valued above $10,000 and up to $500,000 from the criminal interest rate, when APR on these loans does not exceed 48% APR.
For commercial loans above $500,000, those loans will not be subject to any rate cap.
Commercial loans $10,000 and below will be subject to the new criminal interest rate.
Introduces exemptions for pawn loans with APR below 48%, valued less than $1,000.
Pawn loans valued at $1,000 and above subject to new criminal interest rate of 35%.
Imposes a new limit on the cost of borrowing for payday loans of $14 per $100.
Excludes dishonored check fees of $20 or less from calculation of the $14 rate limit.
Regulations do not include interest on outstanding loan amounts in the $14 limit, as provincial regimes allow interest on outstanding loan amounts up to 2.5% per month.
Apply to all loans, including payday loans, entered into on or after effective date.
Effectiveness
Regulations effective on same day on which Budget implementation act, 2023 revisions to the Criminal Code to lower criminal rate of interest come into force, on Jan. 1, 2025.
