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[Consultation Deadline Oct 7, 2022]: Fighting Predatory Lending by Lowering the Criminal Interest Rate

Department of Finance Canada | Aug 21, 2022

Predatory lending - [Consultation Deadline Oct 7, 2022]: Fighting Predatory Lending by Lowering the Criminal Interest Rate

Are you concerned about the criminal rate of interest being too high or low?

Budget 2021 announced the Government of Canada's intention to consult on fighting predatory lending by lowering the criminal rate of interest in the Criminal Code of Canada applicable to, among other things, installment loans offered by payday lenders. The criminal rate of interest, which is currently set at 60 per cent effective annual interest, is applicable to most lending products in Canada. This consultation paper seeks views and feedback on proposals related to the criminal rate of interest and provision of high-cost installment loans in Canada.

Consultation Scope

High-cost installment loans appear to be the most widely held high-cost lending product in Canada. In a recent study conducted by the Financial Consumer Agency of Canada (FCAC), 44 per cent of consumers who had taken out high-cost credit reported taking a high-cost installment loan in 2020.

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The criminal rate of interest in the Criminal Code, which is currently set at 60 per cent effective annual interest, is applicable to most lending products in Canada (e.g. installment loans, lines of credit, auto loans, auto title loans, credit cards, and more). The only exceptions are payday loans (loans for values of $1,500 or less and for a term of 62 days or less) offered by licenced or specifically authorized persons in provinces that have enacted consumer protection laws and where the province has been designated by the federal Governor in Council. Nine provinces have been designated. The Criminal Code provisions governing payday loans are not the subject of this consultation paper.

Specifically, key questions we want to hear from you on include:

  • Should the criminal rate of interest be set at a fixed level or linked to prevailing market conditions?
  • What are the reasons financial consumers access high-cost installment loans?
  • What impact would lowering the criminal rate of interest have on the availability of credit for financial consumers who use high-cost installment loans?
  • How could the Government of Canada, including the FCAC, improve financial education and awareness regarding high-cost installment loans to further empower and protect Canadians as they make informed financial decisions?

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Contact information to participate by email

We also invite you to submit any additional comments or feedback relevant to the scope of this consultation by OCTOBER 7, 2022.

Send us your comments to consultationconsumeraffairs.consultationconsommation@fin.gc.ca with "Predatory Lending Consultation" as the subject line.

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