The Department of Finance is launching a new consultation on further lowering the criminal rate of interest, the payday lending exemption and other questions related to access to small loans. The federal government announced intended amendments to the Criminal Code in its 2023 Budget to lower the criminal rate of interest from the equivalent of 47 per cent annual percentage rate (APR) to 35 per cent APR and adjust the Criminal Code’s payday lending exemption to require payday lenders to charge no more than $14 per $100 borrowed.

The new consultation asks the following questions:

• How much further beyond 35 percent APR should the criminal rate of interest be lowered?
• How can the government improve enforcement of the criminal rate of interest to protect Canadian consumers?
• Should further revisions to the Criminal Code’s provincial or territorial-requested payday lending exemption be considered?
• What are the features of credit products that can help Canadians improve their financial positions?
• What protections from unreasonable fees for credit products, including payday lenders, could help Canadian consumers?
• What marketing techniques target vulnerable Canadians into taking on high-cost debt, and what measures would protect Canadians from deceptive advertising?
• How could all types of credit lenders better provide Canadians with information on the costs of credit products, including associated fees and interest?
• What barriers do Canadian consumers face in accessing low-cost, small-value credit?
• What barriers do financial institutions, banks, and credit unions in particular, face in increasing their offerings for low-cost, small-value credit to a broader consumer base?
• What could various levels of government, including provincial governments, do to improve, promote, and support access to low-cost, small-value credit?
• What could financial institutions, banks, and credit unions in particular, do to improve, promote, and support access to low-cost, small-value credit?
• Are there practices to improve the availability of low-cost, small-value credit within Canada or abroad that could be learned from?

The consultation document can be found here https://www.canada.ca/en/department-finance/programs/consultations/2023/consultation-on-cracking-down-on-predatory-lending-faster-by-further-lowering-the-criminal-rate-of-interest-and-increasing-access-to-low-cost-credit.html

In October of 2022, CAPL urged the government to refrain from using the Criminal Code to regulate the lending industries, which are already regulated under various provincial licensing regimes – read CAPL’s letter here – https://www.privatelenderassociation.ca/wp-content/uploads/2023/04/criminal-rate-letter-3.pdf

Following the government’s decision to lower the criminal rate of interest, CAPL recommended to the government that it consider adopting various exemptions to the criminal rate of interest prohibition  – read the CAPL letter on this subject here https://www.privatelenderassociation.ca/wp-content/uploads/2023/06/Crim-int-exemptions-May-31-2023.pdf

Please consider either responding to the consultation or sharing your comments with CAPL at s.gale@privatelenderassociation.ca