Per Section 347 of the Criminal Code of Canada, a person who makes any agreement or arrangement to receive interest at a criminal rate or receives interest at a rate of more than 60% is said to have committed a criminal offence. Any individual convicted by indictment under 347 of the Code may face imprisonment for a term not exceeding five years while they may be liable to a fine of $25,000 or face imprisonment of a maximum of six months or both if found guilty by way of a summary offence.
It is extraordinarily crucial to consider section 347 of the Criminal Code of Canada while making transaction agreements, failure to which would result in criminal charges as well as civil consequences. By definition, the criminal interest rate in Canada is an effective annual rate surpassing 60%.
Although several bills have been presented to mitigate the interest rates, no attempt has been successful. It could be said without a doubt that Bill S-293 will bring a paradigm shift to the overall interest rate framework. The borrowers can likewise shield themselves from unfair interest rate provisions.
Bill S-239 aims to cap the criminal rate of interest, which is currently set at 60%. This Bill suggests amendments to Section 347(2) of the Criminal Code of Canada to cut down the present-day criminal interest rate.
Furthermore, the Canadian government has already initiated a consultation on Fighting Predatory Lending by Lowering the Criminal Rate of Interest in August 2022 to seek public feedback on the initiative of lowering criminal interest rate. However, the consultation did not specify an exact new criminal interest rate and methods for calculating interest rates.
Highlighting Points Of The Consultation
There are several pertinent questions on which the consultation asked for feedback:
- Should the criminal rate of interest be fixed or tailored to current market conditions?
- To what extent do alternative lenders’ interest rates on high-cost installment loans indicate the debtor’s creditworthiness?
- Why do financial customers opt for high-interest installment loans?
- What role do high-cost installments play in impacting Canadians’ financial well-being and endurance?
- What effect would dropping the criminal interest rate have on credit supply for financial customers who go for high-cost instalment loans? Would cutting this rate affect financial customers, such as loss or restricted access to credit?
- How could the government increase financial information and understanding concerning high-cost installment loans to safeguard Canadians and enable them to make wise financial choices?
After considering the feedback from stakeholders and the public, corporate borrowing and lending practices are expected to be impacted to a great extent.
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