Lowering Criminal Interest Rate to 35% APR

Summary#

This Order in Council sets January 1, 2025 as the day when sections 610 to 612 of the Budget Implementation Act, 2023, No. 1 come into force. Those sections change parts of the Criminal Code that deal with very high interest rates on loans — most notably by lowering the criminal interest limit and allowing rules for payday loans.

What it does#

• Fixes January 1, 2025 as the coming-into-force date for sections 610 to 612 of the Budget Implementation Act, 2023, No. 1.
• Lowers the criminal maximum interest measure to 35% APR (the Act changes how the rate is measured from EAR to APR).
• Gives the government authority to make regulations that:
  • exempt certain types of loans from the criminal interest limit, and
  • set a maximum cost of borrowing for payday loans (the Budget announced a cap of $14 per $100 borrowed).
• Enables previously published proposed regulations (the Criminal Interest Rate Regulations) to be brought into effect once those sections are in force.

Who's affected#

• Consumers who borrow at high interest rates — including people who use payday loans or short-term high-cost credit.
• Lenders that currently offer high-rate products — for example payday lenders and other non-bank lenders.
• Provincial governments and provincial regulators, because provinces set rules and licensing for payday lenders and may need to change laws or guidance.
• The exact list of loan types that will be exempt from the criminal rate is not yet clear; that will depend on the regulations to be made.

Why it matters#

• The change aims to curb predatory lending by lowering the criminal interest ceiling to 35% APR, which could reduce the cost of some loans for borrowers.
• It gives provinces and lenders more time to adjust systems, contracts and consumer information by setting the effective date at January 1, 2025.
• The new regulation powers mean some loans might still be exempt, but those decisions and details will be set later through regulations.
• Because provinces currently allow higher payday costs in most cases, the cap of $14 per $100 and the timing could lead to legal and operational changes for provincial rules and for lenders.