Lower Criminal Interest Rate Now in Effect

Written By Preet Gill and Denise Bright

As detailed in our prior blog, Canadian Government (Finally) Provides Certainty on Criminal Interest Rates, the Government of Canada proposed amendments to lower the criminal interest rate to an annual percentage rate (APR) of 35 percent (the prior criminal interest rate, being an effective rate of 60 percent, was equivalent to an APR of about 48 percent). 

On January 1, 2025, these amendments came into effect, making it a criminal offence to offer loans at any interest rate higher than 35 percent, subject to the exceptions within the regulations.

While there are three important exemptions to the lower criminal interest rate—for (1) commercial loans; (2) pawnbroking loans; and (3) payday loans—the amendments also expand the activities that may be caught by the criminal interest provision. For example, they now capture offering or advertising credit at a criminal rate, not just entering into an agreement, expanding the scope of activities applicable to the criminal interest rate.

For further details on the scope of the provision, and the exemptions, please see Canadian Government (Finally) Provides Certainty on Criminal Interest Rates.

Note that the new criminal interest rate does not apply to a payment arising from an agreement entered into before these new provisions came into force. In other words, an agreement that was compliant with section 347 at the time it was entered into is not impacted by the change, however, clients should seek advice when amending such agreement to ensure continued compliance with the legislation.

If you have any questions about the legislation or how these changes may impact your loans, please contact the authors.

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