March 30, 2023
In a move hailed as a victory by opponents of so-called predatory lending, Ottawa has pledged to cut the legally permitted cap on interest rates for loans.
The federal government said in Tuesday’s budget that it intends to cut the maximum allowable annual percentage rate (APR) on loans to 35 per cent, down from the current 47 per cent. It also plans to launch consultations on whether the rate, which is in the Criminal Code, should be lowered even further.
The maximum interest rate is often charged on instalment loans of $1,500 or more offered by “alternative lenders” such as easyfinancial to borrowers with poor credit who don’t qualify for loans at lower rates from Canada’s big banks. (It does not apply to payday loans, which are short-term, ultra-high-interest loans for smaller amounts that are exempt from the criminal rate and fall under provincial rules.)
“I was like, ‘Finally, they’re listening to us,’” said Donna Borden, a Toronto-based leader with the anti-poverty group ACORN, who has been calling for the government to change the law for about 15 years after her own experience with a high-interest loan.
“We were pushing for 30 per cent and they did 35 per cent,” she said, adding, “(But) it will save a lot of low- and moderate-income people a lot of money.”
