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ARTICLE · 31 JANUARY 2024

Criminal Interest Rate Overhaul: Impact On Commercial Loans

Gowling WLG
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On Dec. 23, 2023, the federal government released the proposed Criminal Interest Rate Regulations (Regulations) in the Canada Gazette, which have the effect of reducing the criminal interest rate...

CanadaFinance and Banking
Kelby Carter
Kelby Carter
Alana Scotchmer
Alana Scotchmer
Chloe Davies
Chloe Davies
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On Dec. 23, 2023, the federal government released the proposed Criminal Interest Rate Regulations (Regulations) in the Canada Gazette, which have the effect of reducing the criminal interest rate under section 347 of the Criminal Code. The criminal interest rate, which is currently an effective annual rate (EAR) of 60 per cent – or approximately 48 per cent on an annual percentage rate (APR) basis – is set to be reduced to 35 per cent APR. Although these changes are not yet in force, this significant development should prompt lenders across Canada to re-evaluate their existing loan portfolios and lending policies.

The proposed Regulations come with significant exemptions for certain types of commercial loans and pawn loans. Payday loans are subject to separate prohibitions. The proposed Regulations, along with the Budget Implementation Act, 2023, No. 1 (BIA), present the most significant overhaul to the criminal interest rate regime in Canada since 1980. The

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