The Effect Of The Unconscionable Transactions Act On Loans In Alberta

Parties to loan transactions in Alberta should be aware of the Unconscionable Transactions Act¹ (the "Act"), which gives the Courts broad powers to affect loans deemed to be unconscionable.

Although the Act itself does not provide a cause of action, borrowers often plead it in conjunction with the equitable doctrine of unconscionability or in actions based on the Interest Act² or Criminal Code³ provisions that deal with criminal interest rates. The Act only applies to money lent, and provides that if the Court finds that the cost of the loan is excessive and the transaction is "harsh and unconscionable", the Court may:

• despite any agreement proposing to settle the loan, reopen the transaction and relieve the debtor from the obligation to pay what is deemed to be unfair;