The Canadian federal government has proposed regulations for payday loans in their latest budget in order to cap borrowing rates. The budget, released on March 28, categorized lenders who offer loans at excessively high-interest rates as “predatory lenders”. According to the budget, these lenders “can take advantage” of low-income Canadians, seniors, and newcomers with their high-interest loans. Currently, the Criminal Code in Canada limits the legal interest rate to 60% effective annual interest applicable to most lending products, except for payday loans of up to $1,500 in some provinces. The finance department has proposed lowering the rate to 35%, which is the rate in Quebec. Payday loans usually cost up to $15 per $100 borrowed for a two-week period, according to the Ontario government. However, payday loan opponents warn that the annual percentage interest rate (APR) can reach over 400%, while supporters argue that payday loans are a legitimate resource for receiving quick and easy access to necessary funds. Previously, bankers and credit unions have spoken out against caps on interest rates on short-term loans, saying that it may cause negative consequences and hinder the availability of credit for short-term lending products.
“Budget 2023 includes cap on payday loan rates proposed by liberals.”
