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Canadian Government sets its Sight on Predatory Lending
July 16, 2024
Canadian Government sets its Sight on Predatory Lending
Effective January 1, 2025, the federal government will lower the criminal interest rate from 60% effective annual rate (EAR) to 35% annual percentage rate (APR), which equals about 42% EAR, in order to combat predatory lending. “Interest” includes all charges and expenses, including fees, fines, penalties, or commissions, associated with a loan.
Commercial loans under $10,000 will have the new interest rate limitations.
Commercial lenders will be allowed to structure loans with an interest rate of up to 48 per cent APR for loans between $10,000 and $500,000, in order to provide small business owners with some level of protection from loan sharks.
Commercial loans over $500,000 can be structured with no cap on the interest rate, allowing for more flexibility for risky credit borrowers. The reason being that these types of larger, sophisticated transactions should not affect vulnerable Canadians.
Lenders and brokers should be aware of these changes and take the time to learn their responsibilities under the new laws. Violations can result in fines of up to $25,000, or imprisonment of up to 5 years.
If you are a private lender or mortgage broker with any questions related to the new laws, or require help in navigating these pending changes, reach out to Aman Bindra at [email protected] or 604-591-7321 today.
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Aman Bindra and his team assist clients with all real estate, banking, and business matters, including purchases and sales of real estate and businesses, borrowing and lending, land development and construction, and leasing.
Aman has extensive experience working with individual, business and corporate clients throughout British Columbia. He regularly advises on and prepares agreements relating to land, asset, and share purchases, financings, and construction projects, and he assists with leasing, incorporations, partnerships, corporate reorganizations, and more.
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