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Khalid Akram |
Amendments to the Criminal Rate of Interest
Purpose of the amendment
One of the most significant changes to Canada’s financial crime laws is the reduction of the criminal rate of interest, set to take effect on Jan. 1, 2025. This amendment is designed to curb predatory lending practices and provide greater financial protection for vulnerable Canadians who rely on high-interest loans, including payday loans, instalment loans, and other forms of short-term credit.
Historically, Canada’s criminal interest rate — defined under s. 347 of the Criminal Code — has been 60 per cent (effective annual rate or EAR). This high cap has allowed lenders to impose exorbitant rates, particularly on low-income borrowers and individuals with limited access to traditional banking services.

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- Protect consumers from excessive interest rates imposed by high-risk lenders.
- Reduce financial exploitation and debt traps that disproportionately affect low-income Canadians.
- Encourage fair lending practices while still allowing for legitimate small-dollar lending.
However, certain exceptions and modifications have been included to accommodate short-term, high-risk lending markets, particularly pawn loans and payday lending services.
Key changes
The amendments to the Criminal Rate of Interest introduce the following significant changes:
1. Lowered criminal interest rate
- The annual percentage rate (APR) cap is now 35 per cent, replacing the previous 60 per cent EAR.
- This applies to all consumer and commercial loans, including credit cards, personal loans, and payday lending agreements.
- Lenders exceeding this cap could face criminal charges under the Criminal Code.
2. Exceptions for small pawn loans
- Pawn loans under $1,000 are permitted to charge up to 48% APR instead of the 35 per cent cap.
- The reasoning behind this exception is that pawn loans involve collateral, which reduces the lender’s risk but often comes with higher administrative costs.
- Lenders must still comply with provincial regulations regarding fair lending practices.
3. New regulations on payday loan charges
- Provinces and territories with existing payday lending regulations will now be subject to an additional federal restriction:
o The cost of payday loans cannot exceed $14 per $100 borrowed.
o Previously, payday lenders charged up to $15 or more per $100 borrowed, leading to effective APRs well above 300 per cent.
- This change ensures that payday loan costs remain within a reasonable limit, preventing exploitative lending practices.
The amendments to the Criminal Rate of Interest introduce new legal complexities for both borrowers and lenders. Criminal defence lawyers handling financial crime and fraud-related cases must be prepared for an increase in legal disputes surrounding loan agreements, contract violations, and lender liability.
1. Potential defences for lenders accused of violating the new cap
As lenders adjust to the new regulatory environment, there may be instances where they unknowingly or unintentionally exceed the new 35 per cent interest cap. Defence lawyers representing lenders charged under s. 347 of the Criminal Code may use the following strategies:
- Lack of intent:
o If the lender can prove that they miscalculated the APR and did not intentionally exceed the legal interest rate, this could serve as a valid defence.
• Contractual ambiguity:
o Some loan agreements may have complex structures that make it difficult to determine the actual APR, leading to disputes over whether the criminal threshold was exceeded.
o Defence teams may argue that unclear contract terms should not automatically result in criminal liability.
o Defence teams may argue that unclear contract terms should not automatically result in criminal liability.
• Provincial versus federal jurisdiction conflicts:
o Since some provinces have their own payday lending laws, defence lawyers may argue that federal and provincial regulations conflict, requiring judicial clarification on which law applies.
2. Impact on financial crime cases and fraud-related offences
- The new criminal interest rate cap may lead to more investigations and prosecutions against lenders operating outside of regulated financial institutions.
- Defence lawyers can expect an increase in financial fraud cases related to misrepresentation of loan terms, undisclosed fees and predatory lending practices.
- The revised payday lending rules could also lead to disputes between consumers and lenders, potentially resulting in class action lawsuits or regulatory fines.
This is the second part of a two-part series. Part one: Key amendments to Canada’s criminal defence law in 2024 and 2025.
Khalid Akram, J.D., B.Sc. is the founding lawyer at Akram Law in Calgary, specializing in criminal defence. Called to the Ontario Bar in 2015 and Alberta Bar in 2023, he provides legal representation in cases involving assault, drug offences, fraud and impaired driving. Fluent in English, Urdu, Hindi, and Punjabi.
The opinions expressed are those of the author(s) and do not necessarily reflect the views of the author’s firm, its clients, Law360 Canada, LexisNexis Canada or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.
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