Let’s put an end to the excessive interest rates

Here in Canada, unscrupulous financial institutions and lenders have managed to get around the criminal law by charging interest of up to 600% on loans contracted to the less fortunate in society.

You read that correctly at 600%, or 10 times the current 60% interest rate that we call “criminal”

It was NDP Representative Peter Julian of New Westminster Burnaby who denounced these abusive loans on December 14 during the first reading of Bill C-213: “Act to Amend the Criminal Code (“criminal interest” rate”).

Trudeau and Freeland retreat

What has Justin Trudeau’s government done so far to counter these financial abuses?

Against all odds, he found a way to undo the steps he took in 2021 to counter abusive interest rates.

In their 2022 budget, Justin Trudeau and his finance minister Chrystia Freeland don’t say a word about “loans on abusive terms” and the downward review of the interest rate labeled “criminal.”

Although…

In a pre-election budget in April 2021, Justin Trudeau’s government pledged to take action against predatory lending.

“In order to combat abusive terms loans, as per Ms Freeland’s budget for 2021, the Government of Canada will launch a consultation on the criminal rate reduction under the Canadian Criminal Code, which applies, among other things, to loan installments offered by payday loan companies.”

In the end, the “counseling” did not take place.

And we still find ourselves struggling with an officially “criminal rate” of 60%. But in fact, as MP Julian denounced, this rate can be greatly exceeded by multiple loopholes, and this, with complete impunity for financial violators.

Bill C-213

What does Rep. Peter Julian of the NDP do with Bill C213?

He explained to colleagues in the House of Commons that “this bill would close loopholes that allow financial institutions and payday lenders to charge rates of 500% or 600% and reduce half of the criminal interest rate currently permitted in criminal law.”

He added, “I’d like to give just one example out of the many that exist. One of my passengers, whom I’ll call Lisa, paid $13,000 in interest for a few years. She was struggling to pay off her groceries and rent because of a $700 emergency loan and wasn’t able to To pay off one dollar of the principal all the time.”

With a crime rate of 30%?

Ultimately, Bill C-213 aims to significantly lower the level of the interest rate described as “criminal” in the Criminal Code. Instead of 60%, the interest rate will become “criminal” once it exceeds the Bank of Canada’s prime rate by 30%.

If Bill C-213 is in effect, this means that the “criminal rate” would be estimated today at 32.5% (30% + 2.5% of the headline rate). Which is still high even compared to the 20-22% interest charged by credit card issuers.

By the way, a lot of consumers are currently pulled in with interest charges ranging from 34% to 45%, and even more so with related fees.

It is important to know that many dealers in Canada (used cars, furniture, hardware stores, etc.) have agreements with financial institutions that can charge consumers abusive fees when buying on credit.

Most importantly, the new criminal interest rate will include: “All fees of all kinds, including AGios (overdraft interest fees), commissions, insurance fees, penalties and reimbursements paid or paid by the Borrower to any person on behalf of the principal or lender.” »

By this definition, it would prevent smart lenders and financial institutions from using various loopholes to squeeze borrowers like lemons.

It’s never too late to do a good job. So I am calling on Justin Trudeau and his Finance Minister Chrystia Freeland to support the most sacred provision of Bill C-213.