New Criminal Rate of Interest

Canada has introduced significant changes to its criminal interest rate laws, lowering the maximum lawful interest rate for many loans and credit arrangements. The amendments, which came into force on January 1, 2025, are intended to curb predatory lending practices and provide greater protection for consumers and small businesses. The new framework reduces the general criminal interest rate to the equivalent of 35% annual percentage rate (APR), replacing the much higher threshold that had existed for decades under the Criminal Code.
 
The changes apply to many forms of lending, including personal loans and certain business financing arrangements. In general, personal loans and commercial loans of $10,000 or less are now generally subject to the new 35% APR criminal rate. However, Parliament created exceptions for larger commercial transactions, recognizing that sophisticated business lending often involves different risks and negotiation dynamics than consumer borrowing. As a result, commercial loans between $10,001 and $500,000 may still have interest rates up to 48% APR if the borrower is not an individual and the loan is genuinely for business purposes and commercial loans above $500,000 are exempt from the criminal interest rate entirely.   Payday loans and certain pawn loans are also subject to separate regulatory frameworks and interest caps.
 
The law continues to define “interest” broadly, meaning that fees, bonuses, penalties, commissions, and similar charges connected to a loan may all be added to the calculation to determine whether a loan exceeds the criminal rate.
 
Under the Criminal Code of Canada, it is a criminal offence to enter into an agreement or arrangement to receive interest at a criminal rate. Following the recent amendments in 2025, it may also be an offence to offer, advertise, or promote credit that exceeds the permitted limit. A person or business convicted of charging a criminal rate of interest may face:

• criminal prosecution,
• substantial fines,
• imprisonment, and/or
• Courts may strike out the offending interest provisions or refuse to enforce the loan agreement.

For borrowers, the reforms are designed to increase fairness and transparency in the credit market. Businesses that provide financing, whether through traditional lending, private mortgages, or alternative financing arrangements, should carefully review their agreements and lending practices to ensure compliance.

For more information, contact Le Nguyen, Partner, LLF LAWYERS LLP at (705) 742-1674 or lnguyen@llf.ca