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Difference between revisions of "Interest and the Cost of Borrowing Money"
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Interest and the Cost of Borrowing Money (view source)
Revision as of 22:13, 16 September 2018
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=== Interest rate ceilings=== | === Interest rate ceilings=== | ||
There is little in either federal or provincial law regulating the maximum amount creditors can charge borrowers. Some years ago, the federal government repealed the interest rate ceilings set under its ''Small Loans Act''. In its place, Parliament passed an amendment to the ''Criminal Code'', setting a maximum interest rate in [https://www.canlii.org/en/ca/laws/stat/rsc-1985-c-c-46/latest/rsc-1985-c-c-46.html#sec347_smooth section 347] of 60% per year for all lenders. The section applies to all consumer credit lenders except tax refund buyers and licensed payday loan lenders. Anyone who lends at a higher rate can be prosecuted. And, according to an historic common law principle that courts will not enforce an “illegal” contract, creditors generally cannot use the civil court system to collect on loans where the rate is above 60% per year. | There is little in either federal or provincial law regulating the maximum amount creditors can charge borrowers. Some years ago, the federal government repealed the interest rate ceilings set under its ''Small Loans Act''. In its place, Parliament passed an amendment to the ''Criminal Code'', setting a maximum interest rate in [https://www.canlii.org/en/ca/laws/stat/rsc-1985-c-c-46/latest/rsc-1985-c-c-46.html#sec347_smooth section 347] of 60% per year for all lenders. The section applies to all consumer credit lenders except [[Types of Lenders and Creditors#Tax-refund buyers|tax refund buyers]] and licensed [[Payday Loans|payday loan lenders]]. Anyone who lends at a higher rate can be prosecuted. And, according to an historic common law principle that courts will not enforce an “illegal” contract, creditors generally cannot use the civil court system to collect on loans where the rate is above 60% per year. | ||
Both the federal and provincial governments have laws setting a maximum rate for how much a person can be charged if someone buys their right to receive money from the government. The most common examples of such rights are for refunds for an overpayment of tax paid under the ''Income Tax Act'', contributions paid under the Canada Pension Plan, and premiums paid under the ''Employment Insurance Act''. | Both the federal and provincial governments have laws setting a maximum rate for how much a person can be charged if someone buys their right to receive money from the government. The most common examples of such rights are for refunds for an overpayment of tax paid under the ''Income Tax Act'', contributions paid under the Canada Pension Plan, and premiums paid under the ''Employment Insurance Act''. | ||