Order Fixing January 1, 2025 as the Day on Which Certain Provisions of the Budget Implementation Act, 2024, No. 1 Come into Force: SI/2025-4

Canada Gazette, Part II, Volume 159, Number 1

Registration
SI/2025-4 January 1, 2025

BUDGET IMPLEMENTATION ACT, 2024, NO. 1

Order Fixing January 1, 2025 as the Day on Which Certain Provisions of the Budget Implementation Act, 2024, No. 1 Come into Force

P.C. 2024-1339 December 16, 2024

Her Excellency the Governor General in Council, on the recommendation of the Minister of Justice, under subsection 339(1) of the Budget Implementation Act, 2024, No. 1, chapter 17 of the Statutes of Canada, 2024, fixes January 1, 2025 as the day on which subsections 336(1) and (2) and section 337 of that Act come into force.

EXPLANATORY NOTE

(This note is not part of the Order.)

Proposal

This Order in Council, made under section 339 of the Budget Implementation Act, 2024, No. 1 (the Act), fixes January 1, 2025, as the day on which the amendments to the Criminal Code made by subsections 336(1) and (2) and section 337 of the Act come into force.

Objective

The objective of the legislative amendments is to strengthen the enforcement of the Criminal Code’s criminal interest rate provisions. This Order in Council fixes January 1, 2025, for the coming into force of subsections 336(1) and (2) and section 337 of the Act. The amendments broaden the application of section 347 of the Criminal Code (criminal interest rate) to include ‘offering or advertising’ credit at a rate exceeding the criminal interest rate. These changes aim to enhance the effectiveness of the current regime by improving the ability of law enforcement to act against predatory lending practices.

Background

Amendments to the Criminal Code were introduced as part of the Budget Implementation Act, 2023, No. 1, to lower the criminal interest rate, from the equivalent of 48% Annual Percentage Rate (APR) to 35% APR. These amendments will come into force on January 1, 2025, under P.C. 2024-631 and enable the Criminal Interest Rate Regulations to come into force that same day. These regulations limit the costs of payday loans to no more than $14 per $100 borrowed and exempt certain loans from the criminal interest rate. These amendments will protect Canadians from predatory lenders who can take advantage of vulnerable people in Canada.

To further protect vulnerable people in Canada from harmful illegal lenders who try to circumvent the criminal interest rate, Budget 2024 announced the Government’s intention to amend the Criminal Code to enhance the enforcement of the criminal interest rate.

The current criminal interest rate offence is committed by anyone who enters into an agreement or arrangement to receive interest at a criminal rate, or who actually receives a payment or partial payment of interest at a criminal rate. Some borrowers receiving loans at illegal rates of interest may be reluctant to come forward to law enforcement for a variety of reasons. Victims are often willing borrowers, as they are often unable to access legal forms of credit due to poor or unestablished credit histories. Victims therefore do not have an incentive to report illegal activity to law enforcement. These amendments would enable law enforcement to directly target illegal lenders by prohibiting offers or advertisements of loans at a criminal interest rate.

On May 2, 2024, the Budget Implementation Act, 2024, No. 1, was introduced in the House of Commons and received royal assent on June 20, 2024. Subsection 336(1) of that Act broadens the current criminal interest rate offence to include the offering or advertising of credit at an interest rate above the criminal rate, thereby allowing law enforcement to target lenders based on offers or advertisements alone, without needing evidence of a completed loan. Subsection 336(2) makes consequential amends the definitions of “credit advanced” and “interest” to ensure these definitions capture offers or advertisements of credit above the criminal rate.

In 2007, the Criminal Code was amended to provide an exemption from the application of the criminal rate provisions in section 347 for payday loans, provided certain conditions are met. Specifically, the loan must be for $1,500 or less, be for a term of 62 days or less, and be issued by a licensed lender or someone who is specifically authorized by the laws of a province, and the province is designated by the Governor in Council. A province will be designated if they have enacted a payday lending regime, in accordance with subsection 347.1(3).

Section 337 of the Budget Implementation Act, 2024, No. 1 would clarify that the criminal interest rate offence does not apply to offers and agreements for payday loans that comply with section 347.1 of the Criminal Code. Coordinating amendments with the Budget Implementation Act, 2023, No. 1 to account for offers and advertisements of credit above the criminal rate are also contemplated in the Act. Subsections 336(1) and (2) and section 337 of the Act will all be brought into force on January 1, 2025, through this Order.

Implications

Once in force, these amendments will strengthen enforcement against predatory lending by making it an offence to offer or advertise credit at a rate exceeding the criminal interest rate. When prosecuting the offence, the Crown must elect, based on the circumstances, either to proceed by indictment (which is reserved for more serious cases) or by way of summary conviction (for less serious cases). The penalties for section 347 are imprisonment for a term not exceeding five years, on indictment, or, in the case of summary conviction proceedings, a fine of not more than $25,000, or to imprisonment for a term of not more than two years less a day, or both.

This Order in Council fixes the coming-into-force date as January 1, 2025, for subsections 336(1) and (2) and section 337 of the Act to align with the coming-into-force date of the Budget Implementation Act, 2023, No. 1 amendments to the criminal interest rate provisions in the Criminal Code, as well as the coming-into-force date of the Criminal Interest Rate Regulations. Aligning the coming-into-force date of the Budget Implementation Act, 2023, No. 1 amendments to the Criminal Code, the Criminal Interest Rate Regulations, and the amendments with subsections 336(1) and (2) and section 337 of the Act will reduce confusion for industry and other stakeholders.

Consultation

These amendments follow from the Consultation on Cracking Down on Predatory Lending Faster, held by the Department of Finance in October 2023, through which the Government solicited feedback on potentially lowering the criminal interest rate further, taking steps towards increasing access to low-cost, small-value credit in Canada, and on additional revisions to the payday lending exemption. The consultations also solicited feedback from stakeholders on strengthening the enforcement of the criminal interest rate.

Industry participants (i.e. high-cost lenders in the alternative lending space and the industry associations that represent them), consumer advocacy groups, think tanks, and provincial authorities that provided submissions to this consultation were in general agreement that the enforcement of the criminal interest rate to date has not been adequate in preventing illegal lending in Canada. Industry participants noted that lowering the criminal interest rate could increase the number of consumers turning to illegal lenders. Industry participants also noted that borrowers are often not aware when they are dealing with an illegal lender, which leads them to not report to authorities. Consumer advocacy groups highlighted that removing the Attorney General consent requirement would reduce barriers to the enforcement of the criminal interest rate.

In response to feedback from this consultation, to strengthen law enforcement’s toolkit, Budget 2024 announced that the Government would amend the Criminal Code to enhance the enforcement of the criminal interest rate by prohibiting offers of credit at a criminal interest rate and allowing for prosecutions of illegal lenders without the approval of the Attorney General. The proposal to prohibit offers of loans at a criminal rate will alleviate the burden of reporting on consumers and enable law enforcement to directly target illegal lenders. Following the announcement of these measures in Budget 2024, some consumer advocacy groups voiced support.

Contacts

Judith Hamel
Director General
Financial Services Division
Financial Sector Policy Branch
Department of Finance Canada
90 Elgin Street
Ottawa, Ontario
K1A 0G5
Telephone: 613‑406‑4409
Email: Judith.hamel@fin.gc.ca

Kenyatta Hawthorne
Counsel
Policy Sector
Criminal Law Policy Section
Department of Justice Canada
284 Wellington Street
Ottawa, Ontario
K1A 0H8
Telephone: 343‑571‑7283
Email: kenyatta.hawthorne@justice.gc.ca