Two of Canada’s largest provinces are considering implementing their own rules on what constitutes a legal rate of interest on lending.

Apart from Quebec, Canada’s provinces have relied on the Federal Criminal Code Section 347 to set the limits on the maximum legal rate of interest, which is an Effective Annual Rate of 60%. Quebec’s limits have been set by court interpretations of its Consumer Protection Act at 35%. Exceptions have been made for provincially regulated payday loans, which charge much higher rates.

Manitoba, Alberta and Quebec have recently implemented new rules for “high-cost” lending, credit that charges interest above a certain threshold rate. In Quebec, the threshold is 22% above the bank rate. It’s 32% in the other provinces.

British Columbia passed legislation to regulate the same sector in May 2019, but the regulations have not yet been passed to bring that legislation into force. Section 112.17 of the Business Practices and Consumer Protection Amendment Act, 2019 allows the province to set a lower limit than the federal Section 347.

Ontario first announced its intent to legislate higher cost lending in 2017, and asked in a recent consultation paper whether it should set a maximum interest rate lower than the Criminal Code limit, as British Columbia is poised to do.

These initiatives reflect a lack of enforcement of the Criminal Code that has been an issue for consumer protection. As Consumers Council of Canada research studies have shown, much of Canada’s rent-to-own industry offers financing at rates that appear to be higher than the legal limit. For many years, one of Canada’s largest instalment loan providers also charged consumers about 81% effective annual rates on its loans (though it has since lowered rates). Provincial consumer protection officials in those reports noted that they lacked the authority to enforce federal laws.

The federal Department of Justice responded to the Council’s queries in the 2018 high-cost lending report by stating that the criminal interest rate was introduced to target loan sharking and “Section 347 was not intended to act as a consumer protection tool.”