A British Columbia judge has faulted a lender for waiting years to collect on a loan in default while interest accumulated at 45%. The latest judgment follows a cabinet pledge to rewrite Canada’s usury law, according to Blacklock's Reporter.
“It seems inconsistent to permit such interest to be payable where little was done,” wrote Judge Jeremy Guild of B.C. Provincial Court in Salmon Arm. “There were significant delays in pursuing the debt and the claim,” he added.
The comment came in a claim for repayment of a $10,701 loan that was approved by Easy Financial Services Inc. in 2018 at 45%. Evidence showed even after the borrower defaulted, Easy Financial waited years to collect the debt while interest accumulated at $9.36 a day.
“There were a number of significant periods where nothing was done to pursue collection,” wrote Judge Guild. The Court dismissed the claim for technical breach of notice under British Columbia’s Business Practices And Consumer Protection Act.
The Criminal Code caps interest rates at 60% a year with the exception of payday loans. Parliament in 2007 assigned regulation of payday lenders to provinces where courts have documented interest charges up to 548%.
The Department of Finance last August 9 issued a call for comment on tighter regulation of rates. The Consultation On Fighting Predatory Lending By Lowering The Criminal Rate Of Interest noted charges can run to 20% on credit card balances, 24% on auto loans and as high as 47% on installment loans.
“The criminal rate of interest was set at 60% in 1980,” said Consultation. “It is a fixed rate and not linked to prevailing market rates. The rate has remained unchanged since its introduction.”
Cabinet promised changes to the usury law in its 2019 budget. “The consultation we are launching is going to give us as a government and us as parliamentarians a chance to talk to Canadians and really act on this issue which can cause a lot of misery for a lot of people,” Finance Minister Chrystia Freeland said in 2021 testimony at the Commons finance committee.
“We know predatory lending and criminal rates of interest hit the most vulnerable Canadians,” said Freeland. “For many lower and modest income Canadians, predatory lending including payday lending can impose real hardship.”
A 2009 survey by the Ontario Ministry of Consumer Affairs said typical payday borrowers were men under age 50, renters, people who were employed full-time and earning less than $50,000 a year and people who “wrongly believed the cost of a payday loan is the same or less than a cash advance on a credit card,” said a report Capping Borrowing Costs: A Balanced Approach To Payday Loans In Ontario.
Matthew Horwood is the Parliamentary Bureau Chief of the Western Standard based in the Parliamentary Bureau. He has a degree in journalism from Carleton University and has been a reporter for the Hill Times and the Ottawa Business Journal.
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