New Restrictions Aim to Curb 'Predatory Lending' in High-Interest Loans

New Limit on High-Interest Loans Targets 'Predatory Lending Practices'

The new limit on the interest rates Canadians are charged when they take out high-interest loans aims to prevent predatory lending practices.

Concerns in the Industry

Industry officials express concerns that more Canadians might resort to illegal lending services due to the recent change in interest rates.

The first-ever change to the criminal rate of interest, now capped at 35 per cent, has elicited mixed reactions.

Impact of the New Regulations

Effective January 1, lenders are now restricted from charging Canadians more than 35 per cent interest on loans.

Previously, lenders could charge up to 47.9 per cent interest, but that has now been capped.

Advocacy for Lower Rates

Advocates and organizations working with lower-income Canadians celebrate the changes, as high-interest loans have often trapped borrowers in cycles of debt.

Community Impact in Calgary

In Calgary, organizations like Momentum have been advocating for lower interest rates to prevent payday loan clustering in low-income communities.

These changes aim to make emergency funds more affordable and safer for those in need.

Challenges Faced by Alternative Lenders

The new regulations pose challenges for alternative lenders who may have to turn away customers with low credit scores due to the reduced interest rates.

Concerns are raised that these changes may lead more borrowers to seek loans from illegal lenders charging rates above the legal limit.

Conclusion

The recent changes in interest rate regulations for high-interest loans in Canada have sparked a range of reactions from industry officials, advocates, and lenders.

While the move aims to protect borrowers from predatory practices, concerns remain about the impact on those with low credit scores and the potential rise in illegal lending activities.