At Momentum, we have been long-time advocates for lowering the Criminal Rate of Interest (CRI) - see past publications here. The Federal Government announced in the 2023 budget that the CRI would be lowered from 47% annual percentage rate (APR) to 35% - a change we can all celebrate! To kick off 2024 we are providing comments on the proposed CRI regulation changes. It has been over 40 years since there have been updates made to the CRI, we are doing our part to provide helpful comments that will ensure these changes protect all lenders. Read and share our full submission here. Our main concern with the proposed regulations is the exclusion of pawn loans and small business loans between $10,000 - $500,000 and recent claims made by sub-prime lenders that changes to the CRI will make lending less accessible. 

We are recommending that the proposed limit for commercial loans be raised to loans over $50,000 and under $500,000. Momentum works with Calgarians to start or scale small businesses. Entrepreneurs at Momentum often face barriers to accessing Canada’s mainstream credit system and frequently need access to loans greater than $10,000. It is estimated that the average startup costs for restaurant and retail businesses ranges from $80,000 to $200,000. Raising the limit for commercial loans would protect small business owners, small dollar borrowers, and entrepreneurs who are deserving of protections under the criminal code.

Pawn loans can and do trap lenders in cycles of debt and should not be exempt from the Criminal Rate of Interest. For many, pawn loans are a last resort when faced with a financial crisis. Items pawned often hold personal importance (e.g. heirloom jewelry) or are essential an individual’s livelihood (e.g. power tools, computers). When borrowers aren’t able to repay the loan and recover the item, they may roll-over their pawn loan to avoid losing the item. When this happens, individuals can end up paying more for the item than it is worth, or they’ll take out another form of high-cost credit to pay off the pawn loan, trapping them in an unsustainable debt cycle.

Lowering the CRI is a necessary step for making credit more affordable in Canada. Claims made by sup-prime lenders that a reduction in the CRI will cause thousands of Canadians to lose access to credit and rely on payday lenders is inaccurate. Fringe lending is widely available in Quebec and other jurisdictions in the USA where the allowable interest rate is 35% or lower.

We are encouraged to see action be taken by the Government to protect lenders across Canada. These moves support what Momentum already knows – everyone deserves access to products and services that boost their financial wellbeing and ability to build assets and save.