347

Criminal interest rate

347 (1) Despite any other Act of Parliament, every one who enters into an agreement or arrangement to receive interest at a criminal rate, or receives a payment or partial payment of interest at a criminal rate, is

(a) guilty of an indictable offence and liable to imprisonment for a term not exceeding five years; or

(b) guilty of an offence punishable on summary conviction and liable to a fine of not more than $25,000 or to imprisonment for a term of not more than two years less a day, or to both.

Definitions

(2) In this section,

credit advanced means the aggregate of the money and the monetary value of any goods, services or benefits actually advanced or to be advanced under an agreement or arrangement minus the aggregate of any required deposit balance and any fee, fine, penalty, commission and other similar charge or expense directly or indirectly incurred under the original or any collateral agreement or arrangement; (capital prêté)

criminal rate means an effective annual rate of interest calculated in accordance with generally accepted actuarial practices and principles that exceeds sixty per cent on the credit advanced under an agreement or arrangement; (taux criminel)

insurance charge means the cost of insuring the risk assumed by the person who advances or is to advance credit under an agreement or arrangement, where the face amount of the insurance does not exceed the credit advanced; (frais d’assurance)

interest means the aggregate of all charges and expenses, whether in the form of a fee, fine, penalty, commission or other similar charge or expense or in any other form, paid or payable for the advancing of credit under an agreement or arrangement, by or on behalf of the person to whom the credit is or is to be advanced, irrespective of the person to whom any such charges and expenses are or are to be paid or payable, but does not include any repayment of credit advanced or any insurance charge, official fee, overdraft charge, required deposit balance or, in the case of a mortgage transaction, any amount required to be paid on account of property taxes; (intérêt)

official fee means a fee required by law to be paid to any governmental authority in connection with perfecting any security under an agreement or arrangement for the advancing of credit; (taxe officielle)

overdraft charge means a charge not exceeding five dollars for the creation of or increase in an overdraft, imposed by a credit union or caisse populaire the membership of which is wholly or substantially comprised of natural persons or a deposit taking institution the deposits in which are insured, in whole or in part, by the Canada Deposit Insurance Corporation or guaranteed, in whole or in part, by the Quebec Deposit Insurance Board; (frais pour découvert de compte)

required deposit balance means a fixed or an ascertainable amount of the money actually advanced or to be advanced under an agreement or arrangement that is required, as a condition of the agreement or arrangement, to be deposited or invested by or on behalf of the person to whom the advance is or is to be made and that may be available, in the event of his defaulting in any payment, to or for the benefit of the person who advances or is to advance the money. (dépôt de garantie)

Presumption

(3) Where a person receives a payment or partial payment of interest at a criminal rate, he shall, in the absence of evidence to the contrary, be deemed to have knowledge of the nature of the payment and that it was received at a criminal rate.

Proof of effective annual rate

(4) In any proceedings under this section, a certificate of a Fellow of the Canadian Institute of Actuaries stating that he has calculated the effective annual rate of interest on any credit advanced under an agreement or arrangement and setting out the calculations and the information on which they are based is, in the absence of evidence to the contrary, proof of the effective annual rate without proof of the signature or official character of the person appearing to have signed the certificate.

Notice

(5) A certificate referred to in subsection (4) shall not be received in evidence unless the party intending to produce it has given to the accused or defendant reasonable notice of that intention together with a copy of the certificate.

Cross-examination with leave

(6) An accused or a defendant against whom a certificate referred to in subsection (4) is produced may, with leave of the court, require the attendance of the actuary for the purposes of cross-examination.

Consent required for proceedings

(7) No proceedings shall be commenced under this section without the consent of the Attorney General.

Application

(8) This section does not apply to any transaction to which the Tax Rebate Discounting Act applies.

Annotations | French

• Section 347
• This section creates two separate but complementary offences: entering into an agreement or arrangement to receive interest at a criminal rate and receiving a payment or partial payment of interest at a criminal rate. The first offence targets agreements that are illegal on their face, while the second offence targets agreements that appear legal on their face, but in practice result in the payment or partial payment of an illegal interest rate (Degelder Construction Co v Dancorp Developments Ltd, [1998]. 3 SCR 90 at paras 28 and 31).
• A lender commits the first offence of entering into an agreement to receive a criminal interest rate if the agreement requires the borrower to pay an interest rate of 60 percent or more. The interest rate is calculated using the term of repayment set out in the loan agreement. A lender does not commit the offence if the agreement provides the mere possibility for the interest rate to become illegal. For example, if the repayment period is subject to change, or if a substantial interest rate is payable on demand, the interest rate may become illegal. However, this would not be enough to attract liability because the agreement does not require the borrower to pay an illegal interest rate (Degelder Construction Co v Dancorp Developments Ltd, [1998]. 3 SCR 90 at paras 19 and 29).
• Even if the credit agreement itself is not illegal, a lender can still violate this section by committing the second offence of receiving a payment or partial payment of interest at a criminal rate. When determining whether the interest payment was made at a criminal rate, the interest rate must be calculated based on the time period during which the credit was actually outstanding and being repaid, rather than during the term in the loan agreement (Degelder Construction Co v Dancorp Developments Ltd, [1998]. 3 SCR 90 at para 30).
• Exception
• If a lender enters into a legal loan agreement and then receives an interest payment at a criminal rate through the borrower’s voluntary act, the lender does not become guilty of an offence under this section. For example, the lender cannot be guilty of this offence if the actual interest rate received is illegal as a result of the borrower voluntarily paying off a loan before the end of the term set out in the agreement. In that case, the interest rate must be calculated based on the time period outlined in the loan agreement rather than on a repayment date unilaterally chosen by the borrower (Nelson v CTC Mortgage Corp, [1984]. CanLII 572 (BC CA) at paras 21-24, aff'd [1986] 1 SCR 749; Degelder Construction Co v Dancorp Developments Ltd, [1998]. 3 SCR 90 at para 34).
• Mens Rea – Entering into an Agreement to Receive Interest at a Criminal Rate
• The fault element required for this offence created by s 347(1) is knowledge or wilful blindness to the fact that the agreement charges an effective annual interest rate above 60 percent (R v Saikaley, 2017 ONCA 374 at paras 104).
• Mens Rea – Receiving Payment of Interest at a Criminal Rate
• Similarly, the fault element required for this offence created by s 347(1) is also knowledge or wilful blindness to the fact that the agreement charges an effective annual interest rate above 60 percent. For the offence of receiving a payment or partial payment of interest at a criminal rate specifically, there is a presumption under s 347(3) that the accused knew that the payment was made at a criminal interest rate. The accused must produce evidence to rebut this presumption (R v Saikaley, 2017, ONCA 374 at paras 104–108) .
• The Crown does not need to prove that the accused was swindling or tricking the borrower (R v McRobb (1984), 20 CCC (3d) 493 (Ont Co Ct) at para 28, aff’d in part (1986), 32 CCC (3d) 479 (Ont CA)).
• Monetary Value of Goods, Services, or Benefits
• “Credit advanced” includes both money advanced under an agreement and the advance of “goods, services, or benefits”. An advance of the monetary value of goods, services, or benefits means a deferral of payment for such items. For example, a utility company provides goods and services to its customers in exchange for a specific amount of money paid on a certain date each month. If a customer does not pay the required amount on the required date, the company has “advanced credit” to the customer. If the company’s agreement with the customer requires the customer to pay a late penalty in this situation, that penalty falls under the definition of “interest” under this section and must be less than the value of an effective annual interest rate of 60 percent of the deferred amount. When a customer fails to pay for goods or services on time, the effective interest rate (for example, as a result of applicable late penalties) is not the result of a voluntary act under the customer’s control that could excuse the lender for charging a criminal interest rate (Garland v Consumers’ Gas Co, 1998. 3 SCR 112 at paras 34–35, 40, 48, and 65 ).
• Defences
• The borrower’s willingness to enter into an agreement to pay a criminal interest rate is not a defence. However, proof that the accused made a mistake about the terms of the loan could be a defence (R v McRobb (1984), 20 CCC (3d) 493 (Ont Co Ct) at para 35, aff’d in part (1986), 32 CCC (3d) 479 (Ont CA)).