Fintechs Canada responded to the government’s legislative proposals relating to the criminal interest rate under the Criminal Code.
Among the proposed amendments is a change to the definition of interest in the Criminal Code to include all loan insurance charges paid by or on behalf of the borrower in the calculation of interest.
In its submission, Fintechs Canada recommended that only mandatory insurance tied to loan products should be included. “Including the cost of optional insurance in the interest calculation may mislead borrowers into thinking the insurance is a required part of the loan when it is not,” the association stated.
Fintechs Canada also urged the government to more directly curb predatory behaviour with market conduct regulation, rather than further amendments to the Criminal Code.The association advised the government to focus on:
- Hidden fees: Predatory lenders may hide the true cost of loans, making it harder for borrowers to make informed decisions.
- Unclear terms and conditions: Borrowers may face unexpected costs, like balloon payments or prepayment penalties, due to unclear loan terms.
- Debt traps: Some lenders push borrowers into a cycle of debt by encouraging refinancing or structuring loans to escalate costs.
- Aggressive collection tactics: Predatory lenders may use high-pressure collection efforts, like incessant phone calls, to exploit vulnerable borrowers.
To view Fintech Canada’s submission, click here.
