Definition
Section 347 of the Canadian Criminal Code makes criminal any agreement or arrangement that provides for an effective annual interest rate exceeding 60%. Anyone who enters into or receives payment of such an agreement commits an offence punishable by imprisonment.
This 60% threshold may seem very high, but becomes relevant for: - Very short-term loans (payday loans, bridge loans) where fixed fees represent a very high APR over a short period - Private lender fees on loans of a few weeks - Credit card cash advance fees
APR calculation on a short-term loan: - $1,000 loan for 2 weeks with $100 fee - 2-week effective rate: 10% - APR: (1 + 0.10)^(52/2) - 1 ≈ 1,300% → criminal
Exceptions: some payday loans are regulated by provinces, which received a partial exemption from s. 347 to allow their business models.