There seems to be “no clear oversight” over such lenders and as long as they don’t cross the 60-per-cent threshold, they seem to be in the clear. Photo: Shutterstock.
A recent court decision out of the Court of Appeal of Alberta is probably going to raise more than a few eyebrows.
Legal Feeds has just reported on the case Settlement Lenders Inc. v. Blicharz. In the case, Lucyna Blicharz was asking the court for more time to appeal and file an appeal record.
Her initial case was about three promissory notes, which she had signed with Settlement Lenders Inc. and which amounted to a very high rate of interest. Settlement Lenders is a company that lends money to people to help them pay for legal proceedings. She lost her case and was ordered to pay the lender.
The court found that although the interest rate was “shockingly high” at 48 per cent, and a “marked departure from conventional lending rates,” the court nonetheless found that it should stand as it wasn’t an illegal rate of interest as set out in the Criminal Code.
This raises the question, do we need to re-examine whether higher caps need to be set on the lending rates which are allowable in Canada? Right now, an interest rate does not contravene the Criminal Code as long as it below 60 per cent.
Yet, how can an interest rate of 48 per cent be justified under the law?
It is understandable that lenders want to make profit when lending money, but reasonable limits need to exist as to how much is too much. After all, the idea is that people should be able to pay off their loans within a reasonable amount of time and not be indebted in perpetuity.
Though this predatory type of lending is nothing new, the interest rates that are being charged are still alarming. Institutions like Money Mart and Easyfinancial Services Ltd., lend at rates of 59.9 per cent and 46.9 per cent respectively.
Unfortunately, there seems to be “no clear oversight” over such lenders and as long as they don’t cross the 60-per-cent threshold, they seem to be in the clear.
ACORN, an anti-poverty group, wants Ottawa to lower the legal interest rate to 30 per cent from 60, noting that 25 states in the United States have already created laws that put restrictions on high-interest loans.
So why is Canada not following suit?