On the news a couple of years ago, in BC, they said that if you are NOT an financial institution, it was illegal to charge interest on any money that you have lent out. Now I live in Alberta. And apparently this is ok in Alberta. Is this true? Would this law not be federal instead of provincial? And is it ok to charge interest if I am NOT a financial institution? And if it is ok, then would I not then be branded as a Loan Shark? Is that NOT the definition of a Loan Shark?
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3 Answers
Charging interest by non financial institutions is allowable.
There is only one definition of illegal or criminal interest and this is regarding loan sharks. Section 347 of the Canadian Criminal Code makes it illegal to charge more than 60% annually.
The biggest debate was whether or not "pay day" loan companies were breaking the law. The recent bill C-26 amends this section to exempt "pay day" loans from this definition.
Almost every company I know of charges something like 2% per month on past due accounts. They are not financial institutions, so it's probably quite legal.
answered Nov 17, 2009 at 4:17
I have never seen anything that suggest it's illegal to charge "fair" interests on loans, personally or commercially. Even CRA has long allowed the use of properly written "promissory notes" as the proof for personal loans between individuals, as long as the rates are consistent with their current "subscribed rate" (think bank's prime rate, if you don't want to having to look it up on CRA site).
Loan Shark is someone or some entity that charges significantly higher interests than the rates posted by FI's. We are talking about 30+% versus the bank's 10%.
Yes, we can argue the FI's are acting like Loan Shark when it comes to credit card interest rates, but that's another discussion.
