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💵 Government Interest Rate Cap to Remove up to $10.7 Billion from the Canadian Economy, Cut Off Millions of Canadians from Access to Loans

Thursday, 21 March 2024 12:00.PM

A new report conducted by Ernst & Young LLP, commissioned by the Canadian Lenders Association (CLA), highlights the severe, far-reaching consequences of the federal government's new interest rate cap. The study reveals that a reduction to the allowable rate of interest will remove $10.7 billion from the Canadian economy each year, eliminate nearly 50,000 jobs and cost borrowers up to $4.4 billion in additional interest payments to payday lenders and illegal lenders, as a result of being turned away from regulated lenders.

"The report demonstrates the broad-based, highly damaging impacts that this change will have on the Canadian economy," said Gary Schwartz, President and Chief Executive Officer of the Canadian Lenders Association. "It is clear, that the proposed changes to the maximum allowable rate of interest will only exacerbate the existing affordability challenges. We're looking at billions of dollars of lost GDP and thousands of lost jobs, which is highly concerning. Unfortunately, this is another example of the Federal Government abandoning evidence-based decision making. We continue to request that the Minister of Finance meet with stakeholders to collaborate on a better solution that will truly support the financial health of Canadians."

Canada's Criminal Code currently caps the criminal rate of interest at an APR of 47.2%. However, the Liberal government has recently passed legislation to reduce this rate to 35%. As a result of this change, the report found the Canadian economy will suffer:


• $10.7 billion in lost GDP

• 2 million consumers at risk of losing access to regulated loans

• $4.4 Billion in excess interest paid to payday and illegal lenders as a result of Canadians being turned away from regulated lenders.

• 49,148 jobs eliminated

This economic impact analysis underscores the urgent need for a balanced approach to policy-making that protects Canadians' access to credit while safeguarding the integrity of the financial system. The findings emphasize the necessity for thorough consideration of the broader socio-economic implications of regulatory changes.

The CLA continues to seek out urgent cooperation from government to avoid eliminating credit for millions of Canadians.

SOURCE: Canadian Lenders Association

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