Liberals go after predatory lending

In moves aimed at supporting lower-income Canadians, the federal government is going after predatory lending and will pilot an automatic tax filing service, as well as expand eligibility for an existing free filing service.

The government proposed in Budget 2023 to change the Criminal Code to lower the maximum annual interest rate that payday lenders can charge to 35% and to change the maximum amount that payday lenders can charge people for the amount they borrow to $14 per $100 borrowed.

The Criminal Code currently caps the legal interest rate at 60% effective annual interest, which has been the case since it was set in 1980 — a time when the key overnight rate set by the Bank of Canada was 21%, compared to the 4.5% it is today.

There is an exemption in most provinces for payday loans of up to $1,500 for 62 days or less, which means in some provinces the maximum annualized percentage rate is over 400%.

The rate is 35% in Quebec, where courts have ruled anything higher would violate provincial consumer protection legislation. As a result, payday loan options there are limited.

The budget also proposed that Canada Revenue Agency pilot, starting next year, a new automatic filing service intended to help vulnerable Canadians receive benefits.

“Following consultations with stakeholders and community organizations, the CRA will present a plan in 2024 to expand this service even further,” the budget document said.

Automatic tax filing was first promised in the 2020 speech from the throne.

In Quebec’s 2023 budget, the province proposed sending out pre-filled provincial tax returns to low-income households beginning next year. Under the pilot project for the 2023 tax year, individuals who receive pre-filled returns will have the option of confirming Revenu Québec’s proposed tax return or completing their own.

The government has also stated it will nearly triple the number of eligible Canadians for its File My Return program to two million by 2025. File My Return, which has existed since 2018, allows low-income taxpayers and those with simple situations to file their returns for free over the phone after answering a series of questions.

The government will report on its progress on expanding eligibility in 2024, the budget said.

Staff, with files from The Canadian Press

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