INTRODUCTION AND BRIEF DESCRIPTION
Section 347(2) defines interest for the purposes of the section, which deals with criminalizing excessively high interest rates charged on loans or credit.
SECTION WORDING
347(2) In this section, "interest" means the aggregate of all charges and expenses, whether in the form of a fee, fine, penalty, commission or other similar charge or expense or in any other form, paid or payable for the advancing of credit under an agreement or arrangement, by or on behalf of the person to whom the credit is or is to be advanced, irrespective of the person to whom any such charges and expenses are or are to be paid or payable, but does not include any repayment of credit advanced or any insurance charge, official fee, overdraft charge, required deposit balance or, in the case of a mortgage transaction, any amount required to be paid on account of property taxes.
EXPLANATION
Section 347(2) of the Criminal Code of Canada defines the term "interest" for the purposes of section 347 of the Code. Section 347 of the Code establishes criminal penalties for charging criminal interest rates in relation to credit agreements or arrangements. The section applies to all types of credit agreements, including loans, credit cards, and mortgages, among others. The definition of "interest" in section 347(2) is broad and includes all charges and expenses, whether in the form of fees, fines, penalties, commissions, or any other similar charge or expense, that are paid or payable for the advancing of credit under an agreement or arrangement. This includes charges and expenses paid by or on behalf of the person to whom the credit is or will be advanced, regardless of the person to whom such charges and expenses are or will be paid. However, certain charges and expenses are excluded from the definition of "interest." These include any repayment of credit advanced, any insurance charge, official fee, overdraft charge, required deposit balance, and any amount required to be paid on account of property taxes in the case of a mortgage transaction. The purpose of section 347 of the Criminal Code is to prevent lenders from charging unreasonable and exploitative interest rates on credit agreements or arrangements. Any person who charges a criminal rate of interest, which is defined as an effective annual rate of interest over 60%, can be found guilty of an indictable offense and may face imprisonment for up to five years. In addition, the offender may be required to pay a fine and to forfeit any property or proceeds obtained through the prohibited activity. In summary, section 347(2) of the Criminal Code of Canada is an important provision that defines the term "interest" for the purposes of section 347, which establishes criminal penalties for charging criminal interest rates in relation to credit agreements or arrangements.
COMMENTARY
Section 347(2) of the Criminal Code of Canada provides a definition of the term interest" as it relates to the criminal offence of extortionate lending. Essentially, this section aims to clarify what constitutes interest for the purposes of determining whether or not a lender has engaged in illegal lending practices. The first part of the definition specifies that interest includes all charges and expenses, regardless of their form, that are paid or payable for the advancing of credit under an agreement. This language is broad and inclusive, which is likely intentional given the serious nature of the offence in question. The goal here is to ensure that lenders cannot simply repackage their charges and expenses in alternative forms in an attempt to avoid prosecution. The definition goes on to note that the person to whom the charges and expenses are paid or payable is irrelevant for the purposes of this section. This is an important clarification, as it prevents lenders from attempting to evade prosecution on the basis that they paid these charges and expenses to a third party rather than to themselves directly. However, the definition does exclude certain forms of charges and expenses from the scope of the term interest". Specifically, it excludes any repayment of credit advanced, insurance charges, official fees, overdraft charges, required deposit balances, and certain amounts required to be paid on account of property taxes in the case of a mortgage transaction. These exclusions are reasonable, as they reflect charges and expenses that are not necessarily related to the advancing of credit. For example, requiring a deposit balance is a common practice among lenders to ensure that borrowers have some skin in the game and are less likely to default on their loans. Similarly, property taxes are a legitimate expense that borrowers would have to pay regardless of whether or not they took out a mortgage. Overall, the definition of interest" provided in section 347(2) of the Criminal Code of Canada is fairly comprehensive and should ensure that lenders cannot engage in prohibited practices such as extortionate lending without facing legal consequences. The inclusion of exclusions for certain charges and expenses helps to prevent lenders from being unjustly prosecuted for legitimate practices, while still allowing law enforcement to go after those who are engaging in predatory or illegal activities.
STRATEGY
Section 347(2) of the Criminal Code of Canada provides a definition of interest" that covers all charges and expenses associated with the advancing of credit, except for those explicitly listed in the section. This definition is critical for the application of Section 347, which prohibits the charging of criminal interest rates. The section sets out a maximum interest rate that a lender can charge, and any rate above this ceiling is considered criminal. This provision is intended to protect borrowers from predatory lending practices, which can trap them in a cycle of debt. When dealing with Section 347, there are several strategic considerations that lenders and borrowers must take into account. Below are some strategies that could be employed: 1. Understanding the definition of interest: The definition of interest" under Section 347(2) is broad and includes all charges and expenses related to the advancing of credit. Lenders must be aware of all charges they impose on borrowers and must ensure that they do not exceed the maximum interest rate set out in the section. 2. Compliance with the maximum interest rate: Under Section 347, the maximum interest rate that a lender can charge is generally 60% per year. Compliance with this maximum rate is critical to avoid criminal charges. Lenders must ensure that their interest rates do not exceed this ceiling. 3. Disclosure requirements: Lenders must disclose all charges and fees associated with the credit agreement accurately. This information must be presented in a clear and understandable manner, and all charges must be clearly delineated. Failure to provide accurate and complete disclosure can result in criminal charges under Section 347. 4. Negotiation and dispute resolution: Borrowers can negotiate with lenders to reduce the interest rate or to extend the repayment period. If a borrower has concerns about the charges or fees imposed by a lender, they can initiate a dispute resolution process to resolve the issue. 5. Alternative financing options: If a borrower cannot obtain conventional credit due to a poor credit history or other reasons, they may consider alternative financing options such as peer-to-peer lending or microfinance. These options may have more flexible repayment terms and lower interest rates. In conclusion, Section 347 of the Criminal Code of Canada is an essential provision that protects borrowers from exorbitant interest rates. Lenders and borrowers must understand the definition of interest" under the section and comply with the maximum interest rate. Accurate disclosure, negotiation and dispute resolution, and alternative financing options are some of the strategies that can be employed when dealing with this provision.