INTRODUCTION AND BRIEF DESCRIPTION
This section defines official fee in relation to perfecting security under an agreement for credit.
SECTION WORDING
347(2) In this section, "official fee" means a fee required by law to be paid to any governmental authority in connection with perfecting any security under an agreement or arrangement for the advancing of credit.
EXPLANATION
Section 347(2) of the Criminal Code of Canada defines the term official fee" in the context of the broader provisions related to criminal usury, or loan sharking. The section provides that an official fee refers to any fee that must be paid to a government authority in order to perfect a security, such as a lien or mortgage, that is being used as collateral for a loan. The context of Section 347(2) is important because it helps to clarify the types of fees that are exempt from the criminal usury provisions of the Criminal Code. In Canada, it is illegal to charge interest rates above 60% per year on loans. However, there are exceptions to this rule, such as when a lender charges an official fee in addition to interest. For example, if a bank is lending money to a business and requires a mortgage on the business's property as collateral, the bank may be required to pay a fee to the government to register that mortgage. This fee is considered an official fee and is exempt from the criminal usury provisions of the Criminal Code. However, if the bank were to charge an additional, arbitrary fee that is not required by law, this would be considered a form of loan sharking and would be illegal under Section 347(1) of the Criminal Code. Overall, Section 347(2) of the Criminal Code of Canada is an important provision that helps to clarify the legal and illegal practices related to lending money and charging interest rates. It is aimed at protecting borrowers from predatory lending practices while still allowing lenders to recover some of the costs associated with lending, such as mandatory government fees.
COMMENTARY
Section 347(2) of the Criminal Code of Canada lays out the definition of official fee" in the context of the criminal offense of criminal interest rate". This section has significant implications for the lending market in Canada, as it sets forth the limit on the amount that a lender can charge for lending money. The Criminal Code of Canada's section 347 states that it is a criminal offense to charge an effective annual interest rate of more than 60%. This interest rate includes all fees, penalties, and charges that the borrower is required to pay over the course of the loan. If a lender is found to be charging an interest rate over this limit, they can face criminal charges. However, section 347(2) of the Criminal Code of Canada provides an important exception to this rule. It defines official fee" as a fee that is required by law to be paid to any governmental authority in connection with perfecting any security under an agreement or arrangement for the advancing of credit. This means that any fee charged by a governmental authority for the purpose of recording or registering a loan does not count towards the criminal interest rate limit of 60%. The reason for this exception is to ensure that lenders are able to recover any costs associated with registering or recording a loan, without being penalized for it. Without this exception, lenders would be forced to absorb these costs themselves, which could potentially result in higher interest rates for borrowers. Furthermore, by exempting official fees" from the interest rate cap, it can also encourage lenders to properly register or record their loans, as failure to do so could result in legal consequences. It's worth noting, however, that this exception only applies to fees required by law to be paid to governmental authorities. Fees charged by lenders themselves do count towards the criminal interest rate limit. So if a lender charges an additional fee apart from the registered fee and charges an interest rate that results in an effective annual interest rate of over 60%, they would still be in violation of the Criminal Code of Canada. In conclusion, section 347(2) of the Criminal Code of Canada is an important provision that helps to ensure fair lending practices in Canada. By defining official fee" and exempting it from the interest rate cap, it helps to prevent lenders from being unfairly penalized for registration or recording fees, while also encouraging proper loan registration. However, it's important to remember that this exception only applies to fees charged by governmental authorities, and that lenders must still comply with the criminal interest rate limit of 60%.
STRATEGY
Section 347(2) of the Criminal Code of Canada deals with the offence of lending money at criminal rates. This section is intended to protect borrowers from unscrupulous lenders who charge exorbitant interest rates and fees for loans. While this law is meant to be a deterrent against such practices, it is important for lenders and borrowers to be aware of some strategic considerations when dealing with this section of the Criminal Code of Canada. One of the main strategic considerations for lenders is to ensure that they are not charging rates of interest or fees that would be considered criminal under section 347(2). This means that lenders must carefully review and understand the legal requirements for charging interest and fees on loans, and ensure that they are not violating the provisions of this section of the Criminal Code. This may involve seeking legal advice or consulting with regulatory authorities to ensure compliance with the law. Another strategic consideration for lenders is to tailor their lending practices to comply with the legal requirements of section 347(2) while still remaining profitable. This may require lenders to explore alternative sources of funding or to adjust their lending practices to account for the legal limitations on interest rates and fees. For example, lenders may consider offering shorter-term loans or requiring collateral to compensate for the lower allowable interest rates. For borrowers, it is important to be aware of the legality of the loans they are considering and to understand their rights under the law. This includes understanding the legal requirements for interest rates and fees, as well as the process for resolving disputes with lenders. If a borrower believes that they have been charged criminal rates of interest or fees, they may have legal recourse to seek a refund or damages from the lender. Another strategic consideration for borrowers is to shop around for the best loan terms and interest rates. This may involve researching multiple lenders and comparing their rates and terms, or using a broker or other loan-matching service to find the best deal. Borrowers may also consider alternative funding sources, such as credit unions or peer-to-peer lending platforms, which may offer more competitive rates and terms. Overall, dealing with section 347(2) of the Criminal Code of Canada requires lenders and borrowers to be informed, strategic, and compliant with the legal requirements for lending and borrowing. By taking these considerations into account, lenders and borrowers can ensure that they are operating within the bounds of the law and protecting themselves from potential legal and financial risks.