section 347(8)

INTRODUCTION AND BRIEF DESCRIPTION

The section does not apply to transactions covered by the Tax Rebate Discounting Act.

SECTION WORDING

347(8) This section does not apply to any transaction to which the Tax Rebate Discounting Act applies.

EXPLANATION

Section 347(8) of the Criminal Code of Canada is an exemption clause that excludes certain transactions from the scope of section 347. This section deals with the criminal offense of high-interest loans or usury, which prohibits lenders from charging exorbitant interest rates on loans. Specifically, section 347(1) sets the maximum criminal interest rate at 60% per annum. Anything above that is considered a criminal offense. However, section 347(8) carves out an exception. It states that the criminal interest rate provisions do not apply to any transaction to which the Tax Rebate Discounting Act applies. Essentially, this means that lenders who are engaged in tax rebate discounting are exempt from the criminal interest rate offence under section 347. The Tax Rebate Discounting Act allows lenders to purchase a tax refund from a borrower at a discounted rate. This means that the lender will provide the borrower with cash upfront in exchange for the borrower assigning their tax refund to the lender. The lender then receives the full tax refund from the government when it is issued, allowing them to earn a profit from the discounted purchase price. The exemption provided by section 347(8) acknowledges that tax rebate discounting transactions are not inherently exploitative or predatory, as they provide a valuable service to borrowers who may need cash in advance of their tax refund. Therefore, lenders engaged in tax rebate discounting are not subject to criminal interest rate charges, as long as they stay within the parameters set by the Tax Rebate Discounting Act.

COMMENTARY

Section 347(8) of the Criminal Code of Canada provides an exemption to the provisions outlined in section 347 of the Criminal Code for transactions that are covered by the Tax Rebate Discounting Act. Section 347 of the Criminal Code outlines the offence of criminal interest rates, in which a person or entity charges interest rates that are deemed to be extortionist or unjustly enriching. The Tax Rebate Discounting Act, which was enacted in 2018, allows low-income individuals to receive an advance on their tax rebates through a third-party provider. This third-party provider may charge a fee for their services, which is deducted from the upfront rebate amount. Because this fee may be higher than what would be considered a reasonable interest rate, it would technically fall under the provisions outlined in section 347 of the Criminal Code. However, section 347(8) specifically exempts these types of transactions from the criminal interest rate provisions. The Tax Rebate Discounting Act was introduced as a way to help low-income individuals access their tax refunds sooner, without having to wait for the government to process their claims. By partnering with third-party providers, the government hoped to offer a more efficient and accessible way for individuals to receive their refunds. However, there were concerns raised about the fees charged by these providers, which were seen as potentially exploiting vulnerable individuals who may be in need of quick access to cash. The exemption provided in section 347(8) acknowledges the unique circumstances of transactions covered by the Tax Rebate Discounting Act. While the fees charged by third-party providers may be higher than what would be considered reasonable under normal circumstances, they are seen as necessary to support the overall goals of the program. Without the ability to charge these fees, it may be difficult for third-party providers to justify their participation in the program, which could limit access to much-needed financial support for low-income individuals. Overall, section 347(8) provides an important exemption to the criminal interest rate provisions outlined in section 347 of the Criminal Code. It recognizes the unique circumstances of transactions covered by the Tax Rebate Discounting Act, and offers a way for low-income individuals to access their tax refunds in a timely and efficient manner. While there may be concerns about the fees charged by third-party providers, the benefits of the program likely outweigh these concerns, particularly for individuals who may be struggling to make ends meet. By offering this exemption, the government is able to support a more inclusive and accessible tax system, which benefits all Canadians.

STRATEGY

Section 347(8) of the Criminal Code of Canada provides an exemption to the prohibition on criminal interest rates in situations where the Tax Rebate Discounting Act applies. The Act allows individuals to sell their income tax refund to a third party at a discounted rate before they receive it from the government. Due to this exemption, certain lenders may seek to structure their lending practices to fall within the scope of the Act. Strategic considerations that lenders may take into account when dealing with this section of the Criminal Code include: 1) Assessing the viability of structuring loans as tax rebate discounting arrangements: Lenders may choose to structure their loans as tax rebate discounting arrangements, rather than conventional loans, to avoid falling afoul of the criminal interest rate provisions. However, lenders must ensure that both they and the borrower qualify under the Tax Rebate Discounting Act and that the transaction is conducted in compliance with all applicable laws and regulations. 2) Pricing loans to account for risk and costs: Even if a lender structures their loans as tax rebate discounting arrangements, they must still ensure that they are charging a fair price for their services. This may involve considering factors such as the borrower's creditworthiness, the risks associated with the loan, and the costs of administering the transaction. 3) Ensuring compliance with all applicable laws and regulations: Lenders must ensure that their business practices are compliant with all applicable laws and regulations, including those regulating lending practices, tax rebate discounting arrangements, and anti-money laundering requirements. 4) Mitigating reputational risks: Lenders may face reputational risks if they are perceived as exploiting vulnerable borrowers or engaging in high-risk lending practices. Lenders may consider implementing policies and procedures to address these risks, such as conducting due diligence on borrowers, offering loan counselling and financial literacy support, and being transparent about their lending practices. Strategies that lenders may employ to implement these considerations include: 1) Conducting comprehensive assessments of their lending practices: Lenders may conduct internal reviews of their lending practices to identify areas of potential risk. This may involve reviewing their loan agreements, policies and procedures, and compliance processes. 2) Engaging lawyers and consultants: Lenders may seek the advice of legal and financial professionals to ensure that their practices are compliant with applicable laws and regulations, and to develop policies and procedures to mitigate risk. 3) Offering financial literacy support: Lenders may offer education and support to borrowers to help them make informed financial decisions and avoid financial hardship. 4) Building a culture of compliance and responsible lending: Lenders may develop policies and procedures that emphasize compliance with applicable laws and regulations, customer service, and fair lending practices, and ensure that their employees are trained on these principles. In conclusion, while the exemption in Section 347(8) of the Criminal Code of Canada provides an opportunity for lenders to structure their lending practices to avoid criminal interest rates, lenders must still ensure that their business practices are compliant with all applicable laws and regulations and that they are charging fair prices for their services. By conducting comprehensive assessments of their lending practices, engaging professional advice, offering financial literacy support, and building a culture of compliance, lenders can mitigate their risks and operate in a responsible, sustainable manner.