Canada's Legal Interest Rate Cap – What You Need to Know

Canada's Criminal Code sets a maximum interest rate of 60% effective annual rate (including all fees and charges). Any loan that exceeds this rate is considered criminal and can be prosecuted.

The Loophole

Some predatory lenders try to bypass this cap by:

• Bundling "fees" that are not called interest
• Registering as payday lenders (which have different rules)
• Operating entirely outside the regulated system

The Gerstel Example

Harold Gerstel pushed effective rates to 76% – well above the legal limit – by bundling hidden fees into his loans . This is exactly the kind of behavior the cap is designed to prevent.

What You Can Learn

• Know your rights: in Canada, no loan can legally charge more than 60% effective annual interest
• If a lender is charging more than that, report them to FSRA or the police
• "Fees" count toward the interest calculation – do not be fooled by low "interest rates" combined with high "service fees"