Criminalizing Usury: The Evolution and Application of S. 347 of the Criminal Code

• Author: Sara Smyth
• Position: Is a third year law student at the University of Victoria
• Pages: 24-31

The Evolution and

Application of S. 347 of the

Criminal Code

Usury:

Criminalizing

1S.C. 1906, c. 32.

2M. A. Waldron, The

Law of Interest In

Canada, (Scarborough:

Carswell, 1992) at 12.

3S.C. 1939, c. 23.

4See J.S. Zeigel, “The

Usury Provisions in the

Criminal Code: The

Chickens Come Home

to Roost” (1986) 11

Can. Bus. L.J. 233 at

234.

5See J.S. Ziegel,

“Comment: Bill C-44:

Repeal of the Small

Loans Act and

Enactment of a New

Usury Law” (1981) 59

Can. Bar Rev. 188 at

192.

6Ibid. at 189.

Sara Smyth is a

third year law student

at the University of

Victoria. After

graduation, Sara will

work as a judicial law

clerk at the British

Columbia Court of

Appeal.

Introduction

The Criminal Code of Canada contains an anti- loan sharking provision

which makes it a criminal offence to charge interest rates in excess of

sixty per cent per annum. Section 347 has been used to regulate a

wide variety of consumer and commercial transactions, regardless of their

form or the amount at issue. This paper will begin by providing a brief review

of the history of s. 347 before examining recent developments in the related

case law. It will be argued that while the section could ultimately serve a

useful purpose, it is currently being interpreted and applied so broadly by

the courts that it is not fulfilling its prosecutorial mandate.

Historical Background

Canadian lawmakers have long grappled with controlling the

problem of loan sharking in which a lender, commonly referred to as a “loan

shark,” lends money at an extortionate rate of interest. Parliament first

responded to this threat by regulating interest rates on small consumer loans

through the creation of the Money-Lender’s Act.1The Act limited the rates of

interest on loans under $500 made by money lenders to 12 per cent per

annum. Such legislation quickly proved ineffective, however, as lenders

disguised their usurious interest charges as “legitimate” lending fees required

as a pre-condition for the granting of a loan.2

Parliament then introduced the Small Loans Act,3which placed a

limit on the amount of interest that could be charged on loans up to

$1,500.4The small loans legislation was created during a highly restrictive

consumer credit market, when there were only a small handful of lenders

available to grant small loans to ordinary consumers. The legislation reflected

the need to protect vulnerable consumers who were often driven into the

hands of street-level loan sharks.5

The Small Loans Act was not free from criticism, however.6The

$1,500 ceiling became unworkable given the dramatic increase in the cost of

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2244

The author would like

to thank Professor

Mary Anne Waldron

for her insightful

comments and

guidance.