Interest Act - 2008 Report




Report of the working Group

Readers are cautioned that the ideas or conclusions set forth in this paper, including any proposed statutory language and any comments or recommendations, may not have not been adopted by the Uniform Law Conference of Canada. They may not necessarily reflect the views of the Conference and its Delegates. Please consult the Resolutions on this topic as adopted by the Conference at the Annual meeting.

Quebec City, Quebec August, 2008

May 2008


[1] In September 2007, in Charlottetown, P.E.I., Professor Thomas G.W. Telfer of the University of Western Ontario presented a paper on the Interest Act, R.S.C. 1985, c.I-15, entitled “Preliminary Background Paper on the Canada Interest Act” to the Uniform Law Conference of Canada.

[2] Professor Telfer’s paper examined the history of the Interest Act and the subject-matters covered by its provisions. He reviewed the Act’s original purposes and questioned whether, in light of those original purposes, the Interest Act had continuing relevance in today’s commercial reality.

[3] After receiving Professor Telfer’s paper and oral presentation, the Commercial Section of the ULCC resolved to form a working group to further consider the issues raised by his report and to examine the provisions of the Interest Act in light of provincial legislation and common law developments.

[4] Most ULCC projects raise questions and concerns as to the uniformity of provincial and territorial legislation. This project does not; instead, it raises questions as to the extent to which the provisions of the federal Interest Act are duplicated in existing provincial and territorial legislation and the extent to which the Interest Act provisions, whether they are duplicated in provincial and territorial legislation or not, remain relevant.

Working Group Membership

[5] The working group on this project consisted of Professor Tom Telfer, Professor Mary Anne Waldron of the University of Victoria, David Young of Lang Michener LLP (Toronto) and Lisa Peters of Lawson Lundell LLP (Vancouver), who is a member of the B.C. delegation to the ULCC. Michelle Bissenden of Lawson Lundell LLP provided research assistance.

Methodology Adopted

[6] The working group assembled a collection of provisions in provincial and territorial statutes and regulations dealing with interest rates, disclosure of the cost of borrowing and unconscionable transactions. It then considered the relationship between those provisions and the existing provisions of the Interest Act in the context of the jurisprudence on those provisions and considered to what extent the Interest Act provisions are duplicated or made redundant by the provincial and territorial legislation.

[7] Where the Interest Act provision in question had no equivalent in provincial and territorial legislation, the working group considered whether the provision continued to serve a valid regulatory purpose in light of the jurisprudence considering it and modern lending and contract law and practice.

[8] The working group also reviewed provisions in other federal statutes dealing with interest rates.

Preliminary Nature of Report and Desirability of Consultation

[9] The working group was not formed until early 2008. Because of the short time frame available for carrying out our deliberations, this report and the recommendations contained in it are preliminary only. The working group would like to continue its work into 2009 and, in particular, to have the ability to consult with lawyers practicing in the areas of real estate, consumer and banking law and with consumer and lender associations.

Constitutional Background

[10] The subject-matter of “Interest” was granted exclusively to the federal Parliament under subsection 91(19) of the Constitution Act, 1867. As will be apparent from this report, the provinces and territories have enacted legislation dealing directly with interest rates and also have dealt with that subject-matter more indirectly by enacting consumer legislation. From a constitutional perspective, such legislation has survived constitutional challenges where the legislation can be justified under a head of jurisdiction that courts do not classify as primarily concerned with financial matters and therefore not a major erosion of the federal authority.[1] The fact is, however, that little of the existing provincial and territorial legislation has ever been the subject of a constitutional challenge. Because the body of constitutional law in this area is small, and much of it dates from other decades or centuries, the boundaries of the federal power and the extent to which provinces and territories can encroach upon it are not clear.

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