Late Charges

"Fees for late payments may be adjudged to constitute a criminal rate of interest.

347 (1) Despite any other Act of Parliament, every person who enters or offers to enter into an agreement or arrangement to receive interest at a criminal rate, who advertises an offer to enter into an agreement or arrangement that provides for the receipt of interest at a criminal rate or who receives a payment or partial payment of interest at a criminal rate is

(a) guilty of an indictable offence and liable to imprisonment for a term not exceeding five years; or

(b) guilty of an offence punishable on summary conviction and liable to a fine of not more than $25,000 or to imprisonment for a term of not more than two years less a day, or to both. (R.S.C., 1985, c. C-46)"

It is prohibited to enter into an agreement to receive, or to in fact receive, interest at a criminal rate [section 347(1)]. "Criminal rate" is defined as an effective annual rate of interest calculated in accordance with generally accepted actuarial practices and principles that exceeds 60% on the credit advanced under an agreement [s. 347(2)]. Contravention of this provision is either an indictable offence carrying a punishment of imprisonment for a term not exceeding five years, or an offence punishable on summary conviction by way of a fine not exceeding twenty-five thousand dollars or imprisonment for a term not exceeding six months or both. In Garland v. Consumers' Gas Co. [2004] 1 S.C.R. 629, the Supreme Court of Canada granted restitution for unjust enrichment arising from late payment penalties levied by a utility company in excess of the interest limit prescribed by section 347 of the Criminal Code.