Payday Loan Laws in Canada

How payday loans are regulated in Canada

There is no single “payday loan law” in Canada. Instead, one federal rule in the Criminal Code sets an outer ceiling on the cost of credit, and a narrow carve-out lets provinces run their own licensed payday systems beneath it. That is why the rules feel national in shape but differ in the details from one province to the next.

The national baseline is on this page. The province-specific exemptions, caps, and licensing rules — the carve-outs that actually determine legality on the ground — are broken down in the province articles linked below.

The federal ceiling: the criminal rate of interest

Section 347 of the Criminal Code makes it an offence to receive interest above a set annual rate. As of 2025 that ceiling is an effective annual rate of 35%:

“criminal rate means an annual percentage rate of interest calculated in accordance with generally accepted actuarial practices and principles that exceeds 35 per cent on the credit advanced”^[1]— Criminal Code, R.S.C. 1985, c. C-46, s. 347 (criminal interest rate)

“Interest” here is broad — it captures fees, penalties, and most charges, not just the posted rate^[1]. A conventional short-term payday loan, priced per hundred dollars over two weeks, implies an annual rate far above 35%. Left alone, the payday business model would breach section 347. The payday exemption is what resolves that tension.

The carve-out: section 347.1

Section 347.1 first defines, precisely, what a “payday loan” is:

“payday loan means an advancement of money in exchange for a post-dated cheque, a pre-authorized debit or a future payment of a similar nature but not for any guarantee, suretyship, overdraft protection or security on property and not through a margin loan, pawnbroking, a line of credit or a credit card.”^[2]— Criminal Code, R.S.C. 1985, c. C-46, s. 347.1 (payday loans)

It then switches off the criminal-rate rule for payday lenders — but only when four conditions are all met:

“Section 347 and section 2 of the Interest Act do not apply to a person … if (a) the amount of money that is or would be advanced under the agreement is $1,500 or less and the term of the agreement is or would be 62 days or less; (a.1) the total cost of borrowing under the agreement does not or would not exceed the limit fixed by regulation; (b) the person is licensed or otherwise specifically authorized under the laws of a province to enter into the agreement; and (c) the province is designated under subsection (3).”^[3]— Criminal Code, s. 347.1(2) — non-application (payday exemption conditions)

• The loan is $1,500 or less and the term is 62 days or less^[3].
• The total cost of borrowing stays within the limit fixed by federal regulation^[3] — since January 1, 2025 that limit is $14 per $100 advanced^[5].
• The lender is licensed or specifically authorized under provincial law^[3].
• The province is federally designated for payday lending^[3].

What a payday lender can actually charge

The $14-per-$100 figure is a total cost of borrowing limit, not just an interest rate. Everything a licensed lender charges to make the loan — interest, brokerage, administration, and setup fees — has to fit inside that single cap^[5]. A lender cannot advertise “$14 per $100” and then stack extra origination or processing fees on top.

The regulation does carve out two narrow charges that sit outside the cap — and only when the province specifically authorizes them:

“In determining whether a payday loan agreement complies with the limit fixed under subsection (1), the total cost of borrowing does not include a fee, fine, penalty or other charge that is specifically authorized under the applicable provincial law and imposed on the borrower (a) for defaulting in any payment; or (b) for providing a dishonoured cheque or other dishonoured instrument, if the amount of the fee, fine, penalty or other charge is $20 or less.”^[6]— Criminal Interest Rate Regulations, SOR/2024-114, s. 3(2)

• A default fee — a charge for defaulting in any payment^[6].
• A dishonoured-payment fee of $20 or less — for a bounced cheque or other dishonoured instrument (for example, a failed pre-authorized debit)^[6].

Designation: how a province earns the carve-out

A province only gets the exemption if the federal government designates it, and it is only designated once it has real borrower-protection legislation and a cost cap in place:

“The Governor in Council shall, by order and at the request of the lieutenant governor in council of a province, designate the province for the purposes of this section if the province has legislative measures that protect recipients of payday loans and that provide for limits on the total cost of borrowing under the agreements.”^[4]— Criminal Code, s. 347.1(3) — designation of province

This is the hinge the whole system turns on. Nine provinces have sought and received designation and run licensed payday regimes. Québec and the three territories have not — so the carve-out is unavailable there, and the 35% ceiling^[1] governs any lender. The Financial Consumer Agency of Canada summarizes the province-by-province picture as well^[7].

How these rules decide who is listed under “payday”

We use the framework above to keep the payday category honest. A business is treated as eligible for payday classification in a province only when that province is designated and the operator is expected to hold the required provincial licence. In non-designated jurisdictions, a storefront advertising payday loans is flagged for review rather than listed as a compliant payday lender.

Province and territory breakdown

Each jurisdiction below inherits the national rules on this page, then adds its own carve-outs — the cap, the governing Act, and the licensing body. Open a province for the sourced detail.