Question 1

What is the maximum interest rate allowed in Canada?

Accepted Answer

Under Criminal Code s. 347, charging interest exceeding 35% per annum (reduced from 60% by Bill C-46 for most agreements) is a criminal offence. The Interest Act also requires clear annual rate disclosure.

Question 2

What happens if the debtor defaults on payments?

Accepted Answer

The agreement typically includes an acceleration clause allowing the creditor to demand the full remaining balance. Provincial limitation periods (usually 2 years) apply to debt collection.

Question 3

Do I need to report forgiven debt to CRA?

Accepted Answer

Yes, if a creditor forgives more than $200 of debt, the forgiven amount may be considered taxable income. The creditor must file a T4A slip reporting the forgiven amount.

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