Today, despite the existence of a mature lending market in Canada, many Canadians – over 8 million – do not qualify for loans at prime interest rates when they need it, because their credit scores indicate they are “higher-risk” for defaulting on loan repayments. Their only option is the regulated non-prime alternative lending market.

Lowering the maximum allowable rate of interest below an APR of 47% will mean these Canadians will be priced out of the lending market. Many of these everyday Canadians will not have access to credit and will not be able to obtain loans to cover essential expenses, such as paying for unexpected bills, auto repairs or consolidating debt.  It will not mean that borrowers will access the same loans at reduced interest rates: it simply means that lender will no longer be able to lend to a whole segment of customers.

Canadians with lower credit scores already have few options when they need credit. Eliminating access to credit would not eliminate the need of these millions of Canadians to access credit when unexpected expenses emerge, having to rely on payday lenders, pawn shops or even illegal lenders.

Without access to credit, the 8 million non-prime Canadians will struggle to rebuild their credit score and get back to borrowing at prime interest rates, as borrowing and repaying credit in a timely manner makes up the bulk (48%)^[2] of an individual’s credit score.

The government needs to ensure Canadians can still access the crucial credit they need and that can help them rebuild their credit scores and graduate them to prime lending.