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How payday loans are regulated in Canada, explained

Our U.S. payday loans explainer describes a federal vacuum that individual states fill very differently — some cap the cost tightly, others barely at all. Canada's structure runs the opposite direction. A payday loan is, by default, a Criminal Code violation no matter where in Canada it's made. What makes payday lending legal anywhere in the country at all is a specific federal opt-out that a province has to affirmatively claim — and one large province, Quebec, never has.

The starting point is criminal, not permissive

The Criminal Code's cap on the interest rate a lender can charge (discussed in more detail in our Canadian debt collection rules explainer) applies to every loan made in Canada by default, and a typical payday loan's cost — expressed as an annual rate — runs far above that cap. In 2007, Parliament added section 347.1 to the Criminal Code specifically to carve payday loans out from the criminal-rate offence, but only under conditions: the loan must be $1,500 or less, for a term of 62 days or less, made by a lender licensed under provincial law, and made in a province the federal government has formally designated under section 347.1(3). Absent that designation, the ordinary criminal rate cap simply applies, and a payday loan priced the way the product normally is priced would be a criminal-rate loan like any other.

Nine provinces opted in; Quebec and the territories didn't

To become designated, a province must enact its own legislative regime that licenses payday lenders and sets a real limit on the total cost of borrowing. Nine provinces have done this and hold a federal designation: British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, New Brunswick, Nova Scotia, Prince Edward Island, and Newfoundland and Labrador. Quebec has not sought designation, and neither have Yukon, the Northwest Territories, or Nunavut. Because none of them has the section 347.1 exemption, the ordinary federal criminal rate — 35% APR, the same cap discussed above — applies in full to any loan made there, payday or otherwise, well below what a conventional payday-loan structure needs to be profitable. The practical result isn't a technical gap so much as a functioning ban: storefront payday lending, as the product exists in the other nine provinces, doesn't operate in Quebec at all.

A patchwork narrows: one federal cost ceiling since 2025

Until recently, each of the nine designated provinces set its own maximum cost of borrowing per $100 loaned under its own payday-loan statute, and those limits varied meaningfully — Newfoundland and Labrador's was the lowest at $14 per $100 borrowed, while Nova Scotia, Manitoba, and Saskatchewan allowed as much as $17 per $100. The federal Criminal Interest Rate Regulations, which took effect January 1, 2025 alongside the broader 35% APR criminal-rate change, replaced that patchwork with a single federal ceiling: no more than $14 per $100 borrowed, in every designated province, regardless of what a province's own statute previously allowed. A dishonoured-payment fee of $20 or less, and up to 2.5% monthly interest on an amount that remains outstanding after the loan's term, sit outside that $14 calculation.

What that actually costs, in familiar terms: $14 per $100 sounds modest stated that way, but a typical two-week payday loan priced at that rate works out to an annualized cost of roughly 360% APR — the fee is simply expressed per-loan rather than annualized on the page you're handed. That's the same fixed-cost-per-borrowing-period structure our U.S. payday loans explainer describes, just quoted in a Canadian dollar-per-$100 convention instead of an APR.

What "designated" actually requires beyond a cost cap

Section 347.1(3) doesn't just ask a province to set a price ceiling — it requires the province to have "legislative measures that protect recipients of payday loans," which in practice means each designated province separately licenses payday lenders (Ontario's under the Payday Loans Act, 2008, for instance) and can suspend or revoke that license for violations independent of the federal cost cap. That licensing layer is what a provincial consumer-protection regulator actually enforces day to day; the $14-per-$100 figure is now a federal floor beneath all nine of them, not something any individual province's regulator sets on its own anymore.

Before taking a payday loan anywhere in Canada: confirm the lender is actually licensed in your specific province — a license is province-specific and doesn't transfer automatically from one designated province to another — and read the cost of borrowing as a dollar amount per $100, not just a headline "fee," before signing. The rollover risk our U.S. payday loans explainer describes — reborrowing to cover the last loan's repayment — is the same structural risk in Canada's $14-per-$100 model as it is in a U.S. state-by-state one.

References

  1. Criminal Code, R.S.C. 1985, c. C-46, ss. 347 and 347.1 (payday-loan exemption conditions: $1,500 or less, 62-day maximum term, provincially licensed lender, provincial designation under s. 347.1(3) requiring legislative measures protecting borrowers and a total-cost-of-borrowing limit).
  2. Orders designating British Columbia (SOR/2009-278), Ontario (SOR/2009-277), Manitoba (SOR/2008-212), Saskatchewan (SOR/2011-204), and Newfoundland and Labrador (SOR/2018-257) for the purposes of the Criminal Code's criminal-interest-rate/payday-loan provisions, Justice Laws website (laws-lois.justice.gc.ca); independent secondary corroboration of the full nine-province designated list (adding Alberta, New Brunswick, Nova Scotia, and Prince Edward Island) via the Public Interest Advocacy Centre's "All Along the Watchtower" review of the Canadian consumer debt-collection and payday-loan industry, and Wikipedia's "Payday loans in Canada" entry cross-checked against the individual designation orders above.
  3. Criminal Interest Rate Regulations, SOR/2024-114, made under the Criminal Code and in force 1 January 2025 — federal $14-per-$100 maximum cost-of-borrowing ceiling for a payday loan in a designated province, replacing prior province-set limits that ranged from $14 (Newfoundland and Labrador) to $17 (Nova Scotia, Manitoba, Saskatchewan) per $100; $20-or-less dishonoured-payment-fee exclusion and 2.5%-per-month post-term interest exclusion from the $14 calculation; independent corroboration via Torys LLP, DLA Piper, Bennett Jones, and MLT Aikins client alerts describing the same regulation, cap, and effective date.
  4. Criminal Code, R.S.C. 1985, c. C-46, s. 347 and the Criminal Interest Rate Regulations, SOR/2024-114 — the 35% APR federal criminal rate that applies by default to a Quebec loan because Quebec holds no s. 347.1 payday-loan designation; cited by multiple independent legal and financial-industry sources as the reason no storefront payday-loan regime operates in Quebec.
  5. Payday Loans Act, 2008, S.O. 2008, c. 9 (Ontario) — example of a designated province's own licensing statute operating alongside, and independently enforceable from, the federal cost-of-borrowing ceiling.

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