Submission to the Dept of Finance Canada 2026 Pre-Budget Consultations | Sept 2026

Responsible credit. Stronger consumer protection.

Submission to the Department of Finance Canada
2026 Pre-Budget Consultations | September 2026

Abstract: The Canadian Lenders Association’s pre-budget submission calls for concrete reforms to unlock responsible lending, strengthen competition and support economic growth. By advancing consumer-driven banking, expanding housing financing and tackling fraud, these measures would help lenders serve more Canadians, support business investment and deliver greater choice while protecting consumers.

Executive summary

The Canadian Lenders Association (CLA) welcomes the opportunity to contribute to Budget 2026. The CLA represents more than 300 companies across Canada’s lending and financial technology ecosystem, including consumer, small-business, automotive, equipment, home and mortgage financing, and the data and infrastructure providers that support those activities.

Canada’s robust financial system is what enables Canadian families and businesses to help build Canada Strong. To do so, Canadians need a system that protects them from unaffordable debt, fraud and abusive practices while preserving access to responsible financing. Credit enables households to manage necessary expenses, businesses to invest in productive assets, and builders to deliver the housing and infrastructure Canada needs.

Budget 2026 should address the cumulative barriers that prevent responsible financial service providers from serving Canadians: incomplete information, identity fraud, disproportionate compliance costs, restricted funding channels and uncertainty in the implementation of financial infrastructure.

Priority commitments for Budget 2026

Credit access: undertake an independent review of the 35% criminal interest-rate framework and consult on narrowly defined regulatory exemptions to help Canadians rebuild credit through small-dollar lending with enforceable safeguards.
Consumer-driven banking and payments: deliver consumer-driven banking that non-bank lenders can use in practice, activate lending data on a timely basis, and support secure, competitive access to real time payments.
Housing finance: advance missing-middle mortgage-insurance reforms, review the portfolio-insurance property-value cap and improve the interface between alternative lenders, private capital and federal rental-construction financing.
Automotive finance and financial integrity: strengthen identity and vehicle verification, address organized lending fraud, and coordinate proportionate anti-money-laundering requirements and provincial collateral protections.
Identity integrity, fraud prevention, and AML: Consult on purpose-limited identity verification and develop a privacy-preserving validation pilot with independent oversight.

Implementation should be measurable and fiscally disciplined. The following recommendations emphasize targeted regulatory action, better use of existing infrastructure and bounded pilots, rather than an uncosted general subsidy for lending. Consumer outcomes, not lending volumes alone, should determine success.

Access to responsible non-prime credit

Recommendation: Commission an evidence-based review and consult on targeted exemptions under Criminal Code section 347.01.

The reduction of the criminal interest rate to 35% APR, effective January 1, 2025, was intended to protect borrowers. The CLA has consistently raised a complementary concern: a ceiling that makes some loans uneconomic may reduce access to regulated instalment credit without eliminating the underlying need to borrow. The effect must be examined alongside price reductions for consumers who remain eligible.

A creditworthy borrower for a particular product is not necessarily a prime borrower. Irregular income, a limited credit history or a past disruption can affect access to mainstream financing. Where sustainable instalment credit is unavailable, consumers may defer essential expenses or seek other products. The scale of any displacement toward payday or unregulated lending requires independent evidence; it should not be assumed from rejection rates alone.

Review the consumers most likely to be affected

Finance Canada should work with Justice Canada, credit bureaus, lenders, researchers and consumer organizations to compare the pre-change and post-change market, beginning with 2024 and 2025. Analysis should distinguish borrowers who would ordinarily qualify below 35%, consumers historically reliant on payday lending, and the intermediate cohort most likely to experience a change in eligibility. This avoids diluting the relevant effect across an undifferentiated non-prime population.

Measures should include approvals, unique applicants declined, credit limits, total borrowing cost, delinquencies, repeat borrowing and access to alternatives. Changes in employment, household finances, lender policies and demand must be considered. Where possible, follow borrower outcomes over time and distinguish applications from individual consumers. Industry observations should be transparently labelled and tested against independent data.

A narrow regulatory route with enforceable safeguards

Section 347.01 provides a regulatory mechanism for exemptions, on the recommendation of the Minister of Justice after consultation with the Minister of Finance. The CLA seeks a targeted process through that authority, rather than reopening the entire legislative framework. Priority candidates are small-dollar instalment loans and consolidation products that will enable Canadians to begin rebuilding credit.

The consultation should examine the design option discussed in CLA advocacy: an upper limit of 48% APR for a tightly defined category of loans of $5,000 or less, alongside a separately defined consolidation category. These parameters are proposed for testing and member confirmation, not presented as a completed consensus or as permission to lend above the existing limit.

Conditions should include documented affordability assessment, clear all-in cost disclosure, no compulsory ancillary products, controls on refinancing and repeat borrowing, and accessible complaints and hardship assistance. Consolidation should produce a demonstrable net benefit after fees, not merely a lower payment achieved through a longer term. Independent evaluation and a scheduled review should determine whether any exemption is continued, revised or withdrawn.

Consumer-driven banking and credit mobility

Recommendation: Deliver consumer-driven banking through firm implementation milestones, meaningful participation by non-bank lenders and fintechs, and clear accountability for improvements in consumer choice, affordability and competition.

The Canadian Lenders Association has consistently advocated for consumer-driven banking as a foundation for a more competitive and inclusive financial system. Canadians should be able to securely share their financial information with the providers they choose, compare products and switch providers more easily. Budget 2026 should advance implementation with a clear focus on these outcomes.

For lenders, consumer-permissioned data can support more accurate income verification, affordability assessments, fraud prevention and small-business underwriting. It can help consumers demonstrate their financial circumstances without repeatedly supplying documents or sharing banking credentials. These capabilities can be particularly valuable for self-employed Canadians, newcomers and borrowers whose circumstances are not adequately reflected in conventional credit information.

Maintain momentum and establish firm implementation milestones

The CLA supports the direction of the proposed Consumer-Driven Banking Regulations and urges the government to maintain momentum toward implementation. Finance Canada and the Bank of Canada should publish clear milestones for accreditation, technical standards, testing and the phased activation of account categories. Participants need sufficient preparation time once final requirements are available, accompanied by accountability for resolving outstanding issues and avoiding unnecessary delay. Secured and unsecured lending data should be activated as quickly as operationally responsible.

Ensure smaller providers can participate effectively

Formal eligibility must translate into practical access. Accreditation, supervision, reporting, conformance testing and fees should be proportionate to the nature, scale and risk of a participant’s activities. Existing regulatory controls should be recognized where they provide substantially equivalent assurance and the law permits. Qualified third-party service providers should enable smaller lenders to access shared infrastructure without having to reproduce every technical function internally.

Common standards must deliver consistent connectivity, reliable service and non-discriminatory access. Technical governance should include meaningful representation from non-bank lenders, fintechs and smaller participants. Federal and provincial authorities should coordinate requirements to reduce unnecessary duplication while maintaining strong consumer protections.

Protect consumer control and measure competitive outcomes

Consent must be express, informed, purpose-limited and revocable, with clear responsibility for security, incident response and consumer redress. Consumers should understand what information they are sharing, with whom and for what purpose. Better information should support responsible lending and accurate decisions while preserving accessible processes to correct errors and address complaints.

Following implementation, the government should publish regular reporting on competition and concentration in financial services, including consumer switching, pricing, participation by smaller providers and access for underserved consumers. Operational measures such as connection reliability and accreditation timelines should complement this assessment. Success should be demonstrated through better choices and financial outcomes for Canadians.

Build toward open finance and modern payments

Consumer-driven banking should provide a foundation for broader financial data portability across lending, investments, insurance and other services. Budget 2026 should connect this longer-term direction with payments modernization, including the Real-Time Rail, while respecting the distinct requirements governing data sharing and payment initiation. Together, these initiatives can reduce transaction friction, improve cash flow management and enable responsible providers to compete more effectively. The CLA stands ready to convene its members and work with government, regulators and consumer representatives to support timely, practical implementation.

Real estate financing and housing supply

Recommendation: Widen responsible financing channels for missing-middle housing and improve competition in mortgage funding.

Housing affordability depends partly on whether viable projects and qualified borrowers can obtain competitively priced financing. Non-bank lenders and specialized private-capital providers can complement banks and public programs, particularly for smaller projects and borrowers with non-standard documentation.

Implement missing-middle reforms with usable access

The Spring Economic Update 2026 announced intentions to allow private mortgage insurers to insure five- to eight-unit properties and increase flexibility for insurance products serving new three- and four-unit construction. The CLA supports the direction of these measures. Budget 2026 should report on implementation and identify remaining regulatory, insurer and lender-access barriers, rather than simply repeat the announcement.

Practical implementation should clarify eligible projects, underwriting, construction-stage advances, documentation and transition to permanent financing. Qualified non-bank lenders should have meaningful access on transparent, risk-based terms. The test is whether a viable triplex, fourplex or small rental building can secure financing through a competitive range of providers while maintaining prudent assessment of completion, valuation and repayment risks.

Modernize portfolio insurance without weakening underwriting

The CLA has advanced a proposal to increase the residential portfolio, or bulk, mortgage-insurance property value cap from $1 million to $1.5 million. This is distinct from the high-ratio insured-purchase framework. Budget 2026 should commit to a targeted review of the portfolio threshold and its effect on non-bank funding costs, borrower pricing and competition, with a view to implementing the increase where supported by the evidence.

Any change should preserve applicable qualification standards and risk controls. Finance Canada should assess insurance pricing, contingent public exposure and whether lower funding costs reach borrowers. The purpose is to reduce an arbitrary funding discontinuity, not to subsidize risk-taking or treat mortgage insurance eligibility as a substitute for affordability.

Connect private capital with rental-construction financing

The CLA also seeks a review of how alternative lenders and private capital can complement the Apartment Construction Loan Program (ACLP). The request is not to assume that private-sector borrowers are categorically excluded. It is to clarify and improve practical participation pathways, including co-financing, bridge-to-program transitions and refinancing of eligible construction facilities, where consistent with program rules.

CMHC should consult specialized lenders and smaller developers on approval timelines and financing coordination. New pathways should demonstrate additional housing, appropriate risk allocation and value for taxpayers, complementing rather than displacing useful private capacity.

Finance Canada should also convene authorities on fragmented mortgage regulation and financing bottlenecks, including implications of OSFI’s developing Credit Risk Management framework, while respecting supervisory independence and provincial jurisdiction.

Automotive lending and collateral integrity

Recommendation: connect auto-finance fraud prevention, vehicle verification and provincial collateral reform within a coordinated federal response.

For many Canadians, a vehicle is essential to employment, caregiving and access to services. Auto financing must be affordable and appropriate to the consumer’s circumstances. Fraud, inaccurate vehicle records and abusive collateral claims can increase losses and transaction friction, undermining the ability of legitimate borrowers to obtain suitable financing.

The CLA’s automotive advocacy connects three distinct files: vehicle and identity fraud, the treatment of repair and storage liens, and proportionate implementation of financial-crime obligations. Budget 2026 should fund coordination, improve information infrastructure and ensure that auto-finance expertise informs national enforcement priorities.

Build a verifiable vehicle-finance chain

Budget 2026 should support a bounded vehicle-identification-number (VIN) verification pilot with willing provincial registration authorities, law enforcement, lenders and relevant data providers.

The pilot should test lawful verification of vehicle identity, registration status and relevant fraud or theft indicators before funding. Where legally available, information on security interests should be considered with clear definitions of coverage and timeliness. VIN validation alone does not establish ownership, confirm that collateral is unencumbered or authenticate the applicant; those checks must remain distinct.

Participation criteria, access controls, audit logs and correction procedures should be established before deployment. Evaluation should measure confirmed fraud prevented, false positives, processing time and benefits to legitimate applicants. Government should not mandate a proprietary vendor or create an exclusive information advantage for a small group of lenders.

Address organized fraud and abusive lien practices

Federal anti-fraud work should incorporate lender intelligence on synthetic identities, falsified documentation and organized vehicle-finance schemes. Clear referral channels and feedback on actionable reports can improve investigations while reducing repeated requests for the same records. Public-private collaboration must operate within lawful disclosure authorities and confidentiality safeguards.

The CLA has also pursued Ontario Repair and Storage Liens Act reform, particularly a clearer distinction between essential repairs and discretionary or cosmetic modifications. The concern is that inappropriate claims can impair valid security interests and generate costly disputes. Consumers and legitimate repair and storage businesses also require fair payment rules, notice and effective dispute resolution.

Budget 2026 should support federal–provincial dialogue on these issues. Priorities include timely notice, transparent charges, proportionate fees, clear priority rules and an accessible process to challenge improper claims. These reforms should protect genuine repair claims while limiting opportunities for abuse.

Identity integrity, fraud prevention and privacy

Recommendation: Consult on purpose-limited identity verification and develop a privacy preserving validation pilot with independent oversight.

Accurate identity matching is a consumer-protection issue as well as a fraud issue. Incomplete or misassigned credit records can cause delays, repeated verification and incorrect decisions. These barriers can be particularly significant for newcomers, people with common names, consumers in shared households and those building a credit history.

The CLA is asking government to clarify permissible, limited uses of the Social Insurance Number for identity verification, credit-file matching and fraud prevention; update the SIN Code of Practice and related guidance as appropriate; and explore government-supported authentication. It does not seek unrestricted SIN use or its transformation into a general-purpose commercial identifier.

Consult first; establish safeguards before deployment

Finance Canada and Employment and Social Development Canada should convene privacy authorities, consumer representatives, credit bureaus, lenders and digital-identity specialists. The process should distinguish collecting a number, verifying its validity, matching it to an applicant and authenticating the person presenting it. Possession of a valid SIN is not, by itself, proof of identity.

A pilot, aligned with Canada’s Anti-Fraud Strategy, should test the minimum information needed to return a verification result, rather than distributing underlying government records. It should require clear legal authority, meaningful consent, purpose limitation, security testing, access controls, short and justified retention periods, auditability and independent assessment. Consent alone should not be treated as resolving every privacy or security obligation.

Extend trusted verification to income and transactions

Budget 2026 should support a feasibility assessment of a consumer-authorized CRA income-verification channel, subject to tax-confidentiality requirements and appropriate statutory authority. The objective would be to verify relevant income facts securely, not provide lenders with unrestricted access to tax files.

In real estate transactions, fraud can involve intercepted payment instructions, impersonation and falsified mortgage discharge statements. Federal anti-fraud coordination should support secure verification of counterparties and payment destinations, working with lenders, legal professionals and provincial regulators. Authentication of the payment instruction is a separate control from verifying the borrower.

A public-private fraud-intelligence pilot should use lawful channels, defined purposes and accountable governance. Shared indicators must be tested for quality and corrected when inaccurate; they should not become an unchallengeable blacklist. Success should be measured in reduced consumer harm, more accurate decisions and fewer unnecessary verification steps, alongside confirmed fraud losses avoided.

Proportionate AML and modern payment access

Recommendation: strengthen financial-crime controls through operationally workable supervision and deliver safe, competitive real-time payments.

The CLA supports effective measures against money laundering and terrorist financing. Its engagement with FINTRAC has focused on how obligations operate in non-deposit-taking lending, dealer-originated transactions and mortgage financing. Rules should generate useful intelligence and reliable customer information without imposing unnecessary barriers on legitimate consumers and small businesses.

Make compliance effective at the point of origination

FINTRAC’s requirements for financing or leasing entities include customer identification, beneficial ownership, ongoing monitoring and reporting obligations. The operational challenge in automotive lending is often the division of functions between a lender, a dealership and a business applicant. Personnel at the point of sale may not hold the ownership information needed to complete the lender’s process.

Budget 2026 should support sector-specific guidance and supervisory capacity. Priorities include clear expectations for dealer-agent arrangements, permitted reliance on identification work, recordkeeping responsibilities, beneficial-ownership confirmation and escalation when information cannot be obtained. Guidance should distinguish an applicable legal obligation from recommended practice and preserve the reporting entity’s accountability.

Deliver real-time payments with trusted participation

Payments Canada identifies Q4 2026 as the planned launch period for the Real-Time Rail, following successful testing and sequenced onboarding. Budget 2026 should support delivery against public milestones and fair participation pathways for eligible non-bank payment service providers. Access to payment infrastructure is related to, but legally distinct from, participation in consumer-driven banking.

For lending customers, faster funds availability and clearer payment confirmation could reduce uncertainty around disbursements and repayments. Small businesses could gain more predictable cash flow. These benefits depend on reliable service, transparent costs, workable access arrangements and competition among providers—not simply the availability of a new payment rail.

Instant payments also accelerate fraud losses. Implementation should include strong authentication, appropriate transaction controls, timely fraud response and clear treatment of errors and disputes. Faster settlement should not remove meaningful consumer recourse. Government, Payments Canada and participants should assess customer outcomes and fraud performance as carefully as speed and transaction volume.

Conclusion and Next Steps

Budget 2026 should bring these priorities together without treating them as a single regulatory exercise. Consumer-driven banking, identity verification, mortgage insurance, provincial collateral law and financial crime supervision have different authorities and implementation requirements. A coordinated agenda can reduce duplication while preserving those distinctions.

Immediate commitments and a practical delivery sequence

Finance Canada and Justice Canada should launch the credit-access review and targeted-exemption consultation, publishing the questions and evidence requirements. Finance Canada should also maintain implementation milestones for consumer-driven banking and convene CMHC, insurers and lenders on missing-middle access, portfolio insurance and rental-construction financing.

Finance Canada and ESDC should scope the identity consultation and establish privacy, legal and consumer protection requirements before approving a validation pilot. Relevant federal and provincial partners should similarly define a vehicle-verification pilot and practical channels for lender fraud intelligence. CRA income verification should begin with a feasibility and authority assessment, not an assumption of unrestricted data availability.

FINTRAC should prioritize unresolved sector guidance through established engagement channels. Payments modernization should proceed against published readiness milestones. In each stream, qualified smaller providers and consumer representatives should participate early enough to influence design rather than comment only after core decisions have been made.

Fiscal discipline and public reporting

Most recommendations concern regulatory design, coordination or implementation of existing initiatives. Where new resources are required, government should identify the responsible institution, define deliverables and provide time-limited funding subject to evaluation. No specific appropriation is proposed without a defensible costing. Changes to mortgage insurance require explicit assessment of contingent risk and pricing, not an assumption that they are fiscally costless.

Annual reporting should assess sustainable credit access, total borrowing costs, complaints, hardship outcomes, fraud and false-positive rates, smaller-provider participation, and additional housing delivered. Commercially sensitive information should be protected and results published in appropriately aggregated form. Neither increased lending nor lower compliance expenditure is sufficient evidence of consumer benefit on its own.

A consumer-centred credit system

Canada can protect borrowers and strengthen competition at the same time. Responsible access to credit requires accurate information, effective enforcement, proportionate rules and viable alternatives. It also requires a willingness to examine unintended effects and revise policy where evidence demonstrates that Canadians are being left with poorer choices.

The CLA is prepared to convene its sector and cross-sector roundtables to help government develop evidence, test implementation and identify practical safeguards. Budget 2026 should use that expertise alongside independent research and consumer perspectives to deliver a more secure, competitive and inclusive financial system.

Budget 2026 presents an opportunity to strengthen Canada’s financial system by advancing consumer protection, competition and responsible access to credit together. The Canadian Lenders Association urges the Government of Canada to address barriers to sustainable financing, deliver practical consumer-driven banking and payments infrastructure, strengthen fraud prevention, and ensure that housing and automotive financing policies reflect the needs of Canadian households and businesses. These measures should be guided by evidence, proportionate regulation and clear accountability for consumer outcomes. The CLA stands ready to work with government, regulators and consumer representatives to translate these priorities into practical reforms that expand choice, improve affordability and support Canada’s long-term economic prosperity.

10 Key Points

Review the 35% criminal interest-rate framework to determine whether it is unintentionally restricting access to responsible non-prime credit, particularly for Canadians seeking to rebuild their credit.
Consider targeted exemptions for small-dollar instalment and consolidation loans, potentially allowing tightly controlled lending up to 48% APR for loans of $5,000 or less, subject to strong consumer safeguards.
Accelerate consumer-driven banking with firm implementation timelines and meaningful participation by non-bank lenders and fintechs, giving Canadians greater control over their financial data and access to competitive credit.
Build toward open finance and modern real-time payments so consumers and businesses benefit from greater data portability, faster transactions, improved cash flow and increased competition.
Expand financing for missing-middle housing by making mortgage insurance work effectively for three- to eight-unit projects and ensuring qualified non-bank lenders can participate on competitive terms.
Review the portfolio mortgage-insurance property-value cap, including the CLA proposal to increase it from $1 million to $1.5 million, to improve funding competition without weakening underwriting standards.
Better connect private capital and alternative lenders with federal rental-construction financing, including co-financing, bridge financing and refinancing pathways under the Apartment Construction Loan Program.
Strengthen automotive finance integrity through a VIN-verification pilot, improved identity and vehicle checks, better fraud-information sharing and reforms addressing abusive repair and storage liens.
Modernize identity verification by clarifying purpose-limited uses of the SIN for identity verification, credit-file matching and fraud prevention, supported by privacy-preserving government validation rather than unrestricted access to government records.
Make AML regulation more operationally effective while delivering safe real-time payments, with clearer guidance for lenders and dealers, proportionate compliance requirements, strong fraud controls and competitive access for eligible non-bank providers.