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Regulatory Impact Analysis Statement


The purpose of these regulations is to prescribe the rates and the general terms and conditions under which the government will charge interest on overdue accounts and charge administrative fees where a cheque or other item payable to the Crown is returned as "NSF" or otherwise dishonoured.

Under the regulations, which come into effect on April 1, 1996, there will be one common policy and approach to charging interest on most non-tax receivables. Exceptions include:

  • loans and the like on which interest is already being charged; and
  • superannuation and socio-economic benefits that have their own scheme for charging interest.

The main features of the regulations are:

  • where an account is overdue or a payment is late, interest will be charged and compounded monthly at the average bank rate plus three percent from the due date to the date that payment is received. (This is approximately the same as what the government will be paying its suppliers on its own late payments);
  • overpayments or erroneous payments that result from fraud, falsification, wilful misrepresentation or any other offence will incur interest charges retroactively from the date on which the overpayment or erroneous payment is made;
  • in other cases of overpayment or erroneous payment, a due date shall be set or a repayment schedule over time shall be arranged (these are program decisions, outside of the scope of the regulations themselves), and interest will be charged only in respect of payments which are not made by the due date or in accordance with the agreed repayment schedule;
  • no interest will be charged on small amounts for which an invoice or other demand for payment would normally not be issued. However, if there are several small amounts that add up to more than the cut-off limit, or the total outstanding exceeds that limit, interest will be charged;
  • provisions have been made for Ministers to waive or reduce charges under certain, limited circumstances; for example where:
    • recovery is to be made from subsequent entitlements,
    • the government makes an error in processing a payment or calculating the amount due, or
    • there are other circumstances beyond the control of the debtor, such as a breakdown in the electronic systems used to transfer funds and process payments;
  • an administrative charge of $25 will be levied for dishonoured items where a financial institution has processed an item and a payment must be issued by the government to reimburse it for the amount initially credited to the government's account. Where no such payment has to be issued by the government, the administrative charge will be $15; and
  • subject to any program or departmental governing legislation or regulations, departments will still have complete flexibility in negotiating and setting repayment terms to suit their various programs.

Alternatives Considered

There are no practical other alternatives. No generally-applicable policy instrument is available for charging interest other than these regulations. Maintaining the status quo would not provide an incentive for debtors to pay their accounts on time or compensate the Crown for the borrowing costs that it incurs as a result, nor would the government be permitted to recover its administrative cost of processing NSF cheques and other dishonoured payment items.

Benefits and Costs

Debtors who do not pay their accounts on time or who tender cheques or other payment instruments that are returned as "NSF" or are otherwise not honoured by the financial institution on which they are drawn payments will incur costs in the form of interest charges and administration fees. As a result, debtors will have an incentive to pay their accounts on time and any financial costs incurred by the government will be more equitably shifted from general taxpayers to the delinquent debtors.

It is expected that debtors will pay their accounts faster once departments begin charging interest on overdue accounts. As at March 31, 1995, the last year for which figures are available, the amount of overdue accounts potentially subject to interest charges was approximately $3.3 billion. However, debtors can avoid any interest costs by paying their accounts on time. Any increase in departmental workload resulting from the charging of interest will be offset by the reduced workload in managing a smaller number of overdue accounts, as debts will be collected more quickly.

Some departments and agencies may incur one-time start-up costs if their current financial systems must be modified to accommodate interest charging calculations. It is expected that any costs incurred will be offset by additional interest revenues.


The proposed regulations were published in Part I of the Canada Gazette on December 23, 1995. In addition, all departments listed in Schedule I, I.1 and II to the Financial Administration Act were consulted earlier.

Only one comment was received during the 30-day public consultation period and it expressed concerns principally about:

  • problems with cost-recovery and rate-setting, especially for mandatory services like inspections, and the adding of interest charges on top of cost-recovery; and
  • the resolution of disputes over cost-recovery fees.

However, these are not issues relating to interest-charging per se. The charging of interest on overdue accounts is not additional cost-recovery for the service being provided, but a reflection of the cost of financing and collecting the accounts receivable. Furthermore, interest on late payment can be avoided entirely simply by paying the amount owing by the due date. Secondly, where there is a dispute over the amount owing that is ultimately resolved in favour of the debtor, interest can be waived or reduced, in which case any charges paid would be refunded. If the dispute goes the other way and is determined in favour of the Crown, then interest should be fully enforced as the Crown has incurred the financing costs during the period of dispute and to do otherwise would encourage the filing of disputes simply as a means of delaying or deferring payment.

Compliance and Enforcement

A compliance mechanism is not required as departments will assess and collect interest and administrative charges in the course of their normal collection activities for any amounts owed to the government.


Robin Findlay
Director, Financial Authorities Division
Financial and Information Management Branch
Treasury Board Secretariat
L'Esplanade Laurier
8th Floor West Tower Ottawa, Ontario
K1A 1E4

(Telephone 613-957-9668)
(Facsimile 613-952-9613)

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