Credit-Impaired & Thin-File Borrowing in Nunavut

Consumer credit in Canada is largely underwritten using credit reports and scores maintained by the two national credit-reporting agencies, Equifax and TransUnion. A credit score summarizes a borrower's history of using and repaying credit. Borrowers with little or no reported history have what the industry calls a "thin file," which limits a lender's ability to assess risk using conventional data.

A larger cash-based economy, remoteness, and limited long-term relationships with reporting lenders can all contribute to thin files in Nunavut, a phenomenon sometimes described in the financial-inclusion literature as credit invisibility.

Where a lender cannot assess risk with confidence, it may decline credit or price it higher to compensate for uncertainty. This is the mechanism behind higher-cost credit-impaired lending. Importantly, that risk-based pricing is not unlimited: the Criminal Code section 347 ceiling of an APR exceeding 35% is the legal maximum, and, unlike in designated provinces, no payday-loan carve-out applies in Nunavut.

Territorial consumer-protection law provides relief from unconscionable credit transactions, allowing courts to reopen agreements that are grossly one-sided. Federal disclosure rules and the credit-reporting oversight function of the Office of the Privacy Commissioner of Canada, which supervises how personal credit information is collected and used under federal privacy law, provide additional safeguards.