On June 7th, 2011, An act to combat consumer debt
overload and modernize consumer credit rules (Bill 24) was tabled
in the National Assembly of Québec.
If enacted in its current form, Bill 24 will affect a broad
scope of businesses, but predominantly those which provide
consumers with contracts of credit such as contracts for: money
loans, open credit, instalment sales, and debit cards.
General Measures Counteracting Consumer Debt Overload
Bill 24 introduces a new obligation for merchants to provide a
consumer not only with a copy of the contract that is executed by
the consumer but also with a duplicate of any other documents
signed by the consumer.
A consumer will then have seven days following the day on which
the consumer is in possession of a duplicate of a contract of
credit to cancel it and 30 days to cancel any accessory contract
not required as a condition to obtain a contract of credit (unless
shorter notice is provided in the accessory contract). In the later
case, the consumer will be entitled to a refund of any amount paid
for any portion of the services that has not been provided at the
time of the cancellation.
Merchants will also have:
the obligation to deliver a discharge and to return any object
or document received as an acknowledgement of, or security for, the
said discharged obligation; and
if applicable, to request the cancellation of the registration
of any right or hypothec securing the performance of the
According to Bill 24, as long as a consumer is not in default,
such consumer will have the right i) to ask the court to modify the
terms and conditions of payment under a contract of credit if such
consumer cannot meet those terms and conditions by reason of a
superior force and ii) to request the court to order suspension of
repayment of outstanding balance until final judgement is
Verification of Consumer's Capacity to Repay
If Bill 24 is adopted, merchants will have the obligation to
verify a consumer's capacity to repay the credit requested
or any increase of credit requested before entering into a contract
of credit or extension of credit. A merchant who fails to fulfill
that obligation will lose its right to the credit charges and will
have to refund all credit charges already paid by the consumer.
Bill 24, as it is written now, does not provide merchants with
any insight on how the obligation to verify consumer's
capacity can be fulfilled.
Open Credit Contract
If Bill 24 is enacted, merchants will be prohibited from:
granting a consumer with a higher credit limit than what he or
she requested or increase the credit limit already granted except
if requested by the consumer; and
increasing the credit rate of a credit card issued at a
promotional rate before the expiry of a period of six months.
Merchant's Disclosure Obligations
Bill 24 lists all the information that merchants will have to
disclose in various types of contracts including contract with a
variable credit rate, contract for the loan of money, open credit
contract and its application form or the accompanying documents,
instalment sale contract and any other contract involving
Liability in the Event of an Unauthorized use of a Credit
and/or Debit Card
Pursuant to Bill 24, debit card contracts will be regulated by
the CPA. Consumers will be liable for losses resulting from the use
of their credit/debit card by a third person before the card issuer
is given notice of the loss, theft and fraudulent or unauthorized
use of the card. However, in any case such liability will be
limited to $50.
If Bill 24 is enacted, new prohibitions will be established in
relation to common business practices. Among others, it will be
prohibited (i) for any person and by any mean, to represent to
consumers that credit may improve their financial situation; or
(ii) to state or imply that "no credit charges are payable
during a certain period following a transaction, unless the
applicable credit rate at the end of that period, if the net
capital has not been completely repaid, is clearly specified".
It will also be prohibited to offer a premium to incite consumers
to apply for a credit card or to enter into an open credit contract
with a non emancipated minor without the written authorization of a
person having parental authority.
Nathalie Beauregard is a partner in the
Corporate Practice Group. Her practice focuses on financings,
M&A transactions and strategic commercial matters.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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The Canadian Office of the Superintendent of Financial Institutions ("OSFI") recently ruled that a bank cannot promote comprehensive credit insurance ("CCI") within its Canadian branches under the Insurance Business (Banks and Bank Holdings Companies) Regulations (the "Regulations").
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