The Negative Option Billing Regulations
("Regulations") first released in March
2011 in draft form for public consultation were published in final
form in the March 14, 2012 issue of the Canada Gazette Part
II. The final version of the Regulations, which are to come
into force on August 1, 2012, reflects only minor changes from the
draft form released for consultation.
The Regulations, which have been made pursuant to provisions of
the Insurance Companies Act (Canada), the Bank
Act (Canada), the Trust and Loan Companies Act
(Canada) and the Cooperative Credit Associations Act
(Canada), require federally regulated financial institutions
("FRFIs") to provide certain products
and services to consumers on an opt-in basis only and, in the case
of certain optional products or services, only where an initial
disclosure statement containing prescribed information has been
provided to the consumer, orally or in writing.
Under the Regulations, a FRFI is required to obtain a
consumer's express oral or written consent (the opt-in) before
providing the consumer with a "primary financial product or
service" or an "optional product or service". These
terms are defined in section 1 of the Regulations as follows:
"optional product or service" means a product or
service that is offered or provided to a person by an institution,
an affiliate that it controls or an agent or representative of the
institution or affiliate for an additional fee and is available
only with an agreement for a primary financial product or service
provided by the institution.
"primary financial product or service" does not
include a product or service that is offered or provided by a
company or a foreign company as defined in the Insurance
Companies Act to insure a risk.
An example of a "primary financial product or service"
may be a credit card provided by a bank and an example of an
"optional product or service" may be a balance protection
insurance product made available by the bank to holders of the
We expect that the Regulations will be of particular
significance to banks and other institutions that offer optional
products and services in connection with a credit arrangement.
The Regulations do not provide any new or additional disclosure
requirements for a new "primary financial product or
service" offered to a consumer, but they do require that FRFIs
provide consumers with an initial disclosure statement (orally or
in writing) containing the information referred to in paragraphs
6(a) to (d) of the Regulations (or a summary of that information)
prior to obtaining the consumer's consent to receive an
"optional product or service".
The Regulations also require FRFIs to provide consumers with
advance notice of the end date for certain types of promotional,
preferential, introductory or special offer periods for optional
products or services, and to disclose any charges that may be
imposed after that date.
It is important to note that the Regulations are considered a
"consumer provision" under the Financial Consumer Agency
of Canada's ("FCAC") new Compliance
Framework. Accordingly, any complaints received by FRFIs regarding
the Regulations are subject to the "consumer provision"
reporting requirements of the new Compliance Framework.
CLICK HERE to read our commentary regarding the FCAC's new
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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