Canada: Recent Consumer Protection Developments

Last Updated: December 23 2013
Article by Suhuyini Abudulai

Launch of Consumer Code and publication of prepaid card regulations

Consumer Code

On December 3, 2013, the Federal government announced the launch of consultations on a comprehensive financial consumer code in Canada in an effort to create better protection for consumers of financial products. The Government of Canada will be seeking commentary from Canadians as to how the federal financial consumer framework can be improved. Once the consultation process is complete, the Government intends to produce a comprehensive consumer code to replace the current mix of legislation and regulations in place. Recognizing the ever changing consumer landscape (e.g. developments in electronic commerce with the use of mobile payments), the consumer code will address current and future consumer needs by responding to "the realities of a digital and remote banking environment". The consumer code is a welcome initiative, as it will streamline the legislative landscape and should address concerns of consumers and those who provide goods and services to consumers.

Comments on the proposed consumer code are open to the Canadian public and must be submitted to the Department of Finance by February 28, 2014.

Prepaid Card Regulations

The Prepaid Payment Products Regulations ("Prepaid Regulations") were introduced by the Government of Canada to address new financial payment products in the Canadian marketplace, which are cards that allow consumers to withdraw cash and pay for purchases. These products can be used through the existing payment networks such as Visa or MasterCard or are available through financial institutions or certain retail commercial outlets. 

The Prepaid Regulations will be made pursuant to the Bank Act, the Cooperative Credit Associations Act, the Insurance Companies Act and the Trust and Loan Companies Act and will come into force on May 1, 2014. Under the Prepaid Regulations, federally regulated financial institutions must disclose prescribed information to consumers. Certain business practices are limited, such as the prohibition of expiration dates and also prohibiting dormancy fees or maintenance fees for at least one year after card activation. Overdraft fees and interest charges are also prohibited, unless expressly consented to by the card holder.

Federally regulated financial institutions may incur costs in changing their systems to implement the requirements of the Prepaid Regulations and in ensuring compliance.

Strengthening Protection Against Aggressive Door-to-Door Sales of Water Heaters

In its yearly ranking of top complaints and inquires received, the Ontario Ministry of Consumer Services reported water heater rentals and removals as the second most common complaint received in 2011 and 2012. In an attempt to address - amongst other consumer protection matters – aggressive door-to-door water heater rental sales, Bill 55, Stronger Protection for Ontario Consumers Act, 2013 ("Bill 55") was introduced to the Legislative Assembly of Ontario in April 2013 and passed third reading on November 27, 2013. The Bill is expected to come into force in 2014.

Bill 55 will amend the Consumer Protection Act, 2002 (Ontario) (the "Act") to, amongst other changes:

  • Provide water heater consumers with additional time to cancel an agreement by doubling the existing 10-day cooling off period to 20 days;
  • Prohibit the delivery and installation of water heaters to consumers during the new 20-day cooling off period; and
  • To penalize suppliers who contravene the Act by requiring suppliers to pay all cancellation fees if the 20-day cooling off period is not adhered to.

Businesses who fall under the purview of the proposed changes must be cognizant of the impact of the changes on their current business practices.

Somewhere In Between: Administrative Monetary Penalties

The Ministry of Consumer Services (Ontario) (the "Ministry") is proposing to amend certain consumer protection legislation to introduce administrative monetary penalties ("AMPs"), adding to existing enforcement tools available to regulators. Regulators will consult with their sectors to develop and implement appropriate policies to enforce AMPs in their respective sectors (e.g. travel services, payday loans or collection agencies). AMPs would be issued against a business or an individual and are viewed by the Ministry as a "middle ground" in the enforcement regime, striking a balance between the stringent penalties that may be imposed upon non-compliance with applicable law, such as prosecution or revocation of licences, and lesser penalties such as issuing a simple warning or educating businesses by providing written information and materials regarding their compliance with the law.

Legislation that will be impacted by the proposed AMPs include the Motor Vehicle Dealers Act, the Consumer Protection Act, the Payday Loans Act and the Real Estate and Business Brokers Act. The proposed framework is designed to, among other things, deter non-compliance and future violations more effectively and permit the publication of information as to compliance records of businesses to keep consumers informed.

Three monetary penalty levels are proposed and are subject in certain circumstances to review as to fairness:

  • Level 1 ranges from $100 to $2,000 for minor non-compliance violations.
  • Level 2 ranges from $1,000 to $5,000 for more serious violations that create a risk to public safety or cause financial or other harm to consumers.
  • Level 3 ranges from $2,500 to $10,000 for the most serious acts of non-compliance, particularly in relation to repeat contraventions or those who derive economic benefit from non-compliance.

The Ministry is in process of reviewing feedback it received during a consultation process and expects to clarify any concerns in 2014 with stakeholders and other interested parties.

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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Suhuyini Abudulai
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