In the fall of 2013, the Ontario government sought comments on a
proposed new regulation under the Payday Loans Act, 2008 (the
"Act") that was largely aimed at the use of short
repayment term lines of credit by those seeking to avoid being
regulated under that Act. As we reported
previously, the language used in that draft was so broad that
it caught many others who would not be thought to be payday
lenders, such as those making micro loans on a not-for-profit basis
as part of a charitable microfinance program. This author and
others made submissions to the government about the problems
created by this draft.
On December 17th, 2013, Ontario published the final version as
Regulation 351/13 made under the Act, which goes into effect 60
days from December 17th. This version exempts not-for-profit
loans made to consumers. The Regulation can be found here.
Of note for not-for-profit lenders are the following sections of
1. These changes apply to consumer credit
The Act will now apply to the following loans which are now
classed as "payday loans":
2(2) ..., a loan is prescribed for the purposes of subsection 2
(2) of the Act if it is a loan under which a lender, except an
entity or individual described in subsection (3), extends
credit to a borrower who is a consumer so that the borrower may
take one or more advances for up to an aggregate amount of
principal and to which at least one of the following criteria
applies: ..... [specific loan terms].
The definition of "consumer" is the same one we use
today under the Consumer Protection Act, 2002 (Ontario),
"consumer" means an individual acting for personal,
family or household purposes and does not include a person who is
acting for business purposes.
2. Not-for-profit lenders are fully
exempted from the Regulation:
The Ministry listened to the submissions and has sought to
exempt from the Act persons, including people and other
non-incorporated bodies, which make not-for-profit loans.
This exemption reads as follows:
2(3) The following are the entities and individuals to which the
exception mentioned in subsection (2) applies:
1. A corporation without share capital to which Part III of the
Corporations Act, the Not-for-Profit Corporations Act,
2010, Part II of the Canada Corporations Act, the
Canada Not-for-Profit Corporations Act or comparable
legislation of another province or territory of Canada applies.
2. A registered charity within the meaning of the Income Tax
3. An individual, partnership, trust or an unincorporated body
or association that does not carry on his, her or its activities
for the purpose of gain or profit.
Regulated financial institutions (banks, credit unions, stock
brokers and insurers) are exempted from the application of these
changes as well under section 2(3), whether they make micro loans
in partnership with not-for-profit lenders, or engage in other
consumer credit transactions.
These exemptions are good news to charitable and not-for-profit
lenders who may continue to make their micro loans to consumers
outside of this new regime.
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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