The Government of Ontario has recently introduced proposed
amendments to collection agency, consumer protection and payday
loan legislation. Bill 156 – An Act to amend various Acts
with respect to financial services (Bill 156)
went through first reading in the Ontario legislature on December
9, 2015. The following proposed amendments are noteworthy:
Collection and Debt Settlement Services Act
The definition of "collection agency" would be
expanded to include individuals and businesses that purchase debts
and collect such debts, subject to certain exceptions. This means
that businesses that purchase debts would be subject to the
registration requirement and to the requirements that apply to
An administrative monetary penalties regime would be added as
additional tool to enforce compliance with this legislation.
Consumer Protection Act, 2002
New provisions would be added to regulate service providers that
cash government cheques for consumers. These provisions will not
apply to banks or credit unions. The new provisions would require
certain disclosures and would limit the fee that may be charged for
cashing a government cheque. The specifics of the disclosures and
the permissible amount of the fee would be prescribed by
regulations which have not yet been published.
Regulation-making powers would be added in connection with
consumer loans and leases. Some of new proposed regulation-making
powers would allow regulations to: (a) govern the factors that a
lender must take into account before entering into a credit
agreement with a borrower and to require additional disclosure in
this regard; (b) prescribe the maximum amounts that lenders may
lend to consumers and the maximum charges that are not included in
the cost of borrowing under a credit agreement; (c) govern the
penalties to a lessee for making late payments under a lease; and
(d) govern the rights and obligations of lessors and lessees as a
result of a termination of a lease.
Payday Loans Act, 2008
Additional requirements would apply if a lender enters into a
third payday loan agreement with a borrower within 62 days of
having entered into a first payday loan agreement.
New inspection powers would be added under which businesses may
be inspected if the registrar has reasonable grounds to believe
that a person or entity is acting as a payday lender or a loan
broker while not licensed.
We understand that if Bill 156 is passed, the Government intends
to conduct further consultations regarding the potential regulatory
changes that will be needed to give effect to the proposed changes
to the statutes.
Businesses that purchase portfolios of consumer debts should
monitor the developments of this legislation and should prepare to
be registered as collection agencies, unless they fit within an
exemption. Although we do not yet know the specifics of the new
requirements consumer protection requirements, it appears that the
Government intends to introduce new regulations that will provide
consumer borrowers and lessees of goods with additional consumer
protections. These new consumer protections may impose significant
obligations upon lenders and lessors and may require changes of
practice and changes to customer-facing documents.
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The recent decision of the Ontario Court of Appeal in BMW Financial Services Canada, a Division of BMW Canada Inc. v. McLean provides some useful insight into the relationship between automobile dealers and the financing arms of the manufacturers for whom those dealers are franchisees.
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