On September 1, 2016, amendments to Manitoba's The Consumer
Protection Act (CPA), enacted by The Consumer Protection Amendment
Act (High-Cost Credit Products), will come into effect. The CPA is
amended to include a new Part XXV about high-cost credit products,
introducing new disclosure and licensing requirements for lenders
offering high-cost credit products to Manitoba consumers. Lenders
who offer high-cost credit products nationally will have to adopt
these new procedures when offering those products in Manitoba.
A high-cost credit product is a loan or a line of credit that
meets the criteria set out in section 1(2) of Regulation 7/2016
under the CPA. The first example of a high-cost credit product
given in the Regulation is a loan with an "annual interest
rate" that exceeds 32%. Another example of a high-cost credit
product is a loan which meets the following criteria: (i) the
principal loan amount is no more than $5,000, (ii) the high-cost
credit agreement terms include (a) the payment of interest at a
rate of up to 32% and one or more high-cost credit fees, and (b)
the repayment of the loan over a term not exceeding two years, and
(iii) the loan is not secured by any personal property pledged as
collateral. A high-cost credit fee, as defined in the Regulation,
means a fee, charge, penalty or other amount that is or may be
payable by a borrower to a high-cost credit grantor or third party
under the high-cost credit agreement. The new Part XXV of the CPA
does not apply to mortgages on personal property, credit cards or
margin loans. It also does not apply to high-cost credit grantors
that are corporations without share capital and carrying on its
activities without pecuniary gain for its members.
The CPA is amended to include further licensing requirements for
lenders that offer, arrange or provide high-cost credit products.
Section 241(1) mandates that these lenders obtain a licence before
offering or providing any high-cost credit products in Manitoba.
Licences are location specific so a lender who owns a store front
in Manitoba is required to obtain a separate licence for each store
location. There are additional requirements for posting prominent
signs at each store location where the credit grantor offers or
provides high-cost credit products. These signs must clearly state,
among other requirements, that the product is a high-cost credit
product and separately list each component of the cost of credit
for that high-cost credit product.
Part XXV of the CPA also includes expanded disclosure
requirements for high-cost credit products granted to borrowers in
Manitoba. National lenders with high-cost credit products being
offered in Manitoba will have to adopt a specialized form in
connection with offering high-cost credit products to Manitoba
borrowers. For each high-cost credit product, a high-cost credit
grantor must give the borrower a prescribed form that states that
the product is a high-cost product and provides further information
to satisfy the broad disclosure requirements found under section
249(2). If there is no prescribed form, under section 249(5), the
high-cost credit grantor may use its own form to provide the
necessary information if the form has been approved by the director
of the Consumer Protection Office.
The borrower's rights include the right to receive the
prescribed form and a copy of the high-cost credit agreement with
reasonable time to review the agreement and ask questions before
entering into it. Under section 252(1), the borrower of a high-cost
credit product also has the right to cancel the high-cost credit
agreement within 48 hours, excluding Sundays and holidays, after
entering into the agreement.
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 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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