Canada: Take Two: Quebec Introduces Bill 134 To Modernize The Consumer Protection Act

On May 2, 2017, the Quebec government introduced new legislation intended to modernize the Quebec Consumer Protection Act (CPA), as well as provide for new consumer protection measures. The CPA provisions on credit, in particular, are long overdue for change as they have not been significantly amended since 1978.

The liberal government, under Jean Charest, previously attempted to pass similar legislation in the form of Bill 24, introduced in June 2011. Bill 24 proposed extensive amendments that focused on the consumer lending and leasing provisions, with the underlying policy reason of improving consumer debt loads. However, the government was not able to push Bill 24 through the various legislative stages before the summer election call of 2012, and Bill 24 died on the order paper.

With Bill 134, titled An Act mainly to modernize rules relating to consumer credit and to regulate debt settlement service contracts, high-cost credit contracts and loyalty programs, the liberal government, led by Philippe Couillard, now has a second chance to update the CPA's credit related provisions.

The proposed amendments to Bill 134 can be categorized into modernization and harmonization measures and new rights for consumers. This bulletin summarizes the key aspects of these amendments, focusing on those of interest to financial services providers.

MODERNIZATION AND HARMONIZATION

Cost of Credit Disclosure Laws

The explanatory notes prefacing Bill 134 state that measures arising from the Agreement for Harmonization of Cost of Credit Disclosure Laws in Canada are to be integrated into the CPA. This agreement was prepared by the Consumer Measures Committee and reflects harmonization proposals that were agreed to in principle by the federal and provincial Consumer Affairs Ministers on September 12, 1996. The objectives of the proposed reforms were to develop uniform cost of credit disclosure requirements to reduce compliance costs, provide uniform consumer protection across Canada and simplify cost of credit disclosure rules. This was particularly of concern to lenders and lessors operating on a national level. The first province to adopt harmonized cost of credit disclosure laws was Alberta in 1999. Since that time, British Columbia, Manitoba, New Brunswick, Newfoundland, the Northwest Territories, Ontario and Saskatchewan (with Alberta, the Harmonized Jurisdictions) have each enacted harmonized laws. Although the harmonization efforts in the common law provinces are not complete, nor have they resulted in complete harmonization, lenders and lessors operating in the common law provinces are generally able to use one form for most types of consumer credit and leases.

Bill 134, however, does not go as far as the laws enacted in the Harmonization Jurisdictions and critical differences remain, meaning lenders and lessors operating across Canada will continue to need different forms and systems for use in Quebec.

Importantly, the concept of the "credit rate" remains for both fixed and open credit. In the Harmonized Jurisdictions, a contract for fixed credit must disclose both the annual interest rate and the annual percentage rate (APR). The APR includes both the interest rate and certain non-interest finances charges that are payable by the borrower, expressed as a percentage. In contrast, under the CPA only one credit rate may be disclosed in a contract of credit (except contracts extending variable credit). The credit rate is conceptually equivalent to the APR, although it is not calculated in the same manner. As a result, a lender offering fixed credit is unable to comply with the requirement to disclose only one credit rate (for Quebec) and the requirement to disclose both the annual interest rate and the APR (in the common law provinces) on one form, since these requirements are directly at odds with one another.

For open credit, in the Harmonized Jurisdictions, a lender must disclose the annual interest rate as well as the various fees and charges that may become payable by the borrower in connection with the credit agreement. There is no requirement to disclose an APR. However, the concept of a credit rate remains under the CPA for open credit. Bill 134 purports to work around the issue by setting out certain fees that are not required to be included in the credit rate for an open credit contract, such as credit card customization fees, card replacement fees and statement fees, as well as other fees that are not required to be included in the credit rate for fixed or open credit, such as security registration fees and optional insurance fees. However, the list omits certain fees that are routinely charged by lenders, such as fees for optional services (not just optional insurance), foreign exchange fees, cash advance fees and not sufficient funds (NSF) fees, although additional fees may be excluded under the regulations.

We also note that format requirements may be set out in the regulations. The contract form for fixed and open credit must be "presented in conformity with the model provided by regulation". This language suggests that the regulations will not set out a prescribed format, such as the information box that is required under the federal Bank Act. However, the extent of any format or presentation requirements remains to be seen, including whether lenders and lessors will still need to comply with the existing format requirements, such as the requirement to have all numbers presented in bold, 12-point font.

Despite this, the laundry list of disclosures that must be set out in the contract form for fixed or open credit will appear relatively familiar to lenders operating outside of Quebec.

Additional Requirements for Open Credit, Credit Cards

Bill 134 introduces disclosure requirements for credit card applications, which are relatively consistent with the laws in the Harmonized Jurisdictions, with the exception of the requirement to disclose the credit rate, rather than the annual interest rate.

However, there are some interesting deviations from the harmonized laws.

Bill 134 mandates that a merchant must give consumers a grace period of at least 21 days, starting after the last day of the applicable statement period. During this period, no credit charges can accrue except for an advance of money. The laws in the Harmonized Jurisdictions do not require a grace period. We expect that the Quebec government looked to the minimum grace period requirements set out under the Credit Business Practices Regulations (CBP Regulations) under the Bank Act when drafting these provisions. However, there is an important distinction between Bill 134 and the CBP Regulations on this point, which is that under the CBP Regulations, the 21-day grace period refers specifically to purchases of goods and services, whereas Bill 134 states that the only exception to the grace period is for an advance of money (such as a cash advance). Accordingly, a merchant would need to ensure that any type of transaction where credit charges are applied prior to the expiry of the grace period can be properly characterized as an advance of money.

Bill 134 also imposes new requirements for open credit grantors, and in particular credit card issuers, as well as merchants accepting credit cards, that are meant to protect consumers against increasing their level of indebtedness. Bill 134 requires that the minimum monthly payment for a credit card contract must be at least five per cent of the outstanding balance, exclusive of any payments required under an instalment payment program. No other Canadian jurisdiction has a similar requirement. Credit limits for all open credit cannot be increased except with the consumer's express consent. Bill 134 would also prohibit a merchant from allowing a consumer to make a transaction that would exceed the credit limit unless:

  • The merchant sends a notice to the consumer
  • No charges are imposed for exceeding the credit limit
  • The excess must be included as part of the minimum payment required for the subsequent period

This process presents some challenges from a systems and operational perspective. First, this will mean that credit card issuers will not be able to allow users to exceed their credit limit on a discretionary basis as the first requirement is unlikely to be met at the time a card is presented to a merchant. Second, no other jurisdiction requires that the excess is included in the minimum payment and this requirement will result in one-off, customized minimum payment calculations that will likely be costly to implement.

Quebec is also the first jurisdiction to introduce regulation regarding pre-authorized credit card payments as Bill 134 provides that a consumer can end pre-authorized credit card payments at any time upon notice to the merchant. Bill 134 will also require card issuers to post up-to-date versions of their credit card contracts on their website.

Another unique requirement is that Bill 134 will impose restrictions on credit card holds. Before an amount can be withheld on a credit card, the consumer must receive, before the transaction, information on the amount that will be withheld, the reason for the hold and how long the amount will be withheld.

Consumers are also given the right to limit their joint liability with another consumer for card transactions (although the provision is in respect of all open credit contracts, not just credit cards). A consumer will be released from any joint obligations if the consumer notifies the merchant in writing that the consumer will no longer use the credit and no longer intends to be jointly liable. The consumer must also provide proof to the merchant that a similar notice was provided to the other consumer(s) who are liable under the contract.

One helpful change is that Bill 134 clarifies that credit cards issuers (as well lenders offering lines of credit) can charge a variable credit rate. Further, a change in the variable credit rate does not constitute an amendment to the contract.

Finally, maximum card liability under laws of the Harmonized Jurisdictions is capped at C$50 for unauthorized use of a lost or stolen card, except in most of the Harmonized Jurisdictions, this cap does not apply where the card is used in conjunction with a PIN at an ATM (or in certain other circumstances, depending on the jurisdiction). Bill 134 would extend the C$50 cap to instances of fraud or other unauthorized use of the card, and the PIN exception applies only if the issuer can prove the consumer committed a gross fault regarding the protection of the PIN.

Leases

Notably absent are provisions on leases that are consistent with the harmonized cost of credit disclosure laws. It may be that the Quebec government, in an effort to ensure that Bill 134 does not suffer the same fate as Bill 24, has decided to postpone the introduction of harmonized leasing provisions. However, Bill 134 does provide that merchants are required to assess the consumer's ability to make the lease payments due under the lease.

NEW RIGHTS FOR CONSUMERS

High Cost Credit Contracts

Bill 134 introduces a regime for "high-cost" credit, including new licensing requirements for high-cost credit grantors. The proposed amendments are silent on what constitutes high-cost credit. Manitoba recently enacted a high-cost credit regime that applies to loans with specific characteristics, for example a loan of money or line of credit with an annual interest rate that exceeds 32 per cent (for more information, see our January 2016 Blakes Bulletin: "High-Cost Credit" Consumer Lenders Face New Laws in Manitoba).

It is possible that the Quebec government will also consider loans with substantially similar characteristics to be "high-cost". However, we also note that Quebec courts have previously held that credit agreements that provide for a credit rate that exceeds 35 per cent, 32 per cent or even 28 per cent are considered to be harsh and unconscionable, which has resulted in some uncertainty as to what is the maximum credit rate that may be charged in Quebec. A high-cost credit regime that expressly allows lenders to charge up to a specified threshold, such as the 60 per cent threshold set out under the federal Criminal Code, would provide welcome clarity.

If the credit is considered to be "high-cost", the consumer will benefit from a 10-day cooling-off period.

Capacity to Repay

Bill 134 imposes a new requirement on consumer credit grantors and lessors to assess the consumer's capacity to repay the loan or make their lease payments before entering into the credit agreement or lease, or granting a credit limit increase. If a credit grantor offers high-cost credit, the credit grantor must also provide the consumer with a written copy of the assessment and information on the consumer's debt ratio. The information to be taken into account to conduct the assessment of the consumer's capacity to repay and the formula used to calculate the consumer's debt ratio will be set out in the regulations.

For high-cost credit grantors, if the debt ratio exceeds a maximum percentage, to be set out in the regulations, the contract will be deemed to be unconscionable.

The consequences of failing to comply with these new requirements are significant. Credit grantors, as well as any person who approves and takes assignment of the contract, may be required to forfeit all future credit charges and refund the credit charges that have already been paid.

Advertising

Bill 134 imposes new restrictions on certain market and advertising practices with a view to better protect consumers against indebtedness. Of interest, there is a proposed prohibition covering advertising on credit which prohibits false and misleading suggestions to the effect that a loan product may improve a consumer's financial situation or solve the consumer's debt problems.

Debt Settlement Services, Loan Brokering

Bill 134 introduces a new regime of requirements to protect consumers that use debt settlement services. Merchants offering such services will have to be licensed. Contracts for such services must be in writing and include certain disclosures. Consumers have a 10-day cooling-off period during which the contract can be cancelled without penalty. Merchants must manage funds received from, or paid for, on behalf of the consumer using a trust account and must comply with certain conditions prior to withdrawing funds from such account. Merchants must also comply with the CPA's debt settlement process.

Certain practices relating to debt settlement services and loan brokering are prohibited. These include a prohibition against offering debt settlement services along with lending products and services. Loan brokers are prohibited from requiring partial or full payment from consumers before providing loan brokerage services. Similarly, providers of debt settlement services with the intent of improving the consumer's credit score are prohibited from collecting partial or full payment from consumers before the provider has in fact improved the consumer's credit score. The debt settlement regime, along with the prohibitions against advance payments to loan brokers and debt settlement service providers, is similar to the credit repair regime currently found in Ontario's Consumer Protection Act, 2002.

Loyalty Programs

Loyalty programs have recently been the subject of legislative scrutiny, as recent media coverage has highlighted consumer concerns with the expiry of loyalty points. Recently, legislation on loyalty programs was passed in Ontario (for more information, see our December 2016 Blakes Bulletin: Ban Proposed on the Expiry of Rewards Points in Ontario) and introduced in Prince Edward Island.

For Quebec consumers, Bill 134 would: require merchants to provide certain disclosures (to be set out in the regulations) to the consumer before entering into a contract relating to a loyalty program; prohibit the expiry of points by a set date or by the lapse of time; and prevent the unilateral amendment of the rewards program contract, unless the contract indicates the elements that may be unilaterally amended and the merchant provides written notice of the change.

DEBT COLLECTION

Bill 134 also proposes to amend An Act respecting the collection of certain debts. In brief, Bill 134 will require that each individual representative who is acting for a licensed debt collection agency must obtain a certificate authorizing the individual to act in that capacity. It also includes certain measures to protect vulnerable consumers such as providing that debt collection activities and debt settlement services constitute incompatible occupations and granting the consumer a right to claim punitive damages from a person failing to perform an obligation set out in the legislation.

TIMELINE FOR IMPLEMENTATION

Bill 134 will be subject to a parliamentary committee review, which will likely be held in the fall, meaning that Bill 134 could be adopted in its final form as early as the end of 2017. Once adopted, draft regulations will be released to fully implement the amendments proposed by Bill 134 and such regulations will be subject to a comment period before being enacted.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Events from this Firm
12 Sep 2017, Seminar, Toronto, Canada

Please join us as we take an in-depth look at the legislation and the impact on the industry.

14 Sep 2017, Seminar, Toronto, Canada

Change, stress and uncertainty are ever]present factors in todayfs legal environment, and specific aspects about the practice of law make it difficult to thrive in the profession long term. Luckily, there are specific research]based strategies that have been shown to help lawyers thrive and lead to more effective ways to manage stress and pressure.

5 Oct 2017, Seminar, Toronto, Canada

Blakes is proud to host our New to In-House Series, designed to bring together junior and mid-level in-house counsel for a candid exchange of insights to highlight and address some of the challenges and opportunities facing in-house lawyers in their roles today.

 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.