The recent decision of the Ontario Superior Court of Justice in Peter De Wolf v. Bell ExpressVu Inc. and Bell ExpressVu L.P.1 ("ExpressVu") adds to the growing number of class action judgments that illustrate the problematic provisions of section 347 of the Criminal Code, which enshrines a 60% annual interest limit to anyone who enters into an agreement to advance credit. There is no flexibility in the application of section 347, and the definition of what is considered "interest" is exceedingly broad. This combination means that section 347 applies to all transactions, whether personal or commercial.2 As a result, a Criminal Code provision designed to protect people from being victimized by unscrupulous lenders is also detrimental to many everyday commercial transactions. ExpressVu nicely illustrates why section 347 is a terribly blunt instrument with which to govern everyday commercial transactions.3
THE FACTS IN EXPRESSVU
ExpressVu arose as a result of an "administration fee" of $25 (or $19 before October 1, 2004). Bell ExpressVu ("Bell") charged its customers if a bill remained unpaid sixty days after billing. The administration fee was charged on top of interest fees levied on overdue accounts beginning thirty days after billing. Bell's billing and collection cycle operated as follows:
Day 1: Invoices were printed and mailed;
Day 25: Payment due date;
Day 30: Interest rate charge of 2% levied;
Day 55: As per Bell's contract, Bell's right to disconnect services commenced;
Day 60: Administration fee of $25 (previously $19) is levied;
Day 75: Service disconnected, but it could be reinstated by customer service; and
Day 105: Service disconnected and it could only be reinstated by the credit department.
Peter De Wolf claimed that the administration fee fell within the definition of "interest" in section 347 of the Criminal Code and therefore far exceeded the criminal 60% rate, given that the average monthly bill for Bell's services was $50. Bell argued that the fee was liquidated damages, not interest, because it was imposed to offset the costs incurred by outstanding accounts.
De Wolf had the proceeding certified as a class action on behalf of the more than 33,000 customers who were charged the administration fee every month. Both parties moved for summary judgment and agreed that the only issue for determination was whether the administration fee in Bell's standard contract, as it was typically charged under Bell's billing and collection cycle, was "interest" under section 347 of the Criminal Code.
THE COURT'S FINDING
In ExpressVu, the Court took considerable guidance from Garland v. Consumers' Gas Co.4 which was, at heart, a substantially similar case where the issue was the legal characterization of a particular charge. Using the reasoning in Garland, the court pared down the provisions of section 347 and found that "interest" is defined as "a charge paid under an agreement by a person to whom credit is advanced," and "credit advanced" is "money or the value of goods or services advanced under an agreement." Connecting these definitions, interest therefore became "a charge paid by the debtor under an agreement for the advancing of money or the value of goods or services."
There was no debate that the administration fee was a "charge" and "paid under an agreement". The key issue was whether this charge, paid under an agreement, was for the advancing of money or the value of goods or services. The Court noted that in determining whether a charge is incurred for the purpose of advancing credit, it was entitled to look to substance, not just form. The Court accepted that, in form, the charge was called a "fee" by Bell. The Court also accepted that the administration fee was a genuine pre-estimate of the costs incurred by Bell to collect delinquent accounts. However, the form did not sway the Court's decision.
The Court was more concerned with the substance of the administration fee, and in particular the time at which the administration fee was levied and its appearance to customers. Bell levied the administration fee on day sixty, fifteen days before any service disruption would occur. In the Court's view, this gave a customer the impression that he or she can delay payment for the services received, and will be receiving, without losing the benefit of the contract. As a result, the Court held that there was a consensual granting of credit for the fifteen day period before any service disruption.
Bell argued that the right to terminate services at the point the administration fee was levied meant that the credit had been unilaterally taken by the customer. The Court did not agree, stating that the difference between the fact that Bell "did not" and "could not" disconnect service did not negate Bell's extension of credit to its customers. In the end, the administration fee was held to be a credit advanced by Bell for the fifteen day period regardless of the fact that Bell had intended for it to be a way to recoup the cost that would be incurred to collect the fee. It is interesting to note that the Court stated, in obiter, that if Bell had charged the administration fee after the disconnection of services on day seventy-five, this might have been enough to shield the administration fee from inclusion in the definition of "interest."
Given the ExpressVu decision, the easiest amendment to Bell's business practice would be to simply disconnect service on day sixty instead of day seventy-five. Bell would then sidestep the logic in ExpressVu because the administration fee would be imposed after disconnecting services, and no credit would be advanced. In such a situation, it is unclear whether Bell would be required to limit the administration fee to the genuine pre-estimate of collection costs. It seems an absurd result that a policy ostensibly used to protect customers could actually end up leaving them with fifteen less days of service before disconnection.
Leaving aside the question of whether section 347 was designed to protect customers from losing fifteen days of satellite television, it is important to ask whether section 347 is the appropriate tool with which to regulate genuine commercial interests. As demonstrated in ExpressVu, the application of section 347 can have unintended consequences. To avoid this, several appropriate responses have been suggested. One viable response is to repeal section 347 and enact new legislation protecting consumers while ensuring the viability of legitimate commercial transactions. Another feasible option would be to amend section 347 to include carve-outs for consumer contracts regulated by provincial law, similar to the one recently added for payday lenders, or to exclude any fee that represents a reasonable estimate of the costs incurred to collect overdue accounts.5 Either of these suggestions is recommended because, in its current form, section 347 has the potential to cause inconsistent jurisprudential results, harm consumers and impede commercial transactions.
1 (2008 CanLII 46128).
2 Mary Anne Waldron, Section 347 of the Criminal Code: "A Deeply Problematic Law" at paras. 2 - 5.
3 Alex Manevich, "De Wolf v. Bell ExpressVu and the Law of Unintended Consequences," online: :http://www.slaw.ca/2008/09/19/de-wolf-vbell- expressvu-and-the-law-of-unintended-consequences/.
4  3 S.C.R. 112.
5 Alex Manevich, "De Wolf v. Bell ExpressVu and the Law of Unintended Consequences", online:http://www.slaw.ca/2008/09/19/de-wolf-vbell- expressvu-and-the-law-of-unintended-consequences/.
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