Final versions of the Credit Business Practices Regulations (CBP
Regs) and the Cost of Borrowing Regulations (COB Regs) that apply
to federally regulated financial institutions were published in
September 2009. Drafts of both sets of regulations had previously
been submitted for public comment in May 2009, and after
submissions by industry groups remained largely intact. Some of the
changes came into force on January 1, 2010. Other changes that
require substantial system changes will be delayed until September
The CBP Regs address certain practices regarding credit cards
and debt collection. The new debt collection practices are intended
to provide uniformity for federally regulated financial
institutions in place of the patchwork of provincial regulations.
The more important and visible changes made by the CBP Regs relate
to some fundamental elements of the credit card agreement, such as
The practice (referred to as M2) that required a cardholder to
pay a prior statement balance in full in order to avoid interest
charges on purchases charged in a current billing period will no
longer be permitted. Beginning on September 1, 2010, cardholders
may not be charged interest on purchases made during a billing
period provided that they pay the balance in full on their credit
card statement by the payment due date. The period from the date of
the credit card statement to the payment due date (the grace
period) may not be less than 21 days.
Also, beginning on September 1, 2010, payments on a credit card
in excess of the minimum payment must be allocated either (i) to
the portion of the balance carrying the highest interest rate, and
then to other portions in descending order of the rate of interest
payable on those portions; or (ii) pro rata based on the relative
proportion of each part of the balance bearing a different rate. It
remains to be seen what effect this will have on promotional and
introductory offers that carry lower rates.
Beginning January 1, 2010, credit card issuers are no longer
permitted to increase a cardholder's credit limit without first
obtaining the cardholder's express consent, which may be given
orally if confirmed in writing (paper or electronically) before the
next statement date. Use of a card does not constitute express
consent. This change does not appear to restrict the authorization
of any transaction over a credit limit, as the CBP Regs sanction
overlimit fees, except where an overlimit occurs as a result of a
hold that is placed on a credit card.
Changes to the COB Regs substantially increase the level of
disclosure required with respect to all types of consumer credit
— not just credit cards. The most visible change is the
requirement that there be a "summary box" in addition to
the disclosure statement in order to provide a snapshot of the most
important aspects of the credit arrangement. It is to be provided
at the beginning of the credit agreement (if the disclosure
statement is part of the credit agreement) or at the beginning of
the disclosure statement (if the disclosure statement is separate
from the credit agreement). Even credit card applications must have
a summary box, although it may be used in substitution for the
required disclosure. Both the form and content of the summary boxes
have been prescribed. It is also now abundantly clear in the COB
Regs that a disclosure statement must be presented in a single
location and in a consolidated manner if it is contained in the
In addition, the changes to the COB Regs clarify the rules for
providing disclosure to co-borrowers and require that:
Monthly credit card statements include an estimate of the time
that would be required to repay the outstanding balance at the
annual interest rate if only the minimum payment were made on the
due date each month. This change comes into effect on September 1,
If the interest rate payable by a cardholder could increase in
the next billing period, the circumstances that would give rise to
that increase and the new rate of interest that would apply in the
next billing period as a result of the increase be disclosed.
Accordingly, advance notice of the expiry of an introductory rate
must be given.
Unfortunately, a number of the provisions in the changes to the
COB Regs are subject to various interpretations, and therefore the
goal of uniformity of disclosure may not be achieved.
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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In 2015, and just before his retirement, Justice Murray of the Ontario Superior Court of Justice left us with a challenging legal decision that, for the time being at least, will matter to mortgage lenders.