British Columbia recently released the long-awaited regulations to the high-cost credit legislation it introduced in 2019 as part of the Business Practices and Consumer Protection Amendment Act, 2019 (the Amendment Act). It also announced that British Columbia's new high-cost legislative framework (the Framework) will come into force on May 1, 2022. British Columbia will join Alberta, Manitoba, and Québec who already regulate high-cost credit contracts.
What you need to know
- The Framework which aligns with British Columbia's existing model for payday lenders, will require companies that offer or facilitate high-cost credit products, such as high-interest installment loans and lines of credit above 32% interest, will require annual licensing and be regulated by Consumer Protection BC.
- The rules will prohibit certain fees and practices, set out requirements for credit agreements and establish borrower rights and remedies.
- Banks, credit unions, and certain trust and loan companies are exempted from the requirements, including licensing.
British Columbia's high-cost credit legislative framework
High-cost credit contracts are currently regulated in Alberta, Manitoba, and Québec. B.C. introduced in 2019 the “Amendment Act” which will add a new Part 6.3 to the Business Practices Consumer Protection Act to address high-cost credit contracts. The recently published regulations added the remaining details to this Framework.
The Framework is broadly similar to legislation in the other three provinces that regulate high-cost credit. It will apply to fixed credit, open credit, leases and other prescribed consumer products with an APR or interest rate that exceeds 32% interest. British Columbia has aligned with Manitoba and Alberta who also have a 32% interest rate threshold whereas in Québec, the threshold is determined by adding 22% to the Bank Rate of the Bank of Canada in effect two days before the credit contract was entered into (so it is currently 22.5%).
British Columbia's high-cost credit providers will need to be licensed and must provide borrowers with prescribed disclosures applicable to the credit agreement. The legislation provides borrowers with a one-day cooling off period as well as cancellation rights that are not limited by time. These cancellation rights are available to the borrower in the following circumstances:
- the agreement does not include the twenty-eight prescribed content requirements set out in section 112.21(2) and any additional requirements prescribed in the regulations;
- the lender does not advise the borrower of the cooling-off period;
- the lender does not review with the borrower prescribed matters before the borrower enters the agreement; and
- the lender does not provide the borrower with a copy of the agreement and cancellation notice at the time the agreement is signed by the borrower.
These rights and requirements go beyond those in other provinces. For example, in Alberta there are no similar express cancellation rights in relation to high-cost credit while in Manitoba a borrower has an unlimited cancellation right only if not advised of the cooling off period. The requirement to review the agreement with the borrower does not have an equivalent in other provinces and may restrict the ability of lenders to enter agreements through the internet.
The new proposed regulations added the following exemptions:
- The Framework does not apply to a loan broker when the loan broker arranges, negotiates or facilitates an extension of credit that is not a high-cost credit product.
- The high-cost credit product cancellation rights and the required terms of high-cost credit agreements do not apply in respect of a high-cost credit agreement in relation to a credit sale or a lease.
- The restrictions regarding the use and disclosure of borrower information do not apply to a high-cost credit grantor when the high-cost credit grantor requires, requests or accepts consent from a borrower of a high-cost credit product to use or disclose the borrower's personal information for the purposes of providing credit information of the borrower in relation to the high-cost credit product to a reporting agency.
- Banks, credit unions, and certain trust and loan companies are exempted from the requirements when the institution offers, arranges, provides or facilitates a high credit product.
The Framework also prohibits wage assignments, restricts payment procedures, and prohibits incentives such as prizes or awards to enter a high-cost credit agreement. The regulations prohibit high-cost credit grantors from charging, requiring or accepting any fee for additional attempts to process regularly scheduled payments that were dishonored.
A new consumer financial education fund will be established to provide financial literacy and promote financial consumer protections in the Business Practices and Consumer Protection Act. High-cost credit grantors and payday lenders will contribute to the fund as part of the annual fees paid to Consumer Protection BC.
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.