On November 9, 2022, Newfoundland passed Bill 13 – An Act to Amend the Consumer Protection and Business Practices Act 1. Amongst other things, Bill 13 introduces a framework for regulation of high-cost credit into its consumer protection legislation. In doing so, it joins British Columbia, Alberta, Manitoba and Quebec, which currently have high-cost credit regimes in force.
Newfoundland's high-cost credit regime (the "Framework") will apply to personal credit products (including fixed credit, open credit, and leases; but excluding payday loans) with an annual percentage rate ("APR") exceeding the prescribed rate. While the regulations have yet to be introduced, the second reading of Bill 13 suggests that the APR threshold is expected to be around 32%.2 This aligns with most high-cost credit regimes in other Canadian provinces. Current rates include an APR exceeding 32% in British Columbia, 32% or more in Alberta, over 32% in Manitoba, and an APR exceeding the Bank of Canada rate by 22% in Quebec.
Under the Framework, a licence to carry on business as a high-cost credit grantor will be required by any lender who offers, arranges or provides a high-cost credit product to a borrower in the province of Newfoundland, even where the lender operates over the telephone or the internet. The amendments also introduce enhanced disclosure requirements for high-cost credit. A grantor will be required to display certain prescribed information at all of its high-cost credit locations and on its website where the internet is used for its business. Where a grantor engages in its business by telephone, it must verbally disclose the prescribed information.
Notably, the Framework provides for a four-day cooling off period during which a borrower can cancel a credit agreement, for any reason, without penalty. In addition, the Framework also allows a borrower to cancel a credit agreement at any time if the grantor: (1) does not advise the borrower of the borrower's cancellation right set out above, (2) fails to satisfy (i) any of the requirements related to the prescribed terms that must be included in the credit agreement, (ii) the requirement to review with the borrower certain matters (which will be set out in the regulations) before the credit agreement is signed, or (iii) the requirement to provide a copy of the credit agreement and other required documents to the borrower, or (3) contravenes certain provisions of the Framework.
Other rules under the Framework include a prohibition against grantors requiring or accepting an assignment of wages from borrowers, and a prohibition against offering prizes or rewards as incentive for entering into high-cost credit agreements. Further details of the Framework will become available once the regulations are released.
Ontario has been working towards introducing a high-cost credit regime similar to those in the five provinces mentioned above. In January 2021, the Ontario Government released a consultation paper titled "High-Cost Credit in Ontario: Strengthening Protections for Ontario Consumers" 3, which set out recommendations for its framework. Notably, it proposes to set the threshold for high-cost credit products as an APR exceeding the Bank of Canada Rate by 25% or more (similar to Quebec's approach and as opposed to the specific rate of 32% and above used in the other four provinces). It remains to be seen whether the proposed regime will come to fruition in Ontario, possibly making it the sixth Canadian jurisdiction to regulate high-cost credit.
1. Bill 13, An Act to Amend the Consumer Protection and Business Act, 2nd Sess, 50th Leg, Ontario, 2022 (assented to 9 November 2022), SNL 2009, C-31.1.
2. Ontario, Legislative Assembly, Official Report of Debates (Hansard), 50th Leg, 2nd Sess, No 4 (12 October 2022) at 223 (C. Tibbs).
3. Ontario, Regulatory Registry, Alternative Financial Services: High-Cost Credit Consultation Paper (29 January 2021), online.
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