It is important to consider the laws of the applicable jurisdiction within Canada when engaging in a consumer transaction or entering into an agreement with a consumer. Consumer protection laws in Canada are not entirely harmonised: the federal, provincial and territorial governments share responsibility. The Consumer Measures Committee (CMC), formed pursuant to the Agreement on Internal Trade (1994), is a multi-jurisdictional organisation coordinating consumer protection in Canada. The CMC has completed several harmonisation agreements, covering cost of credit disclosure, internet sales and prohibited collection practices. At the federal level, various laws address matters such as anticompetitive practices, packaging and labelling, federally regulated financial institutions, interest and privacy. The provinces and territories have consumer protection laws in place that address general matters, as well as laws specific to certain industries (e.g., debt collection and payday loans). Disclosure requirements in consumer agreements vary by type of agreement and from Canadian provincial jurisdiction to jurisdiction. Individuals and entities offering certain goods or services to consumers, including credit reporting agencies and agents, payday lenders, direct sellers, motor vehicle dealers, travel agencies and agents, loan brokers, and mortgage brokers, require provincial or territorial licences to carry out their activities. Equal credit opportunity legislation does not exist in Canada, per se, but fair access to financial services will fall under the purview of human rights legislation in Canada, which makes it illegal to discriminate against persons on several protected grounds.
The Financial Consumer Agency of Canada (FCAC) promotes the adoption of policies designed to implement laws, voluntary codes of conduct and public commitments by federally regulated financial institutions; it is also responsible for educating and protecting consumers of financial products and services. The Office of Consumer Affairs, part of the federal government department responsible for industry matters: Innovation, Science and Economic Development Canada, uses policy instruments to support consumer protection regulation in Canada, working with the public and private sector. Each of the provinces and territories has a consumer affairs office.
In recent years, government policy emphasis on consumer protection has increased with the introduction of new laws, principles and codes. The federal government has enhanced consumer protection through: (1) credit card reforms, requiring summary information boxes, mandatory 21-day interest free grace periods and consent for credit limit increases; (2) the introduction of a Code of Conduct for the Credit and Debit Card Industry in Canada, which contains 10 elements that apply to credit and debit card networks and their participants (e.g., card issuers and acquirers), (3) changes to mortgage pre-payment fee disclosure and pre-paid card rules; (4) an expanded mandate for the FCAC; (5) the passing of the Financial Literacy Leader Act and the designating of November as Financial Literacy Month; and (6) formalisation of complaint processes.
Recent developments also include proposed amendments, introduced on 25 October 2016, to the Bank Act, adding a new consumer protection chapter that consolidates and streamlines provisions and adds new measures and principles. While the proposed amendments were withdrawn for further consideration, it is expected revisions of this type will be reintroduced. Further, the Competition Bureau launched a fintech market study on 19 May 2016 into the competitive landscape for new, technology-led innovation and emerging services in Canada’s financial services sector. At the provincial and territorial level, amendments have been proposed to certain consumer laws addressing payday loans, door-to-door sales, alternative financial services and unfair practices. Concerns about the trends in consumers’ use of payday loans brought amendments to consumer protection laws and a 2016 study launched by the FCAC of payday loan users across Canada. The results led to the FCAC updating its website content on payday loans and plans to develop new consumer education materials to foster greater consumer awareness of their high cost. The FCAC is also working with stakeholders across Canada to promote awareness. Addressing electronic commerce, Canada’s Anti-Spam Law (CASL) came into effect on 1 July 2014 (sections relating to unsolicited installation of computer programs or software came into force on 15 January 2015). General prohibitions under CASL include bans on sending commercial electronic messages without the recipient’s consent or permission, on using false or misleading representations online when promoting products or services and on collecting personal information in violation of federal law.
Emerging technologies continue to change the consumer landscape. Consumer transactions have changed with the digitisation of money (e.g., increased use of mobile technology for payments). Aspects of the existing legal framework can be applied to the emerging trends. In some instances, however, further amendments to laws or new laws will be required to address the rapidly changing payments environment in Canada.
II LEGISLATIVE AND REGULATORY FRAMEWORK
Federal and provincial legislation govern payments, deposits and lending. Legislation regulates entities by type or is specific to the nature of the product or service offered to consumers. The Bank Act is the primary federal legislation respecting banks, federal credit unions and banking. On 25 October 2016, amendments were proposed to the Bank Act, creating a new consumer financial protection framework, which consolidates existing consumer protection provisions, streamlining provisions that apply to banks in relation to consumer protection and introducing some new measures. The amendments have been withdrawn for further study. It is not yet known when the amendments will come into force or what final form they will take, but it is anticipated the legislation will go forward. Products and services offered by trust and loan companies to consumers are regulated under the federal Trust and Loan Companies Act. Provincial and territorial legislation addresses disclosure of the cost of credit in consumer agreements (e.g., lease agreements, credit agreements and credit card agreements), prescribing the disclosure requirements applicable in advertising and in consumer agreements, as well as setting out the rights and obligations of borrowers and lenders and lessors. Legislation regulating lending practices in each Canadian province or territory include:
a British Columbia – Business Practices and Consumer Protection Act, Disclosure of the Cost of Consumer Credit Regulation, and the Payday Loans Act;
b Alberta – Fair Trading Act, Cost of Credit Disclosure Regulation and Payday Loans Regulation;
c Saskatchewan – Consumer Protection and Business Practices Act, Cost of Credit Disclosure Act, Cost of Credit Disclosure Regulations, Payday Loans Act, and Payday Loans Regulation;
d Manitoba – Consumer Protection Act, Consumer Protection Regulation, High Cost Credit Products Regulation, and Payday Loans Act;
e Ontario – Consumer Protection Act, Ontario Regulation 17/05 and Payday Loans Act;
f Quebec – Consumer Protection Act and Regulation Respecting the Application of the Consumer Protection Act;
g New Brunswick – Cost of Credit Disclosure Act;
h Nova Scotia – Consumer Protection Act, Consumer Protection Act Regulations and Payday Lenders Regulations;
i Prince Edward Island – Consumer Protection Act, Conduct of Creditors Regulations and Cost of Borrowing Disclosure Regulations;
j Newfoundland and Labrador – Consumer Protection and Business Practices Act, and Cost of Consumer Credit Disclosure Regulations;
k Yukon – Consumers Protection Act and Consumers Protection Regulation;
l Northwest Territories – Consumer Protection Act, Consumer Protection Regulation, Cost of Credit Disclosure Act and Cost of Credit Disclosure Regulations; and
m Nunavut – Consumer Protection Act and Consumer Protection Regulation.
Payments Canada (formerly the Canadian Payments Association) is responsible for the payments system in Canada and provides rules and standards in relation to clearing and settlement, including payment services. Pre-authorised debit agreements must comply with Payments Canada rules, including Rule H1, which prescribes required content and notification requirements.
Prepaid products (e.g., gift cards and prepaid cards) are regulated federally and provincially. The federal Prepaid Payment Products Regulation applies to prepaid payment products issued by federally regulated financial institutions. It does not apply to those issued by provincially regulated institutions or retailers. Provincial consumer protection laws regulate prepaid cards and gift cards.
The FCAC Compliance and Enforcement Branch administers the consumer provisions in federal financial institution legislation (including the Bank Act) and monitors compliance by federally regulated financial institutions, payment card network operators and external complaints bodies with voluntary codes of conduct and public commitments. The FCAC utilises various methods to gather information on current issues in the financial sector, identifying compliance concerns that may lead to investigation and the application of compliance or enforcement methods. Federally regulated entities have reporting deadlines to report received complaints to the FCAC. Consumer complaints directly received by the FCAC are reviewed, and information concerning third-party dispute resolution, if applicable, is provided to consumers. In some instances, complainants are directed to go through the respective entity’s complaint procedure, and, where necessary, the FCAC may direct the consumer to a provincial regulator or another government agency or department.
The Office of the Superintendent of Financial Institutions (OSFI) supervises and regulates banks and federally incorporated and registered entities, including insurers, trust and loan companies, and private pension plans that are subject to federal oversight. OSFI assists in developing and interpreting laws, issuing guidelines, and granting approval to federally regulated entities as required under financial institution laws.
The Competition Bureau has responsibility for administering and enforcing, among other laws, the Competition Act. Various methods are employed to resolve issues, including referring criminal matters to the Director of Public Prosecutions of Canada and non-criminal matters to the Competition Tribunal or courts. Alternative resolution methods may also be used, voluntary compliance encouraged or public alerts issued to provide education to consumers and business respecting anticompetitive practices.
Provincial and territorial offices are responsible for enforcement of the consumer laws in their jurisdictions. Enforcement actions include court proceedings, administrative monetary penalties, compliance orders, voluntary commitments and public notices.
The Canadian payments system comprises various payment methods to purchase goods and services, under various laws (federal and provincial), procedures and rules, and it is recognised globally as a well-functioning system. Payments Canada operates the clearing and settlement system. Financial institutions have arrangements to exchange and transfer funds on behalf of their customers and on their own behalf. The payments system facilitates transactions involving the exchange of funds in return for goods and services. Technology has evolved the methods used to make payment over the last decade. Payment methods used by Canadians include cash, cheque, prepaid cards, gift cards and electronic payment systems (e.g., e-transfers, PayPal and mobile payments).
ii Recent developments
The Canadian payments landscape continues to evolve, with the introduction of new payment products and services in the marketplace changing basic consumer transactions, including contactless cards, peer-to-peer payments and mobile wallets.
Various studies and consultations have been undertaken to address the modernisation of Canada’s payment systems. It is anticipated that, as payment technologies evolve, the payments legal framework will undergo significant change.
A market study was launched by the Competition Bureau on 19 May 2016, to examine the competitive landscape for technology-led innovation and emerging services in the Canadian financial services sector. The Competition Bureau is not examining all consumer financial services related to technological innovations (crypto-currencies, for instance, are excluded from the study). The results of the study may inform changes in law.
In 2016 April, Canada adopted ISO 20022, a global standard for electronic payment messages to facilitate the transition from paper to electronic payments. ISO 20022 uses a global ‘language’ for payments data, to streamline multi-jurisdictional payments.
The Code of Conduct for Credit and Debit Cards was amended in 2015 to extend to mobile payments. This code applies to credit and debit card networks, and their participants, and provides the disclosure requirements to, and rights of, merchants that accept credit and debit card payments. The update to the code added three elements: (1) no obligation on merchants to accept contactless payments; (2) new disclosure requirements for merchant–acquirer agreements; and (3) mandatory dispute resolution processes for merchant complaints. It also contains new protections for merchants that choose not to accept mobile payments: (1) if the payment processor introduces a new fee, the merchant can cancel the agreement or stop accepting mobile payments; (2) the merchant can cancel contactless payments on 30 days’ notice without penalty; and (3) merchants have more flexibility to exit contracts with credit card processors without penalty. In addition, consumers must be allowed to control the settings on their device and mobile wallets to choose either a debit or credit application when making payment.
IV DEPOSIT ACCOUNTS AND OVERDRAFTS
The provision of deposit accounts by financial institutions in Canada is fully regulated. Financial services sector participants wishing to take deposits will be regulated as a bank, or as a loan or trust company, credit union or credit cooperative. All have similar regulation that looks to prudential regulation, including a requirement to hold an operating licence and to meet capital requirements, among others. Deposits will benefit from deposit insurance provided by the Canada Deposit Insurance Corporation, a federal crown agency. This insures individual deposits to the extent of C$100,000 for an account; insured accounts include registered savings plans as well as operating or savings accounts.
Financial institutions that provide deposit accounts are subject to consumer protection legislation relating to disclosure as to interest. The financial institution must also satisfy anti-money laundering and anti-terrorist financing identification, verification and monitoring requirements. Consumers wishing to open a deposit account need to provide the requisite information to permit compliance with those requirements.
Overdraft facilities are generally available in Canada on a negotiated basis. There is no automatic requirement that financial institutions provide consumers with access to overdraft facilities. Whether an overdraft facility will be available in connection with an account will depend on the specific agreement reached between the consumer and the financial institution. Overdraft facilities are the same as any other credit facility, but they are not provided frequently for consumer relationships. If the overdraft facility is available, any extension of credit on the overdraft facility will be subject to the agreement reached as to the requirement for repayment, the provision of security, and all will be subject to the bank set-off rights against accounts held for repayment. Disclosure of the cost of borrowing must be given by the lender providing the facility.
ii Recent developments
There has been little recent development in the law, or practice, governing the deposit accounts or overdrafts. There have been some increases in the requirements for disclosure as to interest, and increasing protection for privacy as to personal information of financial institution customers. Anti-money laundering legislation also requires significant enquiry at the time of the opening of an account and in the event of account activity that indicates either suspicious or connected transaction issues. Financial institutions are not required to provide consumers with access to deposit accounts and overdraft facilities.
V REVOLVING CREDIT
Revolving credit facilities may be made available to consumers, although this is a relatively unusual consumer credit relationship in Canada. Revolving credit facility loans will be repayable on demand. The facility will generally be documented by a simple letter of commitment or term sheet, and may be supported by a request for security. Consumer revolving loans are frequently provided on an unsecured basis.
The demand nature of the revolving facility may be supplemented by a requirement that the facility be periodically repaid, subject to re-advancement, during the course of the term. The most common term for a revolving facility is annual, with annual reviews determining whether the facility will be re-extended.
Revolving loans are a common product of the regulated financial institutions, and may be available from a broad range of additional sources. Most of the specific technical aspects of revolving loans are not regulated, but some areas, such as payday loans or pawn based loans, have specific regulation, which is addressed in Sections VIII–IX, infra.
Consumer credit regulation focuses on disclosure, privacy and anti-money laundering. Disclosure is focused on plain language documentation and providing disclosure of the cost of credit. The most common forms of revolving credit arrangements are credit cards and lines of credit.
The extensions of credit are generally lightly regulated, if regulated at all, relying on the contractual agreement between the consumer and the lender. Servicing of these loans is subject only to limitations on how collection activities can be undertaken. If security is required, the security will generally be margin-based and will often consist of a requirement to deliver marketable securities or other liquid assets.
Credit that is based on assets, such as automobiles or household goods, will generally not be provided as revolving credit but rather as a term loan. An emerging credit product for consumers are home equity arrangements, where a mortgage-type arrangement is entered into providing the ability to require advances and repayments based on the security provided from real estate. These loans are regulated, more particularly as to the entities that can provide such facilities, and otherwise are subject to similar requirements with regard to disclosure.
Consumers are given some protection under law relating to personal property security allowing for increased rights to rectify a default or to redeem security in the event of default and realisation.
ii Recent developments
Legislation is emerging that would limit the ability of collection agents, on behalf of lenders, to undertake activities that would amount to harassment, or to make calls, either in person or by telephone, outside specified hours. Lenders directly undertaking collection activities are generally less restricted.
Disclosure requirements are increasing as to what must be provided to consumers. Banks have a specific required disclosure that must be provided in the specified, box format. Other regulated financial institutions similarly have requirements for disclosure, and consumer disclosure requirements are prevalent across essentially all providers of credit. A failure to provide appropriate disclosure can jeopardise the ability to recover interest, although it will not generally affect the ability to recover principal.
Much of the revolving credit, particularly credit card, automobile loans and some consumer lines of credit, is still being securitised in Canada. This will impose the requirements that pool standards be met in connection with the advance, credit underwriting and documentation of consumer credit.
VI INSTALMENT CREDIT
Mortgage lending is prevalent in Canada. Mortgage lending is provided by a number of sources, both mortgage specialised lenders and regulated financial institutions. Regulated financial institutions are constrained by the debt-to-property-value ratio (80 per cent), the deposit required, and the creditworthiness of the consumer as a consequence of capital requirements and specific loan-to-value restrictions. Mortgage insurance is generally available in Canada, and is commonly obtained from Canada Mortgage and Housing Corporation (CMHC), a Canadian crown agency, and from private providers. Mortgage insurance is most commonly used for first-time homebuyers, those with a small deposit, those with non-prime credit and mortgages to be securitised. Mortgages will require disclosure of the cost of credit. This will be required regardless of the person providing the mortgage loan.
Mortgage lending is generally subject to regulation, requiring the involvement of a mortgage broker in order to lend to consumers in this sector unless the lender is a regulated financial instititution. The security for mortgages will be the real property, and only rarely in a consumer mortgage arrangement will it include other security.
Mortgage remedies are limited by law, and will require periods of notice, rights to rectify and redeem, but in general mortgages may be readily realised upon regardless of the consumer nature of the loan. In Canada, a most common method of realisation is to sell the property and repay the mortgage, and any surplus then goes to the consumer.
Vehicle financing for consumer purposes is readily available. There are a number of sources including unregulated lenders, dealer- or vendor-based lenders and financial institutions. Consumer lending for motor vehicles includes both purchase loans and lease transactions. Motor vehicle equity loans are also now available in Canada. These loans will be subject to consumer protection requirements for disclosure as to the cost of borrowing. The security will generally consist of the motor vehicle; it is rare for other security to be required, but this may be requested.
Student loans are available in Canada, and are generally part of a government, provincial, mix of grant and loan programme. Specialised lenders participate in the student loan market. Protections are provided to the students as consumers, in that the terms of the student loans are heavily regulated. Lenders providing student loans are protected by the inability of students to fully avoid the requirements for repayment, once required by the terms of the loan, by using bankruptcy arrangements.
Servicing of these consumer credit products is regulated as to collection activities, disclosure and privacy.
ii Recent developments
The most significant changes in the instalment credit area of consumer finance in Canada are changes in the mortgage lending sector. Mortgage lending since 2008 has been heavily dependent on the federal government-supported mortgage-backed securities programme overseen by CMHC. Recent changes are reducing the ability to access insurance, which is central to the ability to securitise these mortgages. The restriction on allocation of insurance, and access to the mortgage-backed securities programme that uses the CMHC mortgage, will decrease access to consumer mortgages and potentially increase cost.
There is also increasing regulation on the part of regulated financial institutions, banks and trust companies participating in the mortgage market. Requirements under a guideline known as B-20 are increasing the underwriting requirements for these regulated financial institutions.2 Banks and trust companies in Canada provide the bulk of residential mortgage lending, and accordingly these increased requirements will decrease access to consumer credit and increase cost.
Motor vehicle lending is relatively unregulated; access to the ability to realise on the motor vehicle in the event of repatriation of the asset, as a consequence of default or at the end of a term can create a form of regulation in this sector. Only persons licensed to participate in the auctions that are the most common means of disposal of automobiles can actively participate on a large scale in the automotive lending or leasing sector. The access to auctions, and the used automobile market, is increasingly being regulated as persons who deal in used automobiles must fulfil regulatory requirements as to capital, education and representation status.
Lenders are required to comply with regulatory requirements as to consumer disclosure, privacy and anti-money laundering, all of which are imposing increasing requirements on lenders participating in this sector.
VII OTHER AREAS
i Fintech advances and legislation
Fintech, whether using blockchain technology, or otherwise, is still relatively unregulated in Canada. Customers are free to agree that they will use, or accept, an alternate funds transfer system such as blockchain technology. The consumer must, however, be fully informed as to the increased risk of participating in the alternative financial sector, particularly with regard to currency transfers and exchanges. In general, money services businesses operating in the fintech sector will use customer assurances as to their ability to transfer funds on a basis reasonably equivalent to that of the traditional financial services sector. There is no restriction in Canada from these money services businesses providing assurances using their financial capability, and guarantees, or using insurance to provide equivalent assurances to the customer that funds will move to the intended recipients without risk of loss. The consumer should either be fully informed of the additional risk or be protected by assurances of this nature. Canada has not enacted restrictions on dealing in virtual currency, such as bitcoin.
Regulation is being considered in Canada relating to anti-money laundering requirements for handling of virtual currency, which would generally be considered to be adequately addressed at present by money services businesses that have had to register and deal with anti-money laundering legislation for some time. There is accordingly no restriction on customers in Canada transferring funds using virtual currency.
The general view in Canada is that identification and information should be made available at the point of customer interface, which is fund deposit for exchange to virtual currency. This should include a consumer warning as to the potential for increased risk.
Fintech in Canada is relatively undeveloped. Fintech providers may provide back-office, supplemental or private label services for the traditional financial institutions, banks and trust companies. In doing so the fintech provider will be subject to the usual consumer protection requirements, including on privacy, cost of credit disclosure, anti-money laundering and anti-terrorist financing.
Fintech advances within the traditional sectors, such as banks now using mobile phone and similar types of banking delivery, is increasing. This type of fintech product is not the subject of significant legislation, and it is considered that this is merely the delivery of traditional financial services, using alternative means, which will be subject to the usual consumer protection legislation.
ii Harmonisation projects
Consumer protection legislation in Canada is not entirely harmonised, though efforts have been made to standardise certain legislation across the country. The Agreement on Internal Trade, an inter-governmental trade agreement, was signed 18 July 1994 by the Canadian First Ministers and came into force 1995 July. Under Chapter 8 of the Agreement on Internal Trade, the CMC was created. The CMC has a representative from each level of government (i.e., federal, provincial and territorial) and provides a forum for national cooperation in Canada on the consumer front, through harmonisation of laws, regulations and practices.
The CMC has completed harmonisation agreements, adopted by most Canadian jurisdictions, on cost of credit disclosure, direct sellers regulation, internet sales contracts, and prohibited collection practices. The following harmonisation agreements have been completed by the CMC:
a the Agreement for Harmonization of Cost of Credit Disclosure Laws provides a set of rules governing the way credit is advertised and disclosed in consumer agreements;
b the Harmonized List of Prohibited Collection Practices provides a set of practices for collection agencies;
c the Direct Sellers Harmonization provides a uniform 10-day cooling-off period for consumers when they purchase products or services from door to door sales persons and sets out requirements for disclosure in the consumer agreement;
d the Internet Sales Contract Harmonization Template includes measures to protect consumers who make purchases online; and
e the Cooperative Enforcement Agreement on Consumer Related Measures facilitates information exchange among the consumer protection agencies carrying out enforcement activities.
VIII UNFAIR PRACTICES
Across Canada, provinces have enacted consumer protection legislation that addresses unfair, deceptive or abusive practices relating to all consumer goods and services, including those in the consumer finance context. Each province’s ministry for consumer services (or equivalent) investigates and enforces the applicable jurisdiction’s consumer protection legislation against organisations or individuals that have contravened the provincial law. At the federal level, these practices are scrutinised by Canada’s Competition Bureau (the Bureau), an independent law enforcement agency that investigates and enforces the Competition Act, which protects consumers against false and misleading representations, and FCAC. Both the Bureau and FCAC also release consumer alerts, provide resources and guidelines for consumers and businesses, and evaluate complaints that are submitted by the public.
Currently, eight of the thirteen provinces and territories in Canada have consumer protection legislation that explicitly describes or provides lists of acts or practices deemed to be unfair, deceptive or abusive.3 At the time of writing, Nunavut is seeking to amend its consumer protection legislation to include an enumerated list of unfair business practices.4
Based on alerts, investigations and enforcement actions issued by the provincial ministries, the majority of recent unfair practices related to consumer finance involve payday lenders and debt collection agencies. During 2016, a number of companies and individuals were investigated for practices including misrepresentations about assisting consumers with debt, harassment and intimidation of debtors by collection agencies, and granting payday loans on terms and for amounts not permitted by legislation. In many instances, enforcement action and penalties were levied, including the suspension of a licence to operate as a collector or lender in the applicable jurisdiction. Neither the Bureau nor the FCAC has investigated any complaints or released any consumer alerts in 2016 related to unfair, deceptive or abusive practices relating to consumer finance goods and services. In 2016, provincial courts made a number of key decisions in the area of consumer finance products, particularly in relation to prepaid cards, where the courts clarified the applicability of provincial consumer finance laws to different types of prepaid cards and in some instances carving-out exceptions to the general prohibition against expiry dates. For more details on these investigations and enforcement actions, as well as litigated cases, see Section IX, infra.
Although there were no new enforcement actions by the applicable consumer protection agencies and ministries in Ontario and Prince Edward Island, Bill 59 in Ontario, titled the ‘Putting Consumers First Act’ has gone through its first reading. Bill 59 will amend the Ontario Consumer Protection Act, 2002, the Collection and Debt Settlement Services Act, and the Payday Loans Act, 2008, among others.5 With respect to consumer finance aspects, Bill 59 expands on prohibited practices relating to credit agreements, payday loans, and debt collection.6
IX RECENT CASES
i Enforcement actions
In Alberta, the Director of Fair Trading recently issued an order against a debt repayment company relating to claims made by the company that misrepresented the performance and capability of its debt repayment services.7 Claims such as ‘We help hundreds of people every month, just like you’ and ‘Our record of success is indisputable’ were made, yet an investigation revealed the company had no clients and was not licensed as a debt repayment agency in Alberta.8 The Director of Fair Trading has also issued notices of administrative penalties in 2016 for prohibited practices enumerated in the Collection and Debt Repayment Practices Regulation, including improper contact of a debtor’s partner9 and pursuing a debt that has not been acknowledged in the last six years,10 and the Payday Loans Regulation for unauthorised withdrawals from a borrower’s account.11
The Director of Consumer Protection in British Columbia issued notices of administrative penalties against two companies in 2016 relating to improper debt collection practices, resulting in one instance in the suspension of a debt collector’s licence.12 In addition, a payday lender entered into an undertaking as a result of alleged contraventions relating to unfair practices for improper debt collection and payday loan practices, including an implication that a payday loan would improve a borrower’s credit rating when it would not.13
The Deputy Director of Payday Loans in Saskatchewan issued an order against a payday lender following an inspection that revealed the company had engaged in an unsuitable practice of pre-authorised debit (PAD) transactions without entering into a PAD agreement with the borrower.14
Quebec’s consumer protection authority has investigated and fined a number of companies for improper debt collection practices, including harassment and threatening a borrower with legal action. Fines levied for these unfair practices ranged from a few hundred dollars to over C$10,000.15
ii Disputes before the regulator
Manitoba’s Consumer Protection Office has released alerts relating to the province’s new laws for high-interest loans,16 after the minister issued two administrative penalties against payday lenders for entering into loan agreements that exceed the allowable proportion of the borrower’s net pay, among other things, in late 2015.17
Newfoundland and Labrador appears to be focused on improper securities trading, having released two consumer alerts in 2016 relating to various (allegedly overseas) companies who are targeting consumers in Newfoundland but are not registered to sell securities in Canada. Service NL, the responsible provincial government body, has indicated that it has launched an investigation into at least one of these companies.18 Similar alerts relating to binary options platforms was posted by Saskatchewan’s Financial and Consumer Affairs Authority (FCAA).19 Saskatchewan FCAA has also released an alert to warn investors that individuals are fraudulently using the FinCEN (the US Financial Crimes Enforcement Network government agency) name to elicit information from Saskatchewan residents.20
In recent years, the ambit of provincial consumer protection laws has been challenged in a number of cases, leading to seminal decisions that have reshaped, and will continue to reshape, the consumer protection landscape in Canada for years to come.
In Bank of Montreal v. Marcotte and two companion cases (Amex Bank of Canada v. Adams and Marcotte v. Fédération des Caisses Desjardins du Québec)21 the Supreme Court of Canada (SCC) ruled that the Quebec Consumer Protection Act applies to federally regulated financial institutions, including their credit card businesses. The SCC confirmed the continued exclusive federal jurisdiction over banking, while clarifying that provincial consumer protection laws may nonetheless still apply.
On the heels of the Marcotte decision, there has been a flurry of class action lawsuits brought under provincial consumer protection laws against telecommunications companies with respect to their mobile device billing practices. This is an area that is poised to continue its evolution and one that should be watched carefully by all federally regulated businesses, as the limits of the applicability and inter-relationship between provincial and federal consumer protection laws are tested.
In Sankar v. Bell Mobility,22 the Ontario Court of Appeal did not rule on the province’s jurisdiction over prepaid wireless phone cards, nor did it specifically address whether they were subject to the Ontario Consumer Protection Act’s gift card regulations (the Regulations). The ONCA did confirm that the Regulations do not strictly prohibit time-limited contracts, which it differentiated from the prohibition on the expiry of contracts of future performance. Similarly, the British Columbia Supreme Court determined that open-loop stored-value cards issued by entities, including credit unions, were subject to the Business Practices and Consumer Protection Act (British Columbia).
It is understood that if the proposed Bank Act amendments are enacted, the consumer code will undergo significant change. The outlook is that over the course of the next year the consumer code will be substantially amended and reintroduced. The outlook in Canada will continue to have a significant focus on consumer protection in the mortgage area, as to disclosure and the availability of products, but also to prevent consumers from potential abuse related to mortgage products that they may not understand. Reverse mortgages, home equity loan mortgages, high-ratio and sub-prime mortgages are increasingly becoming the subject of a mix of direct and indirect regulation. Indirect regulation arises from the penalties imposed on regulated financial institutions, as to capital and permitted pools, and to access to securitisation financing.
Canada is working increasingly on harmonising consumer protection legislation, which is primarily a provincial jurisdiction. Harmonisation projects have been ongoing for many years in the consumer credit areas including mortgage lending, consumer lending, cost of credit and interest earned disclosure, and consumer leasing. It is likely that the harmonisation projects will continue over the course of the next year.
1 Alison Manzer and Suhuyini Abudulai are partners, and Belinda Chiu and Bryan Woodman are associates, at Cassels Brock & Blackwell LLP.
2 Office of the Superintendent of Financial Institutions (Canada), Guideline B-20, Residential Mortgage Underwriting Practices and Procedures.
3 In Alberta, Manitoba, Prince Edward Island and Saskatchewan, the provincial consumer protection legislation provides an enumerated non-exhaustive list of practices that are considered unfair. British Columbia, Newfoundland and Labrador, and Ontario legislation also describe practices that are unfair or deceptive, and include non-exclusive lists of examples. Quebec’s consumer protection act describes prohibited practices throughout but does not include a specific list or reference to ‘unfair’ practices. In each province, the legislation empowers the Lieutenant Governor in Council to create legislation to include additional prescribed practices.
4 Bill 25, An Act to Amend the Consumer Protection Act, 3rd Sess, 4th Leg, Nunavut, 2016, cl 3 (second reading), available online at: http://www.assembly.nu.ca/sites/default/files/Bill%2025%20-%20An%20Act%20to%20Amend%20the%20%20Consumer%20Protection%20Act-%20EF%20final.pdf.
5 Bill 59, Putting Consumers First Act (Consumer Protection Statute Law Amendment), 2nd Sess, 41st Leg, Ontario, 2016 (first reading), available online at: http://www.ontla.on.ca/web/bills/bills_detail.do?locale=en&BillID=4333&isCurrent=false&ParlSessionID=.
6 Ontario Ministry of Government and Consumer Services, News Release: Ontario Putting Consumers First, (3 November 2016) online: Ontario.ca https://news.ontario.ca/mgs/en/2016/11/ontario-putting-consumers-first.html.
7 Government of the Province of Alberta, Director’s Order under Section 157 of the Fair Trading Act to Milton Kaseke, Complete Debt Solutions, and any employee, representation or agent of the above, (21 March 2016) online: servicealberta.ca https://www.servicealberta.ca/pdf/admin-penalties/Milton_Kaseke_Complete_Debt_Solutions.pdf.
9 Government of the Province of Alberta, Notice of Administrative Penalty, (13 September 2016) online: servicealberta.ca https://www.servicealberta.ca/pdf/admin-penalties/Optimum_Credit_Recovery_Inc.pdf.
10 Government of the Province of Alberta, Notice of Administrative Penalty, (8 June 2016) online: servicealberta.ca https://www.servicealberta.ca/pdf/admin-penalties/International_Credit_Experts_Inc_June_8_2016.pdf.
11 Government of the Province of Alberta, Notice of Administrative Penalty, (14 April 2016) online: servicealberta.ca https://www.servicealberta.ca/pdf/admin-penalties/1869982_Alberta_Ltd_o_a_Money_Vault.pdf.
12 Consumer Protection BC, Recent Enforcement Actions – Case 29290, (5 July 2016) online: consumerprotectionbc.ca https://www.consumerprotectionbc.ca/consumers-alias/help-for-consumers-enforcement-actions/recent-enforcement-actions?&task=view_result&case_number=29290&bus_name=; and Case 29170, (11 July 2016) https://www.consumerprotectionbc.ca/consumers-alias/help-for-consumers-enforcement-actions/recent-enforcement-actions?&task=view_result&case_number=29170&bus_name=.
13 Consumer Protection BC, Recent Enforcement Actions – Case 29259, (5 August 2016) online: consumerprotectionbc.ca https://www.consumerprotectionbc.ca/consumers-alias/help-for-consumers-enforcement-actions/recent-enforcement-actions?&task=view_result&case_number=29259&bus_name=.
14 Government of Saskatchewan, Order issued to S.T. Holdings Inc. d/b/a Premiere Cash, (24 June 2016) online: fcaa.gov.sk.ca http://www.fcaa.gov.sk.ca/Default.aspx?DN=12c3beb6-e15a-48b9-b89f-cc5aa4e2ecdf.
15 Office de la Protection du Consommateur, Poursuites et condamnations, online: opc.gouv.qc.ca http://www.opc.gouv.qc.ca/en/news/poursuite-condamnation-region-date/ (a list of all actions taken by the regulator in 2016; French only).
17 http://news.gov.mb.ca/news/?item=36633; http://news.gov.mb.ca/news/?item=35013.
21 Bank of Montreal v. Marcotte, 2014 SCC 55,  2 SCR 725.
22 Sankar v. Bell Mobility 2015 ONSC 632 (CanLII).