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 prepayment fee disclosure and prepaid 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) the formalisation of complaint processes.
Recent developments also include proposed amendments, introduced in October 2018, to the Bank Act, adding a new consumer protection framework that consolidates provisions of the Bank Act and introduces new measures to strengthen provisions that apply to banks and authorised foreign banks in relation to consumer protection. Further, the Competition Bureau published its final report on fintech on 14 December 2017, which explores the competitive landscape for new, technology-led innovation and emerging services in Canada's financial services sector. During the summer of 2017, the Department of Finance also released its consultation paper titled 'A New Retail Payments Oversight Framework', which proposes new federal oversight for retail payments in Canada. 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 on 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.
On 13 April 2017, Bill 59 in Ontario, titled the 'Putting Consumers First Act', received royal assent. Bill 59 establishes a new act with respect to home inspections and also amends the Ontario Consumer Protection Act 2002, the Collection and Debt Settlement Services Act, and the Payday Loans Act 2008, among others.2 With respect to the consumer finance aspects, Bill 59 expands on prohibited practices relating to credit agreements, payday loans and debt collection.3 Bill 59 proposes to expand regulation-making powers relating to credit agreements, including lender disclosure of credit processes, limiting the amount of credit or money to be lent, prohibiting lender-initiated contact to offer refinancing of a credit agreement and prescribing maximum amounts for charges not included in the cost of borrowing.
Bill 59 significantly amended the door-to-door provisions (direct agreements) of the Ontario Consumer Protection Act 2002). With certain exemptions, suppliers (e.g., persons engaging in transactions with consumers) are prohibited from soliciting or entering into agreements at a consumer's home (or any other place as may be prescribed) for certain goods and services (primarily heating, ventilation, and air conditioning systems).
Amendments to the Payday Loans Act 2008 (Ontario) under Bill 59 are in force, and, among other changes, lenders cannot lend more than 50 per cent of the borrower's net income per loan, must show the cost of borrowing a payday loan as an annual percentage rate, and must offer an extended payment plan. Additionally, as of 1 January 2018, the maximum cost of borrowing a payday loan is C$15 for every C$100 that is borrowed. Under a City of Toronto bylaw, payday lending businesses must have a payday loan licence by 1 October 2018 to operate in Toronto.
Bill 59 amended the Collection and Debt Settlement Services Act (Ontario) to, among other things, expand its application to the collection of purchased or assigned overdue debts and introduce administrative penalties for violations. Certain transactions are exempt from the application of the law, including (1) persons who enter into agreements and assign payment rights to a third party but continue to collect payments on behalf of the third party; (2) persons who acquire debt through the seizure of accounts receivable under a security agreement; and (3) persons who purchase financing agreements and the payments due thereunder.
On 13 December 2017, Bill 31, A Better Deal for Consumers and Businesses Act (Bill 31), received royal assent in Alberta, with significant amendments to Alberta's Fair Trading Act. Some amendments are in force and regulations are still being developed for other amendments. Changes were made to the Fair Trading Act in the areas of ticket sales, high-cost credit, and auto sales and repairs.
The Quebec government introduced Bill 134 on 2 May 2017 and it received royal assent on 15 November 2017.4 Draft regulations were released in the summer of 2018, and Bill 134 will come into force in 2019. Significant changes include new rules and obligations in respect of consumer credit, advertising and loyalty programmes.
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. 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:
- British Columbia – Business Practices and Consumer Protection Act, Disclosure of the Cost of Consumer Credit Regulation, and the Payday Loans Act;
- Alberta – Fair Trading Act, Cost of Credit Disclosure Regulation and Payday Loans Regulation;
- Saskatchewan – Consumer Protection and Business Practices Act, Cost of Credit Disclosure Act, Cost of Credit Disclosure Regulations, Payday Loans Act, and Payday Loans Regulation;
- Manitoba – Consumer Protection Act, Consumer Protection Regulation, High Cost Credit Products Regulation, and Payday Loans Act;
- Ontario – Consumer Protection Act, Ontario Regulation 17/05 and Payday Loans Act;
- Quebec – Consumer Protection Act and Regulation Respecting the Application of the Consumer Protection Act;
- New Brunswick – Cost of Credit Disclosure Act;
- Nova Scotia – Consumer Protection Act, Consumer Protection Act Regulations and Payday Lenders Regulations;
- Prince Edward Island – Consumer Protection Act, Conduct of Creditors Regulations and Cost of Borrowing Disclosure Regulations;
- Newfoundland and Labrador – Consumer Protection and Business Practices Act, and Cost of Consumer Credit Disclosure Regulations;
- Yukon – Consumers Protection Act and Consumers Protection Regulation;
- Northwest Territories – Consumer Protection Act, Consumer Protection Regulation, Cost of Credit Disclosure Act and Cost of Credit Disclosure Regulations; and
- 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.
The Canadian Radio-television and Telecommunications Commission (CRTC), the Competition Bureau and the Office of the Privacy Commissioner of Canada (OPC) collectively regulate and enforce compliance with CASL. The CRTC takes primary enforcement responsibility to investigate, take action against, and issue monetary penalties to companies who fail to send compliant electronic messages to consumers, alter transmission data without consent, and install computer programs or software without consent. The OPC enforces CASL with respect to the collection of personal information from consumers and electronic address harvesting.
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 payments 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 (cryptocurrencies, for instance, are excluded from the study). The results of the study were subsequently published in a draft consultation report on 6 November 2017, which was open for public comment. After the consultation and comment period, the Competition Bureau published its final report on 14 December 2017. The report recognises the significance of innovative technologies that exist in the financial services sector and focuses on the areas of retail payments and retail payment systems, lending and equity crowdfunding, and investment dealing and advice. Ultimately, the Competition Bureau's report provides recommendations and guidance to financial sector regulators and other authorities to ensure that innovation and competition in this area is not impeded by regulation.
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.
In July 2017, the Department of Finance released a consultation paper on the proposed establishment of a retail payments oversight framework.5 The consultation period has ended, but given the nature of the framework, it is anticipated that there will be ongoing consultation before the framework is anchored in federal legislation. The framework would apply to payment services providers performing any one of five core functions in an electronic funds transfer: (1) provision and maintenance of a payment account; (2) payment initiation; (3) authorisation and transmission; (4) holding of funds; and (5) clearing and settlement. Certain transactions would be excluded. Measures proposed to implement the oversight include requiring payment services providers to segregate end user funds in a trust account, a registration requirement for certain payment services providers, and disclosure and operational requirements.
The Code of Conduct for the Credit and Debit Card Industry in Canada 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 and IX.
Consumer credit regulation focuses on disclosure, privacy and anti-money laundering. Disclosure is focused on plain language documentation and disclosing 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 institution. 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.6 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. As discussed above, the Competition Bureau released its report based on a market study on the fintech sector at the end of 2017.
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 on 18 July 1994 by the Canadian First Ministers and came into force in July 1995. 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:
- 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;
- the Harmonized List of Prohibited Collection Practices provides a set of practices for collection agencies;
- 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;
- the Internet Sales Contract Harmonization Template includes measures to protect consumers who make purchases online; and
- the Cooperative Enforcement Agreement on Consumer Related Measures facilitates information exchange among the consumer protection agencies carrying out enforcement activities.
iii Rewards points and loyalty programmes
Three provinces have proposed legislation to prohibit the expiration of reward points under consumer agreements.
Ontario's Bill 47, Protecting Rewards Points Act, amended the Consumer Protection Act 2002 (Ontario) (CPA) to, among other things, primarily prohibit the expiry of reward points based solely on the passage of time (subject to any limits prescribed in the legislation, as summarised below).7 Bill 47 received royal assent on 6 December 2016 and amended the CPA, including the general regulation, with such amendments coming into force on 1 January 2018.8 The definition of 'consumer agreement' in the CPA will be amended to refer to an agreement where a 'supplier agrees to provide rewards points to the consumer, on the supplier's own behalf or on behalf of another supplier, when the consumer purchases goods or services or otherwise acts in a manner specified in the agreement'. The term 'supplier' will also include persons in the business of supplying rewards points. 'Rewards points' are defined as 'points provided to a consumer under a consumer agreement that can be exchanged for money, goods, or services'.
The amended regulations also stipulate that the 'rewards points' as defined in the CPA must be points earned and accumulated by the consumer across multiple transactions; that is, they do not apply to rewards offers that provide a consumer with a specific good or service after the consumer achieves a certain amount of progress, if the goods or services are identified at the outset of the offer (e.g., coffee stamp cards). The regulations also carve out low-value reward programmes, which exist if no one good or service, or one single set of goods or services, can be redeemed by a consumer for a value of more than C$50. The key provision of these amendments prohibits the expiry of rewards points 'due to the passage of time alone'. However, this still allows consumer agreements that provide for the expiry of rewards points because of account inactivity, and free rewards points (i.e., those earned without having to make a purchase) may expire because of the passage of time alone, as long as the supplier gives notice to the consumer of this at the time of issuing the points and the expiry occurs at least 30 days after they are issued.
Prince Edward Island introduced Bill No. 105, Rewards Points Protection Act, on 27 April 2017.9 The proposed law contains substantially similar, and in some cases verbatim, provisions to the amendments included in the Ontario consumer protection act and regulations, including a prohibition for the expiry of reward points resulting from the passage of time alone, subject to any limits that may be prescribed. The proposed law also has a retroactive effect that requires suppliers to credit back to consumers any reward points that expired because of the passage of time alone on or after 1 April 2017, including certain terminated reward agreements. A consumer also has a right of action to sue a supplier for restitution, damages and costs. Bill No. 105 empowers the Lieutenant Governor in Council to make further regulations to, among other things (1) clarify the definition of 'rewards points', (2) govern the transfer of reward points, (3) govern the inactivity of reward agreements and reward points, and (4) govern the termination of such agreements and reward points.
On 22 February 2017, a private member bill was introduced in Quebec to amend Quebec's Consumer Protection Act (QCPA) to prohibit the expiry of rewards points – Bill 791.10 Bill 791 is fairly short, and provides for the following amendments: (1) inclusion of a defined term for 'rewards program'; (2) clarification that the QCPA applies to rewards programme contracts; (3) the requirement that merchants provide disclosure to a consumer prior to entering into a rewards program contract; (4) prohibition of any stipulation of or amendment to the contract providing for the expiry date of rewards points obtained by a consumer; (5) prohibition of any stipulation that a merchant may retroactively change the value of rewards points accumulated by a consumer; and (6) allowance for the prescribing of additional rules regarding rewards programme contracts and rewards points.
The Quebec government introduced Bill 134 on 2 May 2017 and it received royal assent on 15 November 2017.11 Draft regulations were released in the summer of 2018, and Bill 134 will come into force in 2019. Bill 134 includes amendments relating to credit and leases, as well as provisions relating to loyalty programmes in Quebec that are substantially similar to Bill 791, and refer to 'exchange units', which are granted to consumers who enter into loyalty programme agreements and have an exchange value. Bill 134 prohibits the expiry of exchange units on a set date or by lapse of time.
iv Ticket sales
Two provinces, Alberta and Ontario, have released proposed rules regarding ticket sales to consumers, with a focus on online ticket sales, resale through scalpers, and the use of ticket bots.
Alberta's Bill 31, A Better Deal for Consumers and Business Act, was proposed in 2017 to amend the Fair Trading Act and make legislative improvements to protect Albertans who seek to purchase tickets to events.12 The new rules will, among other things (1) ban the use of ticket bots to purchase tickets, and (2) ensure secondary sellers and ticketing platforms are required to provide guaranteed full refunds in certain instances (e.g., if the event is cancelled before the ticket is used, or if the ticket turns out to be counterfeit). Ticket sellers and buyers will also have a private right of action to sue if ticket bots are used.
In Ontario, the Ticket Sales Act was introduced in the summer of 2017 to protect consumers of event tickets (whether a sporting event, concert or theatre) and, with the exception of the cap on the resale price described below, is currently in force.13 Similar to Alberta, the Ontario law (1) bans ticket bots and the sale of tickets purchased using ticket bots; (2) caps the resale price of tickets at 50 per cent above face value; (3) requires businesses to disclose more information to consumers; and (4) establishes new enforcement measures to ensure ticket sellers and resellers are following the law.
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 the 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, nine of the 13 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.14 On 8 June 2017, Nunavut amended its consumer protection legislation to include a number of consumer finance-related provisions, such as relief from unconscionable loan transactions, an enumerated list of unfair business practices and provisions related to cashing fees for government cheques.15
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 precautions when completing transactions online. During 2016, a number of companies and individuals were investigated for practices including granting payday loans on terms and for amounts not permitted by legislation, failing to state material facts about financial products being sold to consumers and engaging in improper debt collection practices contrary to legislation. In many instances, enforcement action and administrative monetary 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 in 2017 related to unfair, deceptive or abusive practices relating to consumer finance goods and services. However, both the Bureau and the FCAC have released consumer alerts relating to managing debt (particularly home equity lines of credit) and being aware of investment fraud. In 2017, the Ontario provincial court continued to examine the area of consumer finance products involving prepaid cards, and whether or not they could be considered financial services products. For more details on these investigations and enforcement actions, as well as litigated cases, see Section IX.
IX RECENT CASES
i Enforcement actions
In Alberta, the Director of Fair Trading entered into an undertaking with a debt collection company that was engaging in activities in contravention of the Fair Trading Act, namely pursuing a debt that had not been acknowledged in the past six years and continuing to pursue collections even after receiving a written dispute from the debtor.16
The Director of Consumer Protection in British Columbia released two decisions and three letters with director's orders relating to payday lenders in 2017. Both enforcement decisions resulted in administrative monetary penalties and dealt with improper disclosures in payday loan agreements, namely including incorrect annual percentage rates (APR).17 In one of these decisions, a compliance order was issued against payday lender Cash Central Financial Services Inc, which not only included incorrect APR, but failed to review the payday loan agreement with borrowers and also issued two loans to the same customer in violation of the Business Practices and Consumer Protection Act (BPCPA). With respect to the three director's orders, each order was the result of a compliance inspection of various payday lenders across British Columbia who improperly required borrowers to insure their payday loans.18 These investigations were a part of a joint investigation between Consumer Protection BC and the Financial Institutions Commission.19 In addition, an undertaking was entered into with another lender to ensure each loan agreement contains terms of extended repayment options where applicable.20 A debt collection agent and bailiff based in British Columbia also had its licence suspended for engaging in prohibited activities such as failure to provide information required under the BPCPA, hindering and obstructing an inspection, failure to account for and pay money in a timely manner, and accounting to creditors.21
ii Disputes before the regulator
Manitoba's Consumer Protection Office has released alerts relating to consumers' activities online, including using online payday lenders, and reminds consumers of what payday lenders can and cannot request from borrowers.22 As discussed above, Consumer Protection BC also released a variety of consumer alerts during 2017 relating to unfair and deceptive practices of payday lenders.
A variety of other provincial regulators including those in Alberta and Ontario maintain up-to-date consumer tip sheets including information about debt collection agencies, payday lenders, credit reports and consumer rights related to each of those consumer finance-related products.
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),23 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,24 the Ontario Court of Appeal (ONCA) 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).
In 2017, the Ontario Superior Court released a recent decision certifying a class action for prepaid payment cards, Bernstein v. Peoples Trust Company.25 The defendant in this case argued that the prepaid cards it issued were exempt from the applicable consumer protection laws because they were considered 'financial service products' and not gift cards. Although the superior court declined to engage in a full analysis for the purposes of the certification, it cited and referred to another case from 2016 involving a defendant in British Columbia, Jiang v. Peoples Trust Co,26 where the defendant's prepaid cards were subject to the BPCPA, which is similar to Ontario's Consumer Protection Act 2002.27
On 24 November 2017, a statement of claim was filed to the Ontario Superior Court of Justice by Toronto law firm Paliare Roland Rosenberg Rothstein LLP against PayPal CA Limited, Paypal Canada Co and PayPal Holdings Inc (Paypal) on behalf of an Ontario resident Leonid Kaplan. The statement of claim seeks certification by the court for the action to proceed as a class action. In the statement of claim, Mr Kaplan alleges that PayPal charges Canadians currency conversion fees that are not disclosed to consumers, in violation of PayPal's user agreements.
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 at Cassels Brock & Blackwell LLP.
2 Bill 59, Putting Consumers First Act (Consumer Protection Statute Law Amendment), received royal assent on 13 April 2017, available online at: http://www.ontla.on.ca/bills/bills-files/41_Parliament/Session2/b059ra_e.pdf.
4 Bill 134: An Act mainly to modernize rules relating to consumer credit and to regulate debt settlement service contracts, high-cost credit contracts and loyalty programs, received royal assent on 15 November 2017, available online at: www.assnat.qc.ca/en/travaux-parlementaires/projets-loi/projet-loi-134-41-1.html.
5 Department of Finance Canada, A New Retail Payments Oversight Framework (last modified 7 July 2017) online: fin.gc.ca < https://www.fin.gc.ca/activty/consult/rpof-cspd-eng.asp>.
6 Office of the Superintendent of Financial Institutions (Canada), Guideline B-20, Residential Mortgage Underwriting Practices and Procedures.
7 Bill 47, Protecting Rewards Points Act (Consumer Protection Statute Law Amendment), received royal assent on 8 December 2016, available online at: www.ontla.on.ca/bills/bills-files/41_Parliament/Session2/b047ra.pdf.
8 O Reg 388/17 amending O Reg 17/05 General at ss 43.1 to 43.9; the CPA contemplates additional regulations relating to transfer of rewards points (including upon death), inactivity of rewards points, and the termination of rewards points programmes.
9 Bill No. 105, Reward Points Protection Act, (First Reading) available online at: http://www.assembly.pe.ca/bills/pdf_first/65/2/bill-105.pdf.
10 Bill 791: An Act to amend the Consumer Protection Act in order to regulate rewards program contracts, (First Reading), available online at: www.assnat.qc.ca/en/travaux-parlementaires/projets-loi/projet-loi-791-41-1.html.
11 Bill 134: An Act mainly to modernize rules relating to consumer credit and to regulate debt settlement service contracts, high-cost credit contracts and loyalty programs, received royal assent on 15 November 2017, available online at: www.assnat.qc.ca/en/travaux-parlementaires/projets-loi/projet-loi-134-41-1.html.
12 Bill 31, A Better Deal for Consumers and Business Act, (Second Reading), available online at: www.assembly.ab.ca/ISYS/LADDAR_files/docs/bills/bill/legislature_29/session_3/20170302_bill-031.pdf.
13 Bill 166, Strengthening Protection for Ontario Consumers Act, 2017, (Third Reading), available online at www.ontla.on.ca/bills/bills-files/41_Parliament/Session2/b166rep_e.pdf.
14 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.
15 Chapter 18, An Act to Amend the Consumer Protection Act, (Assented to June 8, 2017) available online at https://www.nunavutlegislation.ca/fr/download/file/fid/11391.
16 Government of the Province of Alberta, Undertaking under Section 152 of the Fair Trading Act between Credit Bureau of Canada Collections o/a Collectcents and the Director of Fair Trading (17 January 2017) online at servicealberta.ca/pdf/undertakings/Credit_Bureau_of_Canada_Collections_o-a_Collectcents_-_Jan-4-17.pdf/.
17 Consumer Protection BC, Recent Enforcement Actions – Case 29559 (1 June 2017), online at https://www.consumerprotectionbc.ca/recent-enforcement-actions-details/?cpbc_caseNumber=29559; and Case 29713 (5 October 2017), online at https://www.consumerprotectionbc.ca/recent-enforcement- actions-details/?cpbc_caseNumber=29713.
18 Consumer Protection BC, Recent Enforcement Actions – Case 29738 (15 September 2017), online at https://www.consumerprotectionbc.ca/recent-enforcement-actions-details/?cpbc_caseNumber=29738; see also Case 29675 https://www.consumerprotectionbc.ca/recent-enforcement-actions-details/?cpbc_caseNumber=29675; see also Case 29678 https://www.consumerprotectionbc.ca/recent-enforcement- actions-details/?cpbc_caseNumber=29678.
19 Consumer Protection BC, Joint investigation by watchdogs takes aim at insurance & payday lending practices, (20 September 2017), online https://www.consumerprotectionbc.ca/news/joint-investigation- watchdogs-takes-aim-insurance-payday-lending-practices/.
20 Consumer Protection BC, Recent Enforcement Actions – Case 29397 (25 May 2017), online at
21 Consumer Protection BC, Recent Enforcement Actions – Case 29705 (18 September 2017), online at https://www.consumerprotectionbc.ca/recent-enforcement-actions-details/?cpbc_caseNumber=29705.
22 Consumer Protection Office of Manitoba, Media Bulletin – Manitoba (6 January 2017), online at
23 Bank of Montreal v. Marcotte, 2014 SCC 55,  2 SCR 725.
24 Sankar v. Bell Mobility, 2015 ONSC 632 (CanLII) affirmed in 2017 ONCA 295.
25 Bernstein v Peoples Trust Company, 2017 ONSC 752.
26 2016 BCSC 368.
27 Note 30 at 63.