May 23 2017
Bill 134 to modernize the CPA: overview of proposed changes
On May 2nd, Bill no. 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 was introduced to modify the Consumer Protection Act, among other laws.
The bill proposes various changes, but the main ones focus on modernization of rules regarding consumer credit and regulation of debt settlement service contracts. The bill also includes amendments regarding distance contracts, long-term lease contracts, loyalty programs and advertising.
We summarize some of the proposed changes below.
To increase the protection given to consumers, the bill introduces numerous additions and modifications to provisions regarding consumer credit. For example, the bill modifies the current description, even though it was not exhaustive, of credit charge components as well as the list of credit charge components that must be included in credit rate calculations. The bill also requires that before entering into a credit contract with a consumer, a merchant must assess the consumer’s capacity to repay the credit requested. This assessment must be done in accordance with criteria to be determined by regulation. Failure to do this assessment properly would lead to merchants losing their right to credit charges. The bill also covers situations where the cost of the credit contract is too high for the consumer. Before entering into a contract, merchants will have to disclose information in writing to consumers, including informing consumers of their debt ratio. The bill also grants a right of resolution to consumers when they enter into a high-cost credit contract and their debt ratio exceeds the legal threshold (to be determined by regulation). In such case, the law would consider that the consumer had contracted an excessive, harsh or unconscionable obligation. For contracts, the bill would add requirements with regard to information that must be disclosed.
It is important to note that if the bill is adopted in its current form, any advertising message that includes a reference to a credit charge will also have to disclose the credit charge calculated in accordance with the requirements.
To further protect consumers, the bill also includes various provisions to regulate how access to credit is advertised, for example by prohibiting false or misleading representations that claim that credit could improve a consumer’s financial situation.
Long-Term Contract of Lease
Similar to the new provisions regarding credit contracts, the bill also sets out that before entering into a long-term contract of lease with a consumer, the merchant must assess the consumer’s capacity to fulfill his or her obligations.
In its current form, the Consumer Protection Act already sets forth requirements applicable to advertisement of instalment sale contracts. With the bill, these requirements would be extended to long-term contract of lease as well: any advertisement that discloses the amount of the instalments to be paid to purchase or lease long-term a good or service must also disclose the total price of the good or service or, in the case of a long-term lease, the retail value of the goods. The advertiser will also have to ensure that the emphasis on the total or retail value is as important as the one on the instalment amount.
The bill also adds provisions to the CPA to regulate loyalty programs. Under these proposed provisions, (i) the merchant will have to disclose in writing to consumers information to be determined by regulation before entering into a contract relating to a loyalty program; (ii) exchange units will no longer expire on a set date or by the passing of time; and (iii) a merchant will be able to amend unilaterally an essential provision of the contract, subject to certain conditions.
Prohibited Advertising and Practices
With regard to how the information is presented in advertisements, the bill states that “a merchant, manufacturer or advertiser must, in an advertisement concerning goods or services, present all the information in a clear, legible and understandable manner, and as prescribed by regulation.”
Furthermore, if an advertisement mentions the total or retail price for a specific good or service and includes a picture of the good or service, this picture must be an accurate representation of the good or service advertised. The bill also prohibits the use of the expression “cost price” or any similar expression, except in cases where the price at which the good or service is offered to the consumer (by sale or lease) is in fact the price that the retailer paid.
This bill is the conclusion of the consultations carried out by the Consumer Protection Office in the fall of 2015 and spring of 2016. The bill was introduced on May 2 and is now at the consultation stage.
For any questions regarding this bill, contact Pierre Savoie: Pierre.Savoie@ljt.ca