Bank Act (S.C. 1991, c. 46)

Marginal note:Prepayment

• 627.28 (1) An institution shall not make a loan to a natural person that is repayable in Canada, the terms of which prohibit prepayment of the money advanced or any instalment on the money advanced before its due date.

• Marginal note:Non-application

  (2) Subsection (1) does not apply in respect of a loan that

  • (a) is secured by a mortgage on real property; or

  • (b) is made for business purposes and has a principal amount of more than the prescribed amount or, if there is no prescribed amount, $100,000.

• Marginal note:Prepayment of certain loans

  (3) If an institution enters into a credit agreement with a natural person other than for business purposes, the institution shall allow the person

  • (a) in the case of a loan for a fixed amount, other than a loan that is secured by a mortgage on real property,

    • (i) to prepay the outstanding balance under the agreement, at any time, without incurring any charge or penalty for making the prepayment, or

    • (ii) to prepay a part of the outstanding balance

      • (A) on the date of any scheduled payment, if payments are scheduled once a month or more often, or

      • (B) at any time but only once a month, in any other case; and

  • (b) in the case of any prescribed credit agreement, to prepay any prescribed amount at any prescribed time if the person meets any prescribed requirements.

• Marginal note:Refund or credit

  (4) If a person makes a prepayment referred to in paragraph (3)(a) or (b), the institution shall refund or credit to the person the prescribed amount of any prescribed charge other than any interest or discount applicable to the loan.