Cost of Borrowing (Retail Associations) Regulations (SOR/2002-263)

Changes in Circumstances

Amendments to Credit Agreements

• 13 (1) Subject to subsection (2), if a credit agreement is amended, the retail association must, not later than 30 days after the day on which the amendment is made, disclose in writing to the borrower any resulting changes to the information that was required to be disclosed in the initial disclosure statement.

• (2) If a credit agreement for a fixed amount has a schedule for instalment payments and the schedule is amended, the retail association must, not later than 30 days after the day on which the amendment is made, disclose in writing to the borrower the amended payment schedule and any increase in the total amount to be paid or in the cost of borrowing as a result of that amendment.

Renewals of Mortgages or Hypothecs

• 14 (1) If a credit agreement for a loan secured by a mortgage or hypothec is to be renewed on a specified date, the retail association must, at least 21 days before the date, provide the borrower with a subsequent disclosure statement that contains the information required to be disclosed by

  • (a) section 8, if the credit agreement is for a fixed interest rate; or

  • (b) section 9, if the credit agreement is for a variable interest rate.

• (2) The subsequent disclosure statement referred to in subsection (1) must specify that

  • (a) no change that increases the cost of borrowing will be made to the credit agreement between the transmission of the subsequent disclosure statement and the renewal of the credit agreement; and

  • (b) the borrower’s rights under the credit agreement continue, and the renewal does not take effect, until the day that is the later of the date specified for its renewal and 21 days after the borrower receives the statement.

• (3) A retail association that does not intend to renew a credit agreement for a loan secured by a mortgage or hypothec after its term ends shall, at least 21 days before the end of the term, notify the borrower of that intention.

Waiver of Payments

• 15 (1) If a retail association, under a credit agreement for a loan for a fixed amount, waives a payment without waiving the accrual of interest during the period covered by the payment, the retail association must, in an offer to make such a waiver, disclose in a prominent manner that interest will continue to accrue during that period if the offer is accepted.

• (2) If a retail association offers to waive a payment under a credit agreement for a line of credit or a credit card, the retail association must, with the offer, disclose in a prominent manner whether interest will continue to accrue during any period covered by the offer if the offer is accepted.

Cancellation of Optional Services

• 16 (1) A disclosure statement made in relation to a credit agreement under which optional services, including insurance services, are provided on an on-going basis must specify that

  • (a) the borrower may cancel the optional service by notifying the retail association that the service is to be cancelled effective as of the day that is the earlier of one month after the day that the disclosure statement was provided to the borrower, determined in accordance with subsection 6(6), and the last day of a notice period provided for in the credit agreement; and

  • (b) the retail association shall, without delay, refund or credit the borrower with the proportional amount, calculated in accordance with the formula set out in subsection (2), of any charges for the service paid for by the borrower or added to the balance of the loan, but unused as of the cancellation day referred to in the notice.

• (2) The proportion of charges to be refunded or credited to a borrower shall be determined in accordance with the formula

  R = A × ((n- m) / n)

  where

  R

  is the amount to be refunded or credited;

  A

  is the amount of the charges;

  n

  is the period between the imposition of the charge and the time when the services were, before the cancellation, scheduled to end; and

  m

  is the period between the imposition of the charge and the cancellation.

• (3) Subsection (1) is subject to any provincial laws that apply to the cancellation of services that are referred to in that subsection.

Prepayment of Loans

• 17 (1) This section applies to loans for fixed amounts of credit, except mortgage or hypothec loans.

• (2) A borrower under a credit agreement may prepay

  • (a) the outstanding balance of a credit agreement, at any time, without incurring any charge or penalty for making the prepayment; or

  • (b) a part of the outstanding balance

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

    • (ii) at any time but only once a month, in any other case.

• (3) A borrower under a credit agreement who prepays

  • (a) the outstanding balance must be refunded or credited with the proportional amount of any non-interest charges, except for disbursement charges, paid by the borrower or added to that balance, calculated in accordance with the formula set out in subsection (4); and

  • (b) a part of the outstanding balance is not entitled to a refund or credit related to non-interest charges mentioned in paragraph (a).

• (4) The proportion of non-interest charges to be refunded or credited to a borrower shall be determined in accordance with the formula

  R = A × ((n- m) / n)

  where

  R

  is the amount to be refunded or credited;

  A

  is the amount of the non-interest charges;

  n

  is the period between the imposition of the non-interest charge and the scheduled end of the term of the loan; and

  m

  is the period between the imposition of the non-interest charge and the prepayment.

Default Charges

18 If a borrower under a credit agreement fails to make a payment when it becomes due or fails to comply with an obligation in the agreement, in addition to interest, the retail association may impose charges for the sole purpose of recovering the costs reasonably incurred

• (a) for legal services retained to collect or attempt to collect the payment;

• (b) in realizing on any security interest taken under the credit agreement or in protecting such a security interest, including the cost of legal services retained for that purpose; or

• (c) in processing a cheque or other payment instrument that the borrower used to make a payment under the loan but that was dishonoured.

Advertising

Loans for a Fixed Amount

• 19 (1) A retail association that advertises a loan involving a fixed amount of credit in an advertisement that makes a representation of the interest rate, or the amount of any payment or of any non-interest charge, in relation to the loan must disclose the APR and the term of the loan. The APR must be provided at least as prominently as the representation and in the same manner, whether visually or aurally, or both.

• (2) If the APR or the term of the loan is not the same for all loans to which the advertisement relates, the disclosure must be based on an example of a loan that fairly depicts all those loans and is identified as a representative example of them.

Lines of Credit

20 A retail association that advertises a loan involving a line of credit in an advertisement that makes a representation of the annual interest rate, or the amount of any payment or of any non-interest charge, in relation to the loan must disclose the annual rate of interest on the date of the advertisement and any initial or periodic non-interest charges at least as prominently as the representation and in the same manner, whether visually or aurally, or both.

Credit Cards

21 A retail association that advertises a credit card in an advertisement that makes a representation of the annual interest rate, or the amount of any payment or of any non-interest charge, in relation to the loan must disclose the annual rate of interest on the date of the advertisement and any initial or periodic non-interest charges at least as prominently as the representation and in the same manner, whether visually or aurally, or both.

Interest-free Periods

• 22 (1) A retail association that finances a transaction depicted in an advertisement that involves a representation, express or implied, that a period of a loan is free of any interest charges must ensure that the advertisement discloses in a manner equally as prominent as the representation, if it is expressed, or in a prominent manner otherwise, whether or not interest, due after the period, accrues during the period.

• (2) If interest does not accrue during the period, the advertisement must also disclose any conditions that apply to the forgiving of the accrued interest and the APR, or the annual interest rate in the case of credit cards or lines of credit, for a period when those conditions are not met.

Transitional

23 These Regulations apply to the renewal or on-going administration of a credit agreement that was entered into before these Regulations came into force.

Coming into Force

24 These Regulations come into force on the day on which they are registered.