Cost of Borrowing (Retail Associations) Regulations (SOR/2002-263)
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Regulations are current to 2025-10-14 and last amended on 2016-06-14. Previous Versions
3 (1) For the purpose of section 385.17 of the Act, the cost of borrowing for a loan under a credit agreement, other than a loan obtained through the use of a credit card or line of credit, is to be expressed as an annual rate on the principal, as follows:
APR = (C / (T × P)) × 100
where
- APR
- is the annual percentage rate cost of borrowing;
- C
- is an amount that represents the cost of borrowing within the meaning of section 5 over the term of the loan;
- P
- is the average of the principal of the loan outstanding at the end of each period for the calculation of interest under the credit agreement, before subtracting any payment that is due at that time; and
- T
- is the term of the loan in years, expressed to at least two decimal points of significance.
(2) For the purpose of the APR calculation under subsection (1),
(a) the APR may be rounded off to the nearest eighth of a per cent;
(b) each instalment payment made on a loan must be applied first to the accumulated cost of borrowing and then to the outstanding principal;
(c) a period of
(i) one month is 1/12 of a year,
(ii) one week is 1/52 of a year, and
(iii) one day is 1/365 of a year;
(d) if the annual interest rate underlying the calculation is variable over the period of the loan, it must be set as the annual interest rate that applies on the day that the calculation is made;
(e) if there are no instalment payments under a credit agreement, then the APR must be calculated on the basis that the outstanding principal is to be repaid in one lump sum at the end of the term of the loan; and
(f) a credit agreement for an amount that comprises, in whole or in part, an outstanding balance from a prior credit agreement is a new credit agreement for the purpose of the calculation.
(3) For the purpose of section 385.17 of the Act, the cost of borrowing for a loan obtained under a credit card agreement or line of credit is to be expressed as an annual rate, as follows:
(a) if the loan has a fixed annual interest rate, that annual interest rate; or
(b) if the loan has a variable interest rate, the annual interest rate that applies on the date of the disclosure.
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