Financial Consumer Protection Framework Regulations (SOR/2021-181)

Marginal note:Initial disclosure — variable interest loan

• 41 (1) For the purposes of paragraph 627.89(1)(e) of the Act, the following information is prescribed information in relation to a variable interest rate loan for a fixed amount that is to be repaid on a fixed future date or by instalment payments:

  • (a) the information referred to in subsection 40(1) of these Regulations;

  • (b) the annual interest rate that applies on the date of the disclosure;

  • (c) the method for determining the annual interest rate and when that determination is made;

  • (d) the amount of each payment based on the annual interest rate that applies on the date of the disclosure and the dates when those payments are due;

  • (e) the total amount of all payments and of the cost of borrowing based on that annual interest rate;

  • (f) if the loan is to be paid by instalment payments and the amount to be paid is not adjusted automatically to reflect changes in the annual interest rate that apply to each instalment payment,

    • (i) the triggering annual interest rate above which the amount paid under a scheduled instalment payment on the initial principal does not cover the interest due on the instalment payment, and

    • (ii) the fact that negative amortization is possible; and

  • (g) if the loan does not have regularly scheduled payments,

    • (i) the conditions that must occur for the entire outstanding balance, or part of it, to become due, or

    • (ii) the provisions of the credit agreement that set out those conditions.

• Marginal note:Subsequent disclosure — public index

  (2) If the variable interest rate for the loan is determined by adding or subtracting a fixed percentage interest rate to or from a public index that is a variable rate, then, for the purposes of subsection 627.89(4) of the Act, the following information is prescribed information:

  • (a) the annual interest rate at the beginning and end of the period covered by the disclosure;

  • (b) the outstanding balance at the beginning and end of the period covered by the disclosure; and

  • (c) the amount of each instalment payment due under a payment schedule and the time when each payment is due, based on the annual interest rate that applies at the end of the period covered by the disclosure.

• Marginal note:Frequency and manner of disclosure

  (3) The prescribed information referred to in subsection (2) must be disclosed in a statement that is provided at least once every 12 months.

• Marginal note:Subsequent disclosure — other method

  (4) If the variable interest rate for the loan is determined by a method other than the one referred to in subsection (2), then, for the purposes of subsection 627.89(4) of the Act, the following information is prescribed information:

  • (a) the new annual interest rate and the date on which it takes effect; and

  • (b) for payments that are affected by the new annual interest rate, the amount of each instalment payment and the time when each payment is due.

• Marginal note:Time and manner of disclosure

  (5) The prescribed information referred to in subsection (4) must be disclosed in a statement that is provided not later than 30 days after the day on which the institution increases the annual interest rate by more than 1% above the most recently disclosed rate.

Marginal note:Amendments — loan for fixed amount

• 42 (1) For the purposes of paragraph 627.89(5)(a) of the Act, an amendment to a schedule for instalment payments for a loan for a fixed amount is a prescribed amendment.

• Marginal note:Information

  (2) For the purposes of paragraph 627.89(5)(b) of the Act, the amended schedule as well as any increase in the total amount to be paid or in the cost of borrowing is prescribed information.

• Marginal note:Time of disclosure

  (3) The prescribed amendment and the prescribed information must be disclosed in writing not later than 30 days after the day on which the amendment is made.

Marginal note:Mortgages

43 Sections 44 to 46 apply in respect of a credit agreement for a loan secured by a mortgage on real property.

Marginal note:Time of initial disclosure

• 44 (1) The initial disclosure statement for a credit agreement must be provided on or before the earlier of

  • (a) the making of a payment, other than a disbursement charge, and

  • (b) two clear business days before the day on which the credit agreement is entered into.

• Marginal note:Exception

  (2) Paragraph (1)(b) does not apply if

  • (a) the person entering into the credit agreement consents to being provided with the initial disclosure statement on or before the day on which the credit agreement is entered into;

  • (b) the person entering into the credit agreement obtains independent legal advice;

  • (c) a rescission period of at least two clear business days is set out in the credit agreement; or

  • (d) favourable terms that reduce the cost of borrowing are set out in the credit agreement.

Marginal note:Renewal

• 45 (1) For the purposes of subsection 627.89(6) of the Act, the following information is prescribed information in relation to a credit agreement that will be renewed on a specified date:

  • (a) the information referred to in section 40 of these Regulations if the credit agreement is for a fixed interest rate;

  • (b) the information referred to in section 41 of these Regulations if the credit agreement is for a variable interest rate;

  • (c) a statement that no change that increases the cost of borrowing will be made to the credit agreement between the day on which the statement is disclosed by the institution and the day on which the credit agreement will be renewed; and

  • (d) a statement that the person’s rights under the credit agreement continue, and the renewal does not take effect, until the day that is the later of the specified date and the day that is 21 days after the day on which the person receives the statement.

• Marginal note:Time of disclosure

  (2) The prescribed information must be disclosed by providing a disclosure statement at least 21 days before the specified date.

Marginal note:Non-renewal

• 46 (1) If an institution does not intend to renew a credit agreement after its term ends, then, for the purposes of subsection 627.89(6) of the Act, that fact is prescribed information.

• Marginal note:Time of disclosure

  (2) The fact must be disclosed at least 21 days before the end of the term.

Marginal note:Calculating borrowing costs

• 47 (1) For the purposes of section 627.9 of the Act, the following formula is, subject to subsections (3) and (4), the prescribed manner for calculating the cost of borrowing for a loan other than a loan obtained through the use of a credit card or line of credit:

  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 48 of these Regulations over the term of the loan;

  T

  is the term of the loan in years, expressed to at least two decimal points of significance; and

  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.

• Marginal note:Calculation rules

  (2) The following rules apply in respect of the calculation:

  • (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 one month is 1/12 of a year;

  • (d) a period of one week is 1/52 of a year;

  • (e) a period of one day is 1/365 of a year; 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.

• Marginal note:Variable interest rate

  (3) If the annual interest rate underlying the calculation is variable over the period of the loan, that annual interest rate must be set as the annual interest rate that applies on the day that the calculation is made.

• Marginal note:No instalment payments

  (4) If there are no instalment payments under the 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.

Marginal note:Charges included in cost of borrowing

• 48 (1) Subject to subsection (2), 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, consists of all the costs of borrowing under the loan over its term, in particular the interest or discount that applies to the loan, and includes the following charges:

  • (a) administrative charges, including charges for services, transactions or any other activity in relation to the loan;

  • (b) charges for the services, or disbursements, of a lawyer or notary that an institution required the borrower to retain;

  • (c) insurance charges other than those excluded under paragraphs (2)(a), (f) and (h);

  • (d) charges for a broker, if the broker’s fees are included in the amount borrowed and are paid directly by the institution to the broker; and

  • (e) charges for appraisal, inspection or surveying services, other than those mentioned in paragraph (2)(g), related to property that is security for a loan, if those services are required by the institution.

• Marginal note:Charges not included in cost of borrowing

  (2) The cost of borrowing for a loan does not include any of the following fees or charges:

  • (a) charges for insurance on the loan if

    • (i) the insurance is optional, or

    • (ii) the borrower is its beneficiary and the amount insured reflects the value of an asset that is security for the loan;

  • (b) charges for an overdraft;

  • (c) fees paid to register documents or obtain information from a public registry about security interests related to property given as security;

  • (d) penalty charges for the prepayment of a loan;

  • (e) charges for the services, or disbursements, of a lawyer or notary, other than those mentioned in paragraph (1)(b);

  • (f) charges for insurance against defects in title to real or immovable property, if the insurance is paid for directly by the borrower;

  • (g) charges for appraisal, inspection or surveying services provided directly to the borrower in relation to property that is security for a loan;

  • (h) charges for insurance against default on a high-ratio mortgage on real property;

  • (i) fees to maintain a tax account that are required for a mortgage referred to in paragraph (h) or that are optional;

  • (j) any fee to discharge a security interest; and

  • (k) default charges.

• Marginal note:Definition of borrower

  (3) In this section, borrower includes a person to whom a loan is proposed to be made.

Marginal note:Waiver offer

49 An institution that, under an agreement for a loan for a fixed amount, offers to waive a payment without waiving the accrual of interest during the period covered by the payment must, in a prominent manner, disclose in the offer that interest will continue to accrue during that period if the offer is accepted.

Marginal note:Advertisements

• 50 (1) For the purposes of section 627.91 of the Act, a representation of the interest rate, amount of any payment or amount of any non-interest charge in relation to a loan involving a fixed amount of credit is a prescribed representation.

• Marginal note:Information

  (2) For the purposes of section 627.91 of the Act, the APR and the term of the loan are prescribed information.

• Marginal note:Use of examples

  (3) If the APR or the term of the loan is not the same for all loans to which the advertisement relates, its 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.

• Marginal note:Presentation of APR

  (4) For the purposes of section 627.63 of the Act, the APR must be presented at least as prominently as the prescribed representation and in the same manner, whether visually or aurally, or both.

Marginal note:Advertisements — transactions financed by institution

• 51 (1) If an institution 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, the institution must ensure that the advertisement discloses whether or not interest, due after the period, accrues during the period.

• Marginal note:Presentation of accrual of interest

  (2) The institution must ensure that the disclosure of whether or not interest, due after the period, accrues during the period is presented prominently and, in relation to an express representation, is presented equally as prominently as the representation.

• Marginal note:Disclosure of conditions

  (3) If interest does not accrue during the period, the institution must also ensure that the advertisement discloses 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.

Lines of Credit

Marginal note:Information box

52 For the purposes of subsection 627.57(1) of the Act, the following information is prescribed information for a line of credit:

• (a) the initial credit limit, if it is known on the date of the disclosure statement;

• (b) the annual interest rate, or, if it is a variable rate, a brief description of the method for determining it;

• (c) the date on and after which interest accrues as well as information respecting the grace period or, if no grace period applies, an indication to that effect;

• (d) the amount of the minimum payment required in each payment period and a brief description of the method for determining the amount of the minimum payment;

• (e) the foreign currency conversion rate, a brief description of how it is determined and the date on which it is applied;

• (f) the amount of any non-interest charges that are levied on an annual basis and the date on which they are levied or, if no annual charges are levied, an indication to that effect; and

• (g) a list of the types and amounts of any other non-interest charges that indicates the dates on which they are applied.