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Cost of Borrowing (Banks) Regulations (SOR/2001-101)

Regulations are current to 2020-06-17 and last amended on 2020-03-16. Previous Versions

Disclosure — General (continued)

Manner (continued)

  •  (1) Subject to subsections (2) and (3), if a bank enters into a credit agreement with two or more borrowers, it must provide the disclosure statement referred to in subsection 6(1) to all of the borrowers.

  • (2) If all of the borrowers have consented, orally or in writing, in paper or electronic form, to the provision of the disclosure statement to one of the borrowers on their behalf, the bank must provide the statement to that borrower.

  • (3) If two or more but not all of the borrowers have consented, orally or in writing, in paper or electronic form, to the provision of the disclosure statement on their behalf to one of the consenting borrowers, the bank may provide the statement to that borrower on their behalf, if it also provides the statement to every borrower that has not so consented.

  • (4) If the consent referred to in subsection (2) or (3) is given orally by a borrower, the bank must provide confirmation of that consent to the borrower in writing, in paper or electronic form.

  • SOR/2009-258, s. 3
  • SOR/2020-47, s. 2

Timing of Initial Disclosure

  •  (1) A bank that proposes to enter into a credit agreement with a borrower must provide the borrower with the initial disclosure statement required by these Regulations on or before the earlier of the making of a payment, other than a disbursement charge, in relation to the credit agreement by the borrower and

    • (a) two clear business days before the entering into the credit agreement by the borrower and the bank, in the case of a credit agreement for a mortgage or hypothec; or

    • (b) the entering into the credit agreement by the borrower and the bank, in any other case.

  • (2) Paragraph (1)(a) does not apply if

    • (a) the borrower consents to being provided with the initial disclosure statement for the credit agreement in accordance with paragraph (1)(b);

    • (b) the borrower obtains independent legal advice;

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

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

  • SOR/2009-258, s. 4
  • SOR/2014-273, s. 6(F)
  • SOR/2016-142, s. 1
  • SOR/2020-47, s. 3

Disclosure — Content

Fixed Interest Loans for a Fixed Amount

  •  (1) A bank that enters into a credit agreement for a loan for a fixed interest rate for a fixed amount, to be repaid on a fixed future date or by instalment payments, must provide the borrower with an initial disclosure statement that includes the following information:

    • (a) the principal amount of the loan;

    • (b) the amount of the advance, or any advances, of the principal and when it is, or they are, to be made;

    • (c) the total amount of all payments;

    • (d) the cost of borrowing over the term of the loan, expressed as an amount;

    • (e) the term of the loan, and the period of amortization if different from the term;

    • (f) the annual interest rate and the circumstances under which it is compounded, if any;

    • (g) the APR, when it differs from the annual interest rate;

    • (h) the date on and after which interest is charged and information concerning any period during which interest does not accrue;

    • (i) the amount of each payment and when it is due;

    • (j) the fact that each payment made on a loan must be applied first to the accumulated cost of borrowing and then to the outstanding principal;

    • (k) information about any optional service in relation to the credit agreement that the borrower accepts, the charges for each optional service and the conditions under which the borrower may cancel the service if that information is not disclosed in a separate statement before the optional service is provided;

    • (l) the disclosure required by paragraph 452(1)(a) of the Act, including a description of any components that comprise a formula to calculate a rebate, charge or penalty in the event that the borrower exercises the right to repay the amount borrowed before the maturity of the loan and, if section 17 applies, the formula set out in subsection 17(4);

    • (m) the disclosure required by paragraph 452(1)(b) of the Act, including default charges that may be imposed under section 18;

    • (n) the property, if any, over which the bank takes a security interest under the credit agreement;

    • (o) any charge for a broker, if the broker’s fees are included in the amount borrowed and are paid directly by the bank to the broker;

    • (p) the existence of a fee to discharge a security interest and the amount of the fee on the day that the statement was provided; and

    • (q) the nature and amount of any other charge, other than interest charges;

  • (2) If the missing of a scheduled instalment payment or the imposition of a default charge for a missed scheduled instalment payment increases the outstanding balance of a loan referred to in subsection (1) with the result that each subsequently scheduled instalment payment does not cover the interest accrued during the period for which it was scheduled, the bank must, at most 30 days after the missed payment or the imposition of the default charge, provide the borrower with a subsequent disclosure statement that describes the situation and its consequences.

Variable Interest Loans for a Fixed Amount

  •  (1) A bank that enters into a credit agreement for a loan with a variable interest rate for a fixed amount, to be repaid on a fixed future date or by instalment payments, must provide an initial disclosure statement that includes the following information in addition to that required by section 8:

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

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

    • (c) 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;

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

    • (e) 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

    • (f) 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) which provisions of the credit agreement set out those conditions.

  • (2) If the variable interest rate for the loan is determined by adding or subtracting a fixed percentage rate of interest to or from a public index that is a variable rate, the bank must, at least once every 12 months, provide the borrower with a subsequent disclosure statement that contains the following 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.

  • (3) If the variable interest rate for the loan is determined by a method other than that referred to in subsection (2), the bank must, at most 30 days after increasing the annual interest rate by more than 1% above the most recently disclosed rate, provide the borrower with a subsequent disclosure statement that contains the following information:

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

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

Lines of Credit

  •  (1) A bank that enters into a credit agreement for a line of credit must provide the borrower with an initial disclosure statement that includes the following information:

    • (a) the initial credit limit, if it is known at the time the disclosure is made;

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

    • (c) the nature and amounts of any non-interest charges;

    • (d) the minimum payment during each payment period or the method for determining it;

    • (e) each period for which a statement of account is to be provided;

    • (f) the date on and after which interest accrues and information concerning any grace period that applies;

    • (g) the particulars of the charges or penalties referred to in paragraph 452(1)(b) of the Act, including default charges that may be imposed under section 18 of these Regulations;

    • (h) the property, if any, over which the bank takes a security interest under the credit agreement;

    • (i) information about any optional service in relation to the credit agreement that the borrower accepts, the charges for each optional service and the conditions under which the borrower may cancel the service if that information is not disclosed in a separate statement before the optional service is provided;

    • (j) a local or toll-free telephone number, or a telephone number with a prominent indication that collect calls are accepted, that the borrower may use to get information about the account during the bank’s regular business hours; and

    • (k) any charge for a broker, if the broker’s fees are included in the amount borrowed and are paid directly by the bank to the broker.

  • (2) If the initial credit limit is not known when the initial disclosure statement is made, the bank must disclose it in

    • (a) the first statement of account provided to the borrower; or

    • (b) a separate statement that the borrower receives on or before the date on which the borrower receives that first statement of account.

  • (3) Subject to subsections (4) and (5), the bank must, at least once a month, provide the borrower with a subsequent disclosure statement that contains the following information:

    • (a) the period covered and the opening and closing balances in the period;

    • (b) an itemized statement of account that discloses each amount credited or charged, including interest, and the dates when those amounts were posted to the account;

    • (c) the sum for payments and the sum for credit advances and non-interest and interest charges;

    • (d) the annual interest rate that applied on each day in the period and the total of interest charged under those rates in the period;

    • (e) the credit limit and the amount of credit available at the end of the period;

    • (f) the minimum payment and its due date;

    • (g) the borrower’s rights and obligations regarding any billing error that may appear in the statement of account; and

    • (h) a local or toll-free telephone number, or a telephone number with a prominent indication that collect calls are accepted, that the borrower may use to get information about the account during the bank’s regular business hours.

  • (4) The subsequent periodic disclosure statement is not required to be provided for a period during which there have been no advances or payments and

    • (a) there is no outstanding balance at the end of the period; or

    • (b) the borrower has notice that their credit agreement has been suspended or cancelled due to default and the bank has demanded payment of the outstanding balance.

  • (5) The subsequent periodic disclosure statement may be provided once in a three-month period, either in respect of that period or in respect of the last month of that period, if, during that period,

    • (a) there have been no advances or payments;

    • (b) there is an outstanding balance of less than $10; and

    • (c) no interest or fee is being charged or accrued.

  • SOR/2009-258, s. 5
 
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