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

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.

Marginal note:Non-application — paragraph 627.89(1)(a) of Act

53 Paragraph 627.89(1)(a) of the Act does not apply in respect of a line of credit.

Marginal note:Initial disclosure

• 54 (1) For the purposes of paragraph 627.89(1)(e) of the Act, the following information is prescribed information in relation to a line of credit:

  • (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) particulars of the charges or penalties referred to in paragraph 627.89(1)(c) of the Act, including any default charges that may be imposed under section 627.3 of the Act;

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

  • (i) information about any optional service in relation to the credit agreement that the person accepts, the charges for each optional service and the conditions under which the person 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 person may use to get information about the account during the institution’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 institution to the broker.

• Marginal note:Subsequent disclosure of credit limit

  (2) If the initial credit limit is not known on the day on which the initial disclosure statement is provided, then, for the purposes of subsection 627.89(4) of the Act, the credit limit is prescribed information.

• Marginal note:Manner of disclosure

  (3) The prescribed information referred to in subsection (2) must be disclosed in

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

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

Marginal note:Subsequent disclosure

• 55 (1) For the purposes of subsection 627.89(4) of the Act, the following information is prescribed information in relation to a line of credit:

  • (a) the period covered by the disclosure 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 person’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 person may use to get information about the account during the institution’s regular business hours.

• Marginal note:Frequency of disclosure

  (2) Subject to subsections (3) and (4), the prescribed information must be disclosed in a disclosure statement that is provided at least once a month.

• Marginal note:No statement required

  (3) The disclosure statement need not be provided for a period in which there are no advances or payments and

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

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

• Marginal note:Quarterly statement

  (4) The disclosure statement may be provided once in a three-month period, either in respect of that period or the last month of it, 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.