Bill 205, Consumer Protection Amendment Act (Payday Loans), 2007

Versions

Bill 205 2007

An Act to amend the Consumer Protection Act, 2002 with respect to payday loans

Note: This Act amends the Consumer Protection Act, 2002. For the legislative history of the Act, see Public Statutes – Detailed Legislative History on www.e-Laws.gov.on.ca.

Her Majesty, by and with the advice and consent of the Legislative Assembly of the Province of Ontario, enacts as follows:

1. The Consumer Protection Act, 2002 is amended by adding the following Part:

PART VII.1
PAYDAY LOANS

General

Definitions

85.1 In this Part,

"borrower", "cost of borrowing" and "lender" with respect to a payday loan, have the same meaning as in section 66; ("emprunteur", "coût d'emprunt", "prêteur")

"licence" means a licence issued under this Part; ("permis")

"licensee" means a person who holds a licence; ("titulaire de permis")

"payday loan" means a loan of money with,

(a) an initial advance of no more than $1,500, and

(b) an initial term, ignoring any extension or renewal, that is no longer than 62 days; ("prêt sur salaire")

"person" includes a partnership, corporation and an unincorporated association; ("personne")

"registrar" means the registrar appointed under section 85.3; ("registrateur")

"replacement loan" means,

(a) a payday loan arranged or provided by a lender as part of a series of transactions or events that results in the borrower's debt under another payday loan previously arranged or provided by the lender being repaid in whole or in part, or

(b) a prescribed transaction or a prescribed series of transactions. ("prêt de remplacement")

Application of Part

85.2 This Part does not apply to a payday loan that was made before this Part comes into force, but does apply to an extension or a renewal of the loan made or granted after this Part comes into force.

Registrar

85.3 (1) The Minister shall appoint a registrar for the purposes of this Part and may appoint a maximum of two deputy registrars.

Powers and duties

(2) The registrar shall exercise the powers and perform the duties imposed on the registrar under this Act under the supervision of the Director.

Deputies

(3) A deputy registrar shall perform the duties that the registrar assigns and shall act as the registrar in the registrar's absence.

Deputy registrar

(4) If more than one deputy registrar is appointed, only one deputy registrar may act as the registrar under subsection (2) at any one time.

Licensing

Requirement for licence

85.4 (1) No person shall offer, arrange or provide a payday loan from any location except if,

(a) the person is a licensee or the person is employed by a licensee and acts on the licensee's behalf; and

(b) the licence specifies the location.

Business name

(2) No person shall offer, arrange or provide a payday loan under a business name or style that differs from the business name or style specified in the licence that the person uses for that purpose.

Application for licence or renewal

85.5 (1) A person may apply to the registrar, in a form approved by the registrar, for a licence or a renewal of a licence.

Qualifications

(2) A person is not eligible for a licence or the renewal of a licence unless,

(a) the person has attained the age of 18 years, if an individual;

(b) the person has the prescribed qualifications; and

Contents

(3) An application for a licence or a renewal of a licence shall include,

(a) the prescribed information and any additional information relating to payday loans that the registrar requests; and

(b) payment of the prescribed fee.

Refusal to issue licence

85.6 (1) The registrar shall refuse to issue a licence to an applicant for it if the applicant is not eligible for it under subsection 85.5 (2) and may refuse to issue it if,

(a) within five years of the registrar's receiving the application, the applicant has been convicted of,

(i) an offence under this Act, or

(ii) an indictable offence under the Criminal Code (Canada) that involves a dishonest action or intent relating to the granting of credit;

(b) the applicant is an undischarged bankrupt;

(d) a licence issued to the applicant is suspended;

(e) the registrar has reason to believe that an equivalent to a licence issued to the applicant in a jurisdiction outside Ontario with respect to the lending of money is suspended;

(f) within five years of the registrar's receiving the application, the applicant has had a licence cancelled or an application for the renewal of a licence refused;

(g) the registrar has reason to believe that, within five years of the registrar's receiving the application, the applicant has had an equivalent to a licence issued to the applicant in a jurisdiction outside Ontario with respect to the lending of money cancelled or an application for the renewal of that equivalent refused; or

(h) the applicant has not satisfied any other prescribed requirement.

Same, corporation or partnership

(2) In addition to the grounds set out in subsection (1), the registrar may refuse to issue a licence to an applicant for it if,

(a) the applicant is a corporation and the registrar is entitled under that subsection to refuse to issue a licence to a director or officer of the corporation; or

(b) the applicant is a partnership and the registrar is entitled under that subsection to refuse to issue a licence to a member of the partnership.

Notice of refusal

(3) Upon refusing to issue a licence to an applicant, the registrar shall give the applicant written notice of the refusal, setting out the reasons for the refusal.

No right to hearing

(4) An applicant for a licence is not entitled to a hearing in respect of the registrar's refusal to issue a licence.

Conditions of licence

85.7 (1) A licence is subject to the prescribed conditions, if any, and the conditions that the registrar considers appropriate and specifies in the licence.

No transfers

(2) A licence is not transferable or assignable.

Additional locations

(3) If a licensee gives the registrar at least 60 days written notice before offering, arranging or providing payday loans at a location that is not specified in the licence, the registrar may amend the licence to add the location to the list of locations specified in the licence.

Expiry of licence

(4) A licence expires three years after the day on which it is issued or, if it is renewed, on which it is renewed.

Refusal to renew, suspension or cancellation

85.8 (1) Subject to subsection (2), the registrar may refuse to renew a licence or may suspend or cancel a licence,

(a) for any reason for which the registrar may refuse to issue a licence under section 85.6;

(b) if the licensee provides false or misleading information to the registrar;

(d) if the licensee contravenes or fails to comply with a condition of the licence.

Notice of proposal

(2) Before refusing to renew a licence or suspending or cancelling a licence, the registrar shall give the licensee written notice setting out,

(a) that the registrar proposes to refuse to renew the licence or intends to suspend or cancel it and the reasons for that; and

(b) that the licensee may request a hearing by the Tribunal by serving a written request for a hearing on the registrar and the Tribunal.

If no request for hearing

(3) If the licensee does not request a hearing in accordance with clause (2) (b) or does not attend such a hearing after requesting it, the registrar may refuse to renew the licence or may suspend or cancel it, as the case may be.

Notice of decision

(4) Upon refusing to renew a licence or suspending or cancelling it under subsection (3), the registrar shall give the licensee written notice of the decision, setting out the reasons for the decision.

Effective date

(5) If the decision is for the suspension or cancellation of a licence, the suspension or cancellation takes effect when notice of the decision is served on the licensee, or on the date specified in the decision, whichever is later.

Hearing

(6) If the licensee requests a hearing, the Tribunal shall hold the hearing and may by order direct the registrar to carry out the registrar's proposal or substitute its opinion for that of the registrar and the Tribunal may attach conditions to its order or to a licence.

Parties

(7) The registrar, the licensee and the other persons that the Tribunal specifies are parties to the hearing.

Continuation pending renewal

(8) If, before a licence expires, the licensee has applied for renewal of the licence and paid the required fee, the licence shall be deemed to continue until,

(a) the registrar renews the licence;

(b) the time for requesting a hearing under subsection (2) has expired, if the licensee receives a notice under that subsection and does not request the hearing; or

(c) the Tribunal makes its order, if the licensee receives a notice under subsection (2) and requests a hearing under that subsection.

Immediate effect

(9) Even if a licensee appeals an order of the Tribunal under section 11 of the Licence Appeal Tribunal Act, 1999, the order takes effect immediately but the Tribunal may grant a stay until the disposition of the appeal.

Voluntary cancellation

85.9 The registrar may cancel a licence upon the request in writing of the licensee and section 85.8 does not apply to the cancellation.

Obligations and Prohibitions

Limit on cost of borrowing

85.10 (1) No lender shall, in relation to a payday loan,

(a) charge or accept the payment of an amount described in subsection (2); or

(b) arrange for or permit any other person to charge or accept payment of an amount described in subsection (2).

Same

(2) The amount mentioned in subsection (1) shall be any amount or consideration that would result in the cost of borrowing or any component of the cost of borrowing being greater than the maximum prescribed amount.

Consequences

(3) If a lender contravenes subsection (1),

(a) the borrower shall not be liable for any amount charged as the cost of borrowing; and

(b) the lender shall reimburse the borrower, in cash, for the total of all amounts paid and the value of any other consideration given in respect of the cost of borrowing.

Mitigating order

(4) A lender may apply in writing to the Director for an order declaring that the borrower shall be liable to pay the part of the cost of borrowing that the Director specifies and, subject to subsection (5), the Director may make the order if satisfied that it is warranted in the circumstances.

Notice

(5) If the Director proposes to make an order under subsection (4), the Director shall serve notice of the proposed order, together with written reasons, on the lender.

Request for hearing

(6) The notice shall state that the lender is entitled to a hearing by the Tribunal if the lender mails or delivers, within 15 days after the notice under subsection (5) is served, notice in writing requiring a hearing to the Director and the Tribunal.

No hearing required

(7) If the lender does not require a hearing in accordance with subsection (6), the Director may make the order.

Hearing

(8) If the lender requires a hearing in accordance with subsection (6), the Tribunal shall hold the hearing.

Parties

(9) The Director and the lender who has required the hearing and the other persons that the Tribunal specifies are parties to the hearing.

Order

(10) After a hearing, the Tribunal may order the Director to make the proposed order or to refrain from making the proposed order or may make an order of its own in substitution for that of the Director.

Conditions

(11) The Tribunal may attach the conditions to its order that it considers proper.

No security for a payday loan

85.11 (1) In this section,

"assignment of wages" includes a consent order or direction by an employee to pay all or any part of the employee's wages to another person; ("cession de salaire")

"wages" includes,

(a) salary, and

(b) periodic payments in respect of loss of future income or loss of earning capacity. ("salaire")

Same

(2) No lender shall require, take or accept the following, directly or indirectly, as security for the repayment of a payday loan or the performance of an obligation under a payday loan:

1. Real or personal property.

2. An interest in real or personal property.

3. An assignment of wages.

4. A guarantee of a third party.

Wage assignments not valid

(3) An assignment of wages is not valid if it is given in consideration of a payday loan or an advance under a payday loan, or to secure or facilitate a payment in relation to a payday loan.

Posting information

85.12 (1) A lender shall ensure that signs are posted prominently and in accordance with the prescribed requirements at each location specified in the lender's licence.

Content of signs

(2) The signs shall clearly and understandably set out, in accordance with the prescribed requirements,

(a) all components of the cost of borrowing;

(b) the total cost of all components of the cost of borrowing expressed as a single fee for each 100 dollars loaned for a 14-day term; and

Initial disclosure statement

85.13 The initial disclosure statement described in section 79 for a payday loan shall include a document, in a form satisfactory to the Director, that sets out,

(a) the date and time of day at which the lender will provide the borrower with the initial advance under the loan or a cash card or other device that will enable the borrower to access funds under the loan;

(b) a statement that the loan is a high-cost loan;

(d) all other prescribed information.

Cancellation rights

85.14 (1) A borrower may, without any reason, cancel a payday loan before the close of the next business day after receiving the initial advance under the loan or a cash card or other device that will enable the borrower to access funds under the loan.

Cancellation rights at any time

(2) In addition to the right described in subsection (1), a borrower may cancel a payday loan at any time if the document that section 85.13 requires be included in the initial disclosure statement described in section 79 for the loan does not set out the right of the borrower under subsection (1) to cancel the loan.

Notice of cancellation

(3) To cancel a payday loan under subsection (1) or (2), the borrower shall give written notice of the cancellation to the lender at the premises where the borrower obtained the loan.

Receipt to borrower

(4) When a borrower cancels a payday loan in accordance with this section, the lender shall immediately give the borrower a receipt in the form approved by the Director.

Obligations on cancellation

(5) When a borrower cancels a payday loan in accordance with this section,

(a) the borrower shall repay, at the premises where the loan was obtained, the outstanding balance of the principal under the loan; and

(b) the lender shall immediately reimburse the borrower, in cash, for all amounts paid, and the value of any consideration given, by or on behalf of the borrower in respect of the cost of borrowing.

Repayment of principal

(6) A repayment made under clause (5) (a) may be in the form of,

(a) cash, certified cheque or money order or in a form approved by the Director;

(b) the return of all unnegotiated cheques that the borrower has received from the lender, if the loan was made in the form of cheques; or

(c) the return of the cash card or other device that enabled the borrower to access funds under the loan, to the extent of the cash or credit balance remaining on the card or device, if the loan was made in the form of such a card or device.

Set-off of interest

(7) The borrower may set off, against the amount described in clause (5) (a), the amount that the lender is required to reimburse to the borrower under clause (5) (b) and in that case the lender is not required to pay the latter amount to the borrower directly.

No fee on cancellation

(8) No lender shall,

(a) charge or accept the payment of any amount or consideration for, or as a consequence of, the cancellation of a payday loan under this section; or

(b) arrange for or permit any other person to charge, or to require or accept the payment of any amount or consideration described in clause (a).

Effect of cancellation

(9) Except as provided in this section, the cancellation of a payday loan under this section extinguishes every liability and obligation of the borrower under, or related to, the loan.

No penalty for default

85.15 (1) No lender shall, in relation to any default by the borrower under a payday loan,

(a) charge or accept the payment of any penalty or amount in addition to the cost of borrowing except as prescribed; or

(b) arrange for or permit any other person to charge or accept the payment of any penalty or amount in addition to the cost of borrowing except as prescribed.

Consequences

(2) If a lender contravenes subsection (1),

(a) the borrower shall not be liable for any amount charged in contravention of that subsection; and

(b) the lender shall reimburse the borrower, in cash, for the total of all amounts charged in contravention of that subsection.

Limit on charges for extension of loan, etc.

85.16 (1) No lender shall, in relation to a transaction or series of transactions involving a replacement loan or the extension or renewal of a payday loan where all or part is used to repay the existing loan,

(a) charge or accept the payment of any prescribed amount or consideration; or

(b) arrange for or permit any other person to charge or accept the payment of any prescribed amount or consideration.

Consequences

(2) If a lender contravenes subsection (1),

(a) the borrower shall not be liable for any amount charged in contravention of that subsection; and

(b) the lender shall reimburse the borrower, in cash, for the total of all amounts charged in contravention of that subsection.

Joint liability for refund

85.17 If a payday loan is arranged by one lender and provided by another lender, both lenders are jointly and severally liable to the borrower for any amount that this Part requires the lender under the loan to refund or reimburse to the borrower.

Records

85.18 (1) A lender shall maintain records in accordance with the prescribed requirements, including records of all payday loans that the lender offers, arranges or provides.

Inspection

(2) If the lender maintains the records in Ontario, the lender shall make them available to an investigator appointed under subsection 106 (1) who exercises powers under section 107 or 108.

Records outside Ontario

(3) If the lender maintains the records outside Ontario, the lender shall pay to the Minister of Finance the amount required to reimburse the Director for the expenses incurred in inspecting or examining the records at the place where they are maintained.

2. Section 123 of the Act is amended by adding the following subsection:

Regulations: Part VII.1

(8.1) The Lieutenant Governor in Council may make regulations,

(a) respecting licences, including the form of licences;

(b) specifying amounts that are to be included in, or excluded from, the definition of "cost of borrowing" for the purposes of Part VII.1;

(c) specifying an amount for the purposes of subsection 85.10 (2), 85.15 (1) or 85.16 (1) or a method of determining the amount;

(d) respecting documents and information that a lender is required to provide to a borrower under a payday loan;

(e) specifying whether a liability or obligation is, or is not, related to a payday loan, for the purposes of subsection 85.14 (9);

(f) for the purpose of section 85.18, respecting the records that lenders are required to maintain, including the length of time for which and the location at which they are required to retain the records;

(g) respecting the information, including personal information, that lenders are required to provide to the Director with respect to payday loans and the times, form and manner in which they are to provide the information.

3. Section 124 of the Act is repealed and the following substituted:

Regulations on limits on costs

124. (1) In making a regulation under clause 123 (8.1) (c), the Lieutenant Governor in Council shall have, as its objective, allowing for a viable payday loan industry that fosters a competitive marketplace and shall take into consideration,

(a) the operating expenses and revenue requirements of lenders in relation to their payday loan business;

(b) the terms and conditions of payday loans;

(d) the regulation of payday loans in other jurisdictions;

(e) any other factors that the Lieutenant Governor in Council considers relevant and in the public interest; and

(f) any data that the Lieutenant Governor in Council considers relevant.

Periodic review

(2) At least once every three years, the Lieutenant Governor in Council shall review all existing regulations made under clause 123 (8.1) (c) and consider whether it is necessary to amend or replace the regulations.

Commencement

4. (1) This section and section 5 come into force on the day this Act receives Royal Assent.

(2) Sections 1, 2 and 3 come into force on a day to be named by proclamation of the Lieutenant Governor.

Short title

5. The short title of this Act is the Consumer Protection Amendment Act (Payday Loans), 2007.

EXPLANATORY NOTE

The Bill amends the Consumer Protection Act, 2002 to add a new Part about payday loans. A payday loan is defined as a loan of money with an initial advance of no more than $1,500 and an initial term, ignoring any extension or renewal, that is no longer than 62 days.

A person is not allowed to offer, arrange or provide a payday loan from any location except if the person holds a licence issued under the Act or if the person is employed by a licensee and acts on the licensee's behalf. A licence must specify the location involved. The regulations made under the Act can specify the qualifications that a person is required to have and the educational and other requirements that a person is required to satisfy in order to be eligible for a licence. A registrar appointed by the Minister issues licences.

The registrar can refuse to issue or renew a licence or can suspend or cancel a licence for a reason specified in the Act. If the registrar proposes to refuse to renew a licence or to suspend or cancel a licence, the licensee may request a hearing by the Licence Appeal Tribunal.

The regulations made under the Act can specify a maximum amount for the cost of borrowing in relation to a payday loan. A lender under a payday loan is prohibited from taking security for the repayment of a payday loan. A lender is also required to post signs at each of the lender's business locations setting out all components of the cost of borrowing and other information prescribed by the regulations.

A borrower under a payday loan can cancel the loan, for any reason, within one business day after receiving the initial advance under the loan. Upon cancellation, the borrower is required to repay the outstanding balance of the principal under the loan and the lender is required to reimburse the borrower for all amounts paid in respect of the cost of borrowing.

A lender under a payday loan is required to keep the records that the regulations made under the Act specify.