On September 1, 2016 a new law will come into effect in Manitoba for lenders of “high-cost credit products” made available to consumers. A high-cost credit product includes:
- loans or lines of credit with an annual rate of interest of more than 32%,
- unsecured loans for $5,000 or less that provide for a fee, charge or penalty payable to the lender or another person (e.g. administrative fee) (“a high-cost credit fee”) and that have an annual rate of interest of more than 32%,
- an unsecured line of credit of up to $5,000 that meets specified criteria (e.g. has a high-cost credit fee and the borrower’s repayment is tied to when the borrower receives income), and
- loans or lines of credit that are secured by collateral security under the Manitoba Personal Property Security Act where the proceeds of the loan or line of credit are not being used to acquire a specific asset and the borrower is required to pay a high-cost credit fee.
A high-cost credit lender will have to be licensed in Manitoba in order to conduct business.
The new law will also include specific disclosure requirements, including signage in the lender’s store and a specific form of disclosure including prescribed information, such as disclosing to the 48 hour cooling-off period afforded to consumers (giving the consumer the right to cancel the agreement within 48 hours of entering into it), a requirement for certain disclosures to appear on the first page of the agreement, and a requirement for the consumer to sign each page of the agreement that contains the required disclosure.
There are other requirements that will come into effect with the new law to be cognizant of, such as restrictions on prescribed activities of high-cost lenders, requirements for loan and line of credit agreements entered into over the internet, and requirements as to how a consumer’s information is used and the retention of documents in relation to the loan or line of credit.