Ontario Bill to Regulate Alternative Financial Services, Ban Certain Door-to-Door Sales, and License Home Inspectors

Originally published on http://www.casselsbrock.com

Bill 59, Putting Consumers First Act (Bill 59), passed first reading on November 3, 2016. Bill 59 includes changes to the Consumer Protection Act (Ontario) (the Consumer Protection Act), the Collection and Debt Settlement Services Act (the CDSSA) and the Payday Loans Act (the Payday Loans Act) and expands the regulation-making powers under each Act. Bill 59 also introduces a new home inspection regime, requiring home inspectors to be licensed.

Some of the proposed amendments in Bill 59 mirror Bill 156, Alternative Financial Services Statute Law Amendment Act, 2016, that died on the order paper when the Ontario Parliament was prorogued. Bills before parliament prior to prorogation have been reintroduced in the current parliament. We have differentiated proposed amendments under Bill 59 that were not referenced in Bill 156 by delineating such amendments as “new.”

The exact effects of Bill 59 are unknown until regulations are enacted, but, as presently drafted, certain provisions are broadly stated and require greater clarity given the impact on various stakeholders, including the commercial finance industry.

Lease and Credit Agreements

There are several amendments proposed to the Consumer Protection Act in respect of lease agreements:

  • New definition of lease. Application of Part VIII (Leases) of the Consumer Protection Act is expanded to include “such other leases that are prescribed.” It is not clear what leases will be captured, but it can be surmised that the intent may be to include “rent-to-own” arrangements.
  • Prescribing tags or other markers. Regulations may be made that govern and require the use of tags or other markers attached to leased goods, as well as the use of statements included in a display relating to a leased good. The content of the tags, markers, statements or displays and the manner and form in which they are used would be set out in the regulations.
  • Restrictions on the ability of a lessor to exercise rights. The proposed amendments make it difficult for a bona fide lessor to exercise the lessor’s rights under a lease to compel payment or to take action on default. Specifically, the regulation-making powers in respect to leases are expanded to provide for regulations:
    • Governing penalties for late payments.
    • Prescribing a grace period where a lessor cannot exercise the lessor’s rights.
    • Restricting the seizure of leased goods or the termination of a lease, despite any term in the lease to the contrary.
    • Prescribing the maximum amounts of penalties for a late payment.
    • Governing the lessor’s right to terminate the lease, including circumstances where a lessor may terminate.
    • Permitting a lessee to re-instate a lease that a lessor has terminated for payment default.

Consumer protection involves balancing the rights of consumers and those of the businesses who provide goods and services to consumers. The regulations need to be clear, as an over expansive approach may inadvertently lead to a detrimental effect. Customary rights and remedies are included in lease agreements and act as a deterrent for a lessee making late payments or defaulting under a lease. Prohibiting or restricting certain of these rights and remedies may increase the likelihood of a lessee not making payments when due.

Credit Agreements

Bill 59 expands regulation making-powers in respect to credit agreements under the Consumer Protection Act, including regulations requiring a lender to disclose the lender’s credit process, limiting the amount of credit or money to be lent, prohibiting a lender from initiating contact to offer refinancing of credit agreement and prescribing the maximum amounts for charges not included in the cost of borrowing.

Agreements for Supply of Appliances (New)

While consumer transactions for the purchase, sale or lease of real property are exempt from application of the Consumer Protection Act, Bill 59 proposes to bring agreements for the supply of appliances under the purview of the Consumer Protection Act. Specifically, the Act will apply to an agreement for the supply of goods to a consumer that are not fixtures at the time the parties enter into the agreement, but that subsequently become fixtures.

Ban on Certain Door-to-Door Sales; Reduced Cooling-off Period (New)

Under Bill 59, entering into direct agreements for the supply of certain goods or services at a consumer’s home, or any other prescribed place, is prohibited, unless the consumer initiates contact or specifically asks the supplier to attend the consumer’s home or other prescribed place. The following activities are permitted:

  • Leaving marketing materials without attempting to make contact with the consumer.
  • Other activities that may be prescribed by regulations.

It is anticipated that the prohibition on door-to-door sales will include agreements for air conditioners, water heaters, furnaces and water treatment devices. Any direct agreement or related agreement (e.g., guarantee or security agreement) entered into in contravention of this prohibition will be unenforceable and any goods or services supplied to the consumer will be considered unsolicited goods or services, of which the consumer will not have an obligation to pay for.

The cooling-off period for direct agreements for the supply of water heaters is currently 20 days. Bill 59 reduces this period to 10 days, as is the case for other direct agreements. The 20 day cooling-off period continues to apply to water heater agreements entered into before the day Bill 59 comes into force.

Cashing Government Cheques

Bill 59 limits fees charged for cashing government cheques (inapplicable to banks and credit unions) to an amount that will be fixed by regulation, which amount may be a fixed amount, a percentage of the face value of the cheque, or a combination of both. A supplier will be required to provide the consumer with a prescribed disclosure statement when cashing such cheques.

Payday Loans

Bill 59 amends the Payday Loans Act to, among other changes, restrict concurrent or replacement payday loans and the making of more than one payday loan between a borrower and different payday lenders. Additionally, under Bill 59, a payday lender is prohibited from operating at a location if the City of Toronto or a local municipality passes a by-law prohibiting operation within a defined area or limiting the number of offices allowed to be operated within a defined area.

New Rules for Debt Collection

The proposed amendments to the CDSSA include expanding its application to the collection of purchased or assigned overdue debts and introducing administrative penalties for contravention. Recognizing certain ordinary business activities, the amendments exempt, subject to regulations, certain situations, including:

  • A person who enters into agreements and assigns payment rights to a third party, but continues to collect payments on behalf of the third party.
  • Exempting a person who acquires debt through the seizure of accounts receivable under a security agreement.
  • Exempting a person who purchases debt through acquiring or merging with a business in a transaction that includes the transfer of accounts receivable.
  • Exempting a person who purchases a financing agreement or a group of financing agreements or the payments due thereunder.

Licensing Home Inspectors (New)

A new Home Inspection Act, 2016 is proposed. The Act will:

  • Restrict the individuals permitted to perform home inspections and require them to be licensed. A person is not a home inspection provider unless the person is licensed as such or is a sole proprietor licensed as a home inspector who does not employ or retain any other licensed home inspectors.
  • Standardize home inspections by requiring a contract to be entered into that includes prescribed information. Home inspections may only be performed in accordance with the terms of the contract.
  • Requiring a written report to be provided to the client after a home inspection, including prescribed information.
  • Designate an administrative authority, to carry out the administration of the new Act.

Currently in Ontario, home inspectors are not regulated. The Ministry of Government and Consumer Services has stated that the proposed changes will level the playing field in the home inspection industry, while protecting consumers by ensuring that they benefit from advice from qualified professionals.

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