Interpretation

1 The definitions in this section apply in these Regulations.

Act

Act means the Bank Act. (Loi)

APR

APR means the cost of borrowing for a loan under a credit agreement expressed as an annual rate on the principal referred to in subsection 3(1). (TAC)

borrower

borrower includes a person to whom a loan is proposed to be made and a holder, or an applicant to become a holder, of a credit card. (emprunteur)

credit agreement

credit agreement includes an agreement for a line of credit, a credit card or any kind of loan. (convention de crédit)

disbursement charge

disbursement charge means a charge, other than one referred to in subsection 5(1), to recover an expense incurred by a bank to arrange, document, insure or secure a credit agreement. It includes a charge referred to in paragraphs 5(2)(c) and (f) to (h). (frais de débours)

hypothec

hypothec means a hypothec on immovable property. (hypothèque)

principal

principal means the amount borrowed under a credit agreement but does not include any cost of borrowing. (capital)

public index

public index means an interest rate, or a variable base rate for an interest rate, that is published at least weekly in a newspaper or magazine of general circulation, or in some media of general circulation or distribution, in areas where borrowers whose credit agreements are governed by that interest rate reside. (indice publié)

Application

2 These Regulations apply to credit agreements, other than a credit agreement entered into

• (a) for business purposes of a borrower; or

• (b) with a borrower that is not a natural person.

Cost of Borrowing

Calculation

• 3 (1) For the purpose of section 451 of the Act, 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, is to be expressed as an annual rate on the principal, as follows:

  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 5 over the term of the loan;

  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; and

  T

  is the term of the loan in years, expressed to at least two decimal points of significance.

• (2) For the purpose of the APR calculation under subsection (1),

  • (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

    • (i) one month is 1/12 of a year,

    • (ii) one week is 1/52 of a year, and

    • (iii) one day is 1/365 of a year;

  • (d) if the annual interest rate underlying the calculation is variable over the period of the loan, it must be set as the annual interest rate that applies on the day that the calculation is made;

  • (e) if there are no instalment payments under a credit 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; 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.

• (3) For the purpose of section 451 of the Act, the cost of borrowing for a loan obtained under a credit card agreement or line of credit is to be expressed as an annual rate, as follows:

  • (a) if the loan has a fixed annual interest rate, that annual interest rate; or

  • (b) if the loan has a variable interest rate, the annual interest rate that applies on the date of the disclosure.

Annual Interest Rate

4 The APR for a credit agreement is the annual interest rate if there is no cost of borrowing other than interest.

Included and Excluded Charges

• 5 (1) Subject to subsection (2), the cost of borrowing for a loan under a credit agreement, other than an agreement for 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 in accordance with section 449 of the Act, and including 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 a bank 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 bank 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 bank.

• (2) The cost of borrowing for a loan does not include

  • (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 or hypothec;

  • (i) fees to maintain a tax account that are

    • (i) required for a mortgage or hypothec referred to in paragraph (h), or

    • (ii) optional;

  • (j) any fee to discharge a security interest; or

  • (k) default charges.

Disclosure — General

Manner

• 6 (1) For the purpose of subsection 450(1) of the Act, a bank that grants credit must, in writing, provide the borrower with a disclosure statement that provides the information required by these Regulations to be disclosed.

• (2) A disclosure statement may be a separate document or may be part of a credit agreement or an application for a credit agreement.

• (3) Information disclosed in a disclosure statement may be based on an assumption or estimate if the assumption or estimate is reasonable and the information disclosed by it

  • (a) cannot be known by the bank when it makes the statement; and

  • (b) is identified to the borrower as an assumption or estimate.

• (4) A disclosure statement, or a consent in relation to a disclosure statement, must be in plain language that is clear and concise. It must be presented in a manner that is logical and likely to bring to the borrower’s attention the information required by these Regulations to be disclosed.

• (5) If the borrower consents, in writing, the disclosure statement may be provided by electronic means in an electronic form that the borrower can retrieve and retain.

• (6) A disclosure statement is deemed to be provided to the borrower

  • (a) on the day recorded as the time of sending by the bank’s server, if provided by electronic means;

  • (b) on the day recorded as the time of sending by a fax machine, if provided by fax and the borrower has consented to receive if by fax; and

  • (c) five days after the postmark date, if provided by mail;

  • (d) when it is received, in any other case.

Timing of Initial Disclosure

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

Disclosure — Content

Fixed Interest Loans for a Fixed Amount

• 8 (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

• 9 (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

• 10 (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 subsection (4), the bank must, once a month if not more often, 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.

Credit Card Applications

• 11 (1) A bank that issues credit cards and that distributes an application form for credit cards must specify the following information in the form or in a document accompanying it, including the date on which each of the matters mentioned takes effect:

  • (a) in the case of a credit card with a

    • (i) fixed rate of interest, the annual interest rate, or

    • (ii) variable interest rate that is determined by adding or subtracting a fixed percentage rate of interest to or from a public index, the public index and the fixed percentage rate to be added or subtracted from it;

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

  • (c) the amount of any non-interest charges.

• (2) Subsection (1) does not apply if, on the application form or in a document accompanying it, the bank prominently discloses

  • (a) 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 required by subsection (1) during the bank’s regular business hours; and

  • (b) the fact that the applicant may obtain the information required by subsection (1) at that telephone number.

• (3) If an applicant for a credit card applies by telephone or any electronic means, the bank must disclose the information required by paragraphs (1)(a) and (c) at the time of the application.

• (4) If a bank that issues credit cards solicits applications for them in person, by mail, by telephone or by any electronic means, the information required by paragraphs (1)(a) and (c) must be disclosed at the time of the solicitation.

Credit Cards

• 12 (1) A bank that enters into a credit agreement for a credit card must provide the borrower with an initial disclosure statement that includes the following information in addition to that required by paragraphs 10(1)(a) and (c) to (k):

  • (a) the manner in which interest is calculated and the information required by paragraph 11(1)(a);

  • (b) if the borrower is required by the credit agreement to pay the outstanding balance in full on receiving a statement of account,

    • (i) mention of that requirement,

    • (ii) the grace period by the end of which the borrower must have paid that balance, and

    • (iii) the annual interest rate charged on any outstanding balance not paid when due;

  • (c) if a lost or stolen credit card is used in an unauthorized manner, the maximum liability of the borrower is the lesser of $50 and the maximum set by the credit agreement;

  • (d) if a transaction is entered into at an automated teller machine by using the borrower’s personal identification number, the liability incurred by the transaction is, despite paragraph (c), the maximum liability; and

  • (e) if the bank has received a report from the borrower, whether written or verbal, of a lost or stolen credit card, the borrower has no liability to pay for any transaction entered into through the use of the card after the receipt of the report.

• (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) Despite section 13, if a credit agreement for a credit card is amended, the bank must, in writing and 30 days or more before the amendment takes effect, disclose to the borrower the changes to the information required to be disclosed in the initial statement other than any of those changes that involve

  • (a) a change in the credit limit;

  • (b) an extension to the grace period;

  • (c) a decrease in non-interest charges or default charges referred to in paragraphs 10(1)(c) and (g);

  • (d) a change concerning information about any optional service in relation to the credit agreement that is referred to in paragraph 10(1)(i); and

  • (e) a change in a variable interest rate referred to in subparagraph 11(1)(a)(ii) as a result of a change in the public index referred to in that subparagraph.

• (4) An amendment referred to in paragraphs (3)(a) to (d) must be disclosed in the first periodic subsequent disclosure statement that is provided after the amendment is made.

• (5) A bank that issues credit cards must provide borrowers with supplementary disclosure statements on a regular periodic basis, at least once a month, that disclose the information referred to in subsections 10(3) and (4), other than paragraphs 10(3)(b) and (c) and that, in addition, contain the following information:

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

  • (b) the amount that the borrower must pay, on or before a specified due date, in order to have the benefit of a grace period; and

  • (c) the sum for payments and the sum for purchases, credit advances and interest and non-interest charges.

• (6) For the purpose of paragraph (5)(a), an itemized statement of account is adequate if it permits the borrower to verify each transaction described by linking it with a transaction record provided to the borrower.

Changes in Circumstances

Amendments to Credit Agreements

• 13 (1) Subject to subsection (2), if a credit agreement is amended by a subsequent agreement, the bank must, in writing and at most 30 days after entering into the subsequent agreement, disclose to the borrower the changes to the information required to be disclosed in the initial statement.

• (2) If a credit agreement for a fixed amount has a schedule for instalment payments and the schedule is amended by a subsequent agreement, the bank must, in writing and at most 30 days after entering into the subsequent agreement, disclose to the borrower the new payment schedule and any increase in the total amount to be paid or the cost of borrowing.

Renewals of Mortgages or Hypothecs

• 14 (1) If a credit agreement for a loan secured by a mortgage or hypothec is to be renewed on a specified date, the bank must, at least 21 days before the date, provide the borrower with a subsequent disclosure statement that contains the information required to be disclosed by

  • (a) section 8, if the credit agreement is for a fixed interest rate; or

  • (b) section 9, if the credit agreement is for a variable interest rate.

• (2) The subsequent disclosure statement referred to in subsection (1) must specify that

  • (a) no change that increases the cost of borrowing will be made to the credit agreement between the transmission of the subsequent disclosure statement and the renewal of the credit agreement; and

  • (b) the borrower’s rights under the credit agreement continue, and the renewal does not take effect, until the day that is the later of the date specified for its renewal and 21 days after the borrower receives the statement.

• (3) A bank that does not intend to renew a credit agreement for a loan secured by a mortgage or hypothec after its term ends shall, at least 21 days before the end of the term, notify the borrower of that intention.

Waiver of Payments

• 15 (1) If a bank, under a credit agreement for a loan for a fixed amount, waives a payment without waiving the accrual of interest during the period covered by the payment, the bank must, in an offer to make such a waiver, disclose in a prominent manner that interest will continue to accrue during that period if the offer is accepted.

• (2) If a bank offers to waive a payment under a credit agreement for a line of credit or a credit card, the bank must, with the offer, disclose in a prominent manner whether interest will continue to accrue during any period covered by the offer if the offer is accepted.

Cancellation of Optional Services

• 16 (1) A disclosure statement made in relation to a credit agreement under which optional services, including insurance services, are provided on an on-going basis must specify that

  • (a) the borrower may cancel the optional service by notifying the bank that the service is to be cancelled effective as of the day that is the earlier of one month after the day that the disclosure statement was provided to the borrower, determined in accordance with subsection 6(6), and the last day of a notice period provided for in the credit agreement; and

  • (b) the bank shall, without delay, refund or credit the borrower with the proportional amount, calculated in accordance with the formula set out in subsection (2), of any charges for the service paid for by the borrower or added to the balance of the loan, but unused as of the cancellation day referred to in the notice.

• (2) The proportion of charges to be refunded or credited to a borrower shall be determined in accordance with the formula

  R = A × ((n-m)/n)

  where

  R

  is the amount to be refunded or credited;

  A

  is the amount of the charges;

  n

  is the period between the imposition of the charge and the time when the services were, before the cancellation, scheduled to end; and

  m

  is the period between the imposition of the charge and the cancellation.

• (3) Subsection (1) is subject to any provincial laws that apply to the cancellation of services that are referred to in that subsection.

Prepayment of Loans

• 17 (1) This section applies to loans for fixed amounts of credit, except mortgage or hypothec loans.

• (2) A borrower under a credit agreement may prepay

  • (a) the outstanding balance of a credit agreement, at any time, without incurring any charge or penalty for making the prepayment; or

  • (b) a part of the outstanding balance

    • (i) on the date of any scheduled payment, if payments are scheduled once a month or more often, or

    • (ii) at any time but only once a month, in any other case.

• (3) A borrower under a credit agreement who prepays

  • (a) the outstanding balance must be refunded or credited with the proportional amount of any non-interest charges, except for disbursement charges, paid by the borrower or added to that balance, calculated in accordance with the formula set out in subsection (4); and

  • (b) a part of the outstanding balance is not entitled to a refund or credit related to non-interest charges mentioned in paragraph (a).

• (4) The proportion of non-interest charges to be refunded or credited to a borrower shall be determined in accordance with the formula

  R = A × ((n-m)/n)

  where

  R

  is the amount to be refunded or credited;

  A

  is the amount of the non-interest charges;

  n

  is the period between the imposition of the non-interest charge and the scheduled end of the term of the loan; and

  m

  is the period between the imposition of the non-interest charge and the prepayment.

Default Charges

18 If a borrower under a credit agreement fails to make a payment when it becomes due or fails to comply with an obligation in the agreement, in addition to interest, the bank may impose charges for the sole purpose of recovering the costs reasonably incurred

• (a) for legal services retained to collect or attempt to collect the payment;

• (b) in realizing on any security interest taken under the credit agreement or in protecting such a security interest, including the cost of legal services retained for that purpose; or

• (c) in processing a cheque or other payment instrument that the borrower used to make a payment under the loan but that was dishonoured.

Advertising

Loans for a Fixed Amount

• 19 (1) A bank that advertises a loan involving a fixed amount of credit in an advertisement that makes a representation of the interest rate, or the amount of any payment or of any non-interest charge, in relation to the loan must disclose the APR and the term of the loan. The APR must be provided at least as prominently as the representation and in the same manner, whether visually or aurally, or both.

• (2) If the APR or the term of the loan is not the same for all loans to which the advertisement relates, the 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.

Lines of Credit

20 A bank that advertises a loan involving a line of credit in an advertisement that makes a representation of the annual interest rate, or the amount of any payment or of any non-interest charge, in relation to the loan must disclose the annual rate of interest on the date of the advertisement and any initial or periodic non-interest charges at least as prominently as the representation and in the same manner, whether visually or aurally, or both.

Credit Cards

21 A bank that advertises a credit card in an advertisement that makes a representation of the annual interest rate, or the amount of any payment or of any non-interest charge, in relation to the loan must disclose the annual rate of interest on the date of the advertisement and any initial or periodic non-interest charges at least as prominently as the representation and in the same manner, whether visually or aurally, or both.

Interest-free Periods

• 22 (1) A bank that 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 must ensure that the advertisement discloses in a manner equally as prominent as the representation, if it is expressed, or in a prominent manner otherwise, whether or not interest, due after the period, accrues during the period.

• (2) If interest does not accrue during the period, the advertisement must also disclose 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.

Transitional

23 These Regulations apply to the renewal or on-going administration of a credit agreement that was entered into before these Regulations came into force.

Repeal

24 [Repeal]

Coming into Force

25 These Regulations come into force on September 1, 2001.