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

Loans

Marginal note:Information box — fixed interest loan for fixed amount

38 For the purposes of subsection 627.57(1) of the Act, the following information is prescribed information in relation to a fixed interest loan for a fixed amount that is to be repaid on a fixed future date or by instalment payments:

• (a) the principal of the loan;

• (b) the applicable annual interest rate and a brief description of how the interest is compounded, if applicable, and charged;

• (c) the APR, if it differs from the annual interest rate, and a brief description of how it is determined;

• (d) the number of months or years of the term of the loan and whether the term is open or closed, and a brief explanation of what “open” or “closed,” as applicable, means;

• (e) the date on which the principal of the loan is to be advanced and the date on which interest is to begin to be charged;

• (f) the amount of each payment, the date on which each payment is due, a brief description of the components of a payment and the frequency of the payments;

• (g) the number of months or years of the amortization period, if that period is different from the term of the loan;

• (h) a brief description of the conditions under which a person may repay a greater portion of the loan than required in any given period without incurring penalty charges for the prepayment of the loan, if applicable;

• (i) the amount of the penalty charges, if any, for prepayment of the loan and a brief explanation of the manner in which the penalty charges are calculated;

• (j) the amount of charges for insurance against default on a high-ratio mortgage on real property, if any; and

• (k) a list of the types and amounts of any other charges, other than interest charges.

Marginal note:Information box — variable interest loan

39 For the purposes of subsection 627.57(1) of the Act, the following information is prescribed information in relation to a variable interest loan for a fixed amount that is to be repaid on a fixed future date or by instalment payments:

• (a) the principal of the loan;

• (b) the annual interest rate that applies on the date of the initial disclosure statement and a brief description of how the interest is compounded, if applicable, and charged;

• (c) a brief description of the method for determining the annual interest rate and the date that the determination is made;

• (d) the APR, if it differs from the annual interest rate, and a brief description of how it is determined;

• (e) the number of months or years of the term of the loan and whether the term is open or closed, and provide a brief explanation of what “open” or “closed,” as applicable, means;

• (f) the date on which the principal of the loan is to be advanced and the date on which interest is to begin to be charged;

• (g) the amount of each payment, based on the annual interest rate that applies on the date of the initial disclosure statement, the date on which each payment is due and a brief description of the components of a payment and the frequency of the payments;

• (h) the number of months or years of the amortization period, if that period is different from the term of the loan;

• (i) a brief description of the conditions under which a person may repay a greater portion of the loan than required in any given period without incurring penalty charges for the prepayment of the loan, if applicable;

• (j) the amount of the penalty charges, if any, for prepayment of the loan and a brief explanation of the manner in which the penalty charges are calculated;

• (k) the amount of charges for insurance against default on a high-ratio mortgage on real property, if any; and

• (l) a list of the types and amounts of any other charges, other than interest charges.

Marginal note:Initial disclosure — fixed interest rate loan

• 40 (1) For the purposes of paragraph 627.89(1)(e) of the Act, the following information is prescribed information in relation to a fixed interest rate loan for a fixed amount that is to be repaid on a fixed future date or by instalment payments:

  • (a) the principal of the loan;

  • (b) the amount that represents the cost of borrowing within the meaning of section 48 of these Regulations over the term of the loan;

  • (c) the amount of the advance, or any advances, of the principal and when it is, or they are, to be made;

  • (d) the total amount of all payments;

  • (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, if 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 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;

  • (l) a description of any components that comprise a formula to calculate a rebate, charge or penalty in the event that the person exercises the right to repay the amount borrowed before the maturity of the loan and, if paragraph 627.28(3)(a) of the Act applies in respect of the loan, the formula set out in subsection 11(2) of these Regulations;

  • (m) any default charges that may be imposed under section 627.3 of the Act;

  • (n) a description of the property, if any, over which the institution 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 institution 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.

• Marginal note:Subsequent disclosure

  (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 the loan with the result that each subsequently scheduled instalment payment does not cover the interest accrued during the period for which it was scheduled, then, for the purposes of subsection 627.89(4) of the Act, a description of this situation and its consequences is prescribed information.

• Marginal note:Time and manner of disclosure

  (3) The prescribed information referred to in subsection (2) must be disclosed in a statement that is provided not later than 30 days after the day on which the payment is missed or the default charge is imposed.

Marginal note:Initial disclosure — variable interest loan

• 41 (1) For the purposes of paragraph 627.89(1)(e) of the Act, the following information is prescribed information in relation to a variable interest rate loan for a fixed amount that is to be repaid on a fixed future date or by instalment payments:

  • (a) the information referred to in subsection 40(1) of these Regulations;

  • (b) the annual interest rate that applies on the date of the disclosure;

  • (c) the method for determining the annual interest rate and when that determination is made;

  • (d) 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;

  • (e) the total amount of all payments and of the cost of borrowing based on that annual interest rate;

  • (f) 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

  • (g) 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) the provisions of the credit agreement that set out those conditions.

• Marginal note:Subsequent disclosure — public index

  (2) If the variable interest rate for the loan is determined by adding or subtracting a fixed percentage interest rate to or from a public index that is a variable rate, then, for the purposes of subsection 627.89(4) of the Act, the following information is prescribed 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.

• Marginal note:Frequency and manner of disclosure

  (3) The prescribed information referred to in subsection (2) must be disclosed in a statement that is provided at least once every 12 months.

• Marginal note:Subsequent disclosure — other method

  (4) If the variable interest rate for the loan is determined by a method other than the one referred to in subsection (2), then, for the purposes of subsection 627.89(4) of the Act, the following information is prescribed information:

  • (a) the new annual interest rate and the date on which it takes effect; and

  • (b) for payments that are affected by the new annual interest rate, the amount of each instalment payment and the time when each payment is due.

• Marginal note:Time and manner of disclosure

  (5) The prescribed information referred to in subsection (4) must be disclosed in a statement that is provided not later than 30 days after the day on which the institution increases the annual interest rate by more than 1% above the most recently disclosed rate.

Marginal note:Amendments — loan for fixed amount

• 42 (1) For the purposes of paragraph 627.89(5)(a) of the Act, an amendment to a schedule for instalment payments for a loan for a fixed amount is a prescribed amendment.

• Marginal note:Information

  (2) For the purposes of paragraph 627.89(5)(b) of the Act, the amended schedule as well as any increase in the total amount to be paid or in the cost of borrowing is prescribed information.

• Marginal note:Time of disclosure

  (3) The prescribed amendment and the prescribed information must be disclosed in writing not later than 30 days after the day on which the amendment is made.

Marginal note:Mortgages

43 Sections 44 to 46 apply in respect of a credit agreement for a loan secured by a mortgage on real property.

Marginal note:Time of initial disclosure

• 44 (1) The initial disclosure statement for a credit agreement must be provided on or before the earlier of

  • (a) the making of a payment, other than a disbursement charge, and

  • (b) two clear business days before the day on which the credit agreement is entered into.

• Marginal note:Exception

  (2) Paragraph (1)(b) does not apply if

  • (a) the person entering into the credit agreement consents to being provided with the initial disclosure statement on or before the day on which the credit agreement is entered into;

  • (b) the person entering into the credit agreement obtains independent legal advice;

  • (c) a rescission period of at least two clear business days is set out in the credit agreement; or

  • (d) favourable terms that reduce the cost of borrowing are set out in the credit agreement.

Marginal note:Renewal

• 45 (1) For the purposes of subsection 627.89(6) of the Act, the following information is prescribed information in relation to a credit agreement that will be renewed on a specified date:

  • (a) the information referred to in section 40 of these Regulations if the credit agreement is for a fixed interest rate;

  • (b) the information referred to in section 41 of these Regulations if the credit agreement is for a variable interest rate;

  • (c) a statement that no change that increases the cost of borrowing will be made to the credit agreement between the day on which the statement is disclosed by the institution and the day on which the credit agreement will be renewed; and

  • (d) a statement that the person’s rights under the credit agreement continue, and the renewal does not take effect, until the day that is the later of the specified date and the day that is 21 days after the day on which the person receives the statement.

• Marginal note:Time of disclosure

  (2) The prescribed information must be disclosed by providing a disclosure statement at least 21 days before the specified date.