On June 15, 2015, Ontario’s Ministry of Government and Consumer Services (Ministry) issued a consultation paper, “Strengthening Consumer Financial Protection,” (consultation paper) which offers a discussion of potential approaches to strengthening protection for Ontario consumers of financial services perceived to be “high-cost”.
The Ministry is seeking input from the public, community agencies, businesses, and municipalities on consumer financial services including installment loans, payday loans, cheque cashing, money transfers, and in connection with debts in collection. This bulletin discusses the proposals relating to consumer financial services. For a discussion on the proposals relating to debt collection, please refer to our June 2015 Blakes Bulletin: Expanding the Meaning of Debt Collector in Ontario?
The proposals are informed by the work of a Payday Lending Panel that met in 2014, the Ministry’s research, and ongoing discussions with stakeholders.
Comments relating to the consultation paper are due on August 14, 2015. Responses are being sought in two ways: (a) respondents can complete an easy survey (see here), or (b) they can read the full consultation paper and submit comments. The consultation may see a large take-up due to the easy-to-complete survey. Interested businesses should be aware of the opportunity to submit responses.
Proposed consumer financial services reforms focus primarily on the Payday Loans Act, however the consultation paper also seeks input on the need for specific regulation of other alternative consumer financial services. As well, the consultation paper includes specific proposals for consideration on remittances.
Payday Loan Proposals
The discussion about payday loans addresses two issues: repeat borrowing and the cost of borrowing. The consultation paper includes a chart comparing the cost of payday loans across Canada (see page 5) and also compares international approaches to payday lending.
Some of the questions on which the Ministry is seeking comment in the consultation paper and survey include:
- Whether payday lenders should be required to consider whether borrowers can afford to pay back a loan
- Whether Ontario should restrict borrowers from repeated borrowing (the number of loans in a row or in a year)
- Whether borrowers would benefit from more information on payday loans, including: more information on the cost, their rights, the average number of loans a borrower takes per year, and the complaint process
- Whether there are ways to more effectively provide increased information on payday loans, including: more posters in stores, more sidebar information online, and/or additional information on the front of the contract
Money Transfer Service Proposals
The discussion about money transfer services focuses on transparency, disclosure and education. Unlike Quebec, the consultation paper does not suggest any intention of the Ministry to license money services businesses, which are already subject to the licensing requirements under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act.
Related to money transfer services, the Ministry is seeking responses on the following proposals:
- Whether Ontario should require money services businesses to provide specific information, including how much money is sent to the recipient or information to assist consumers in comparing rates of money transfer services
- Whether Ontario should require money services business to post a notice of remittance fees in a conspicuous place in their business premises in clear, plain language to further facilitate consumer knowledge, awareness and choice
Alternative Financial Services Proposals
The consultation paper identifies the following as alternative financial services, offered outside of traditional financial institutions: installment loans, payday loans, cheque cashing, pawnbroking, and rent-to-own agreements.
The consultation paper asks which alternative financial services should be specifically regulated in Ontario. The survey does not include any proposals with respect to alternative financial services, but instead asks respondents generally about the risks and biggest problems when using these products.
As noted above, comments relating to the consultation paper are due on August 14, 2015. A link to the survey can be found here.