In June, Borden Ladner Gervais LLP issued an information bulletin on recent amendments to the Consumer Protection Act (the “CPA”) proposed by Bill 48. These amendments, which came into force on December 15, 2007, address “distance contracts”, previously known as remote-parties contracts. The best example of a distance contract is one that is concluded between a consumer and a merchant online, by telephone or by catalogue.
If your company conducts business online, by telephone and/or by catalogue, action may be required on your part. To reiterate the highlights from our previous bulletin, here are some of the CPA amendments which recently came into force and which may directly affect your company:
Amendments in Brief
- Performance of the merchant’s principal obligation is required prior to payment by the consumer unless a chargeback mechanism is available under the CPA;
- Merchants must disclose certain information to consumers before entering into a distance contract (e.g. on the merchant’s Internet site). Such information must be presented prominently and in a comprehensible manner as well as be expressly brought to the consumer’s attention. This same information must also be indicated in the distance contract itself, which must be evidenced in writing;
- Merchants must send a copy of the distance contract to the consumer within 15 days after the contract is entered into;
- The consumer has the opportunity to cancel the distance contract when certain conditions are met;
- Within 15 days following the cancellation of a distance contract (which automatically takes effect upon the sending of the notice of cancellation), the merchant must refund all sums paid by the consumer under the contract and any accessory contract; and
- A consumer can request from a credit card issuer a chargeback of all amounts paid to a merchant under a cancelled distance contract and the cancellation of all charges made to the consumer’s account in relation to such contract (including presumably interest accrued on the unpaid/cancelled purchase) if the merchant defaults on his obligation to make a refund following notice of cancellation.
Along with the amendments listed above, changes to the Regulation respecting the Application of the Consumer Protection Act (the “Regulation”) also came into force on December 15, 2007. These new amendments affect the application of several new provisions of the CPA, and include the insertion of new provisions to the Regulation. This is particularly important because the new provisions list a number of contracts that will be exempt, wholly or partially, from the new regulations regarding distance contracts.
The new amendments wholly exempt the following contracts from the application of the new regulations regarding distance contracts:
(a) a contract pertaining to prearranged funerals and/or sepultures;
(b) a contract for the sale of goods likely to deteriorate rapidly (such as the purchase of perishable food products);
(c) a contract entered into during an auction sale;
(d) a contract entered into following an offer made by a merchant through a vending machine;
(e) a parking space lease if the rental rate is calculated by the minute or on a hourly or daily basis;
(f) a telephone service contract established by the insertion of a coin or credit card into a public telephone; or
(g) the sale of a lottery ticket by a legally authorized person.
In addition to the exemptions listed above, partial exemptions to the new regulations governing distance contracts have also been introduced. Pursuant to the amendments of the Regulation, the following contracts are partially exempt from the application of the new regulations regarding cancellation, refunds and chargebacks to the extent that they are concluded as distance contracts:
(a) a contract of credit;
(b) a contract of service involving sequential performance;
(c) a contract of service or for the lease of goods entered into or performance of a contract of service involving sequential performance.
For example, if a consumer uses the Internet to lease a car from your business, the consumer will not be bound by the new provisions of the CPA that entitle the consumer to cancel the contract within seven (7) days under particular conditions. The consumer could also not rely on the new provisions of the CPA to ask his/her credit card company to effect a chargeback.
The new amendments to the Regulation also make technical adjustments to harmonize the Regulation with the amendments recently made to the CPA.
As mentioned in our June bulletin, it is advisable for merchants who do business with Québec consumers on the Internet, by telephone and/or by catalogue to review their contracts and the way in which they operate to ensure compliance with the new rules introduced by Bill 48 and the amendments to the Regulation.