On November 15, 2017, the Act mainly to modernize rules relating to consumer credit and to regulate debt settlement service contracts, high-cost credit contracts and loyalty program1 (the “Act”) was sanctioned, bringing numerous changes to the Consumer Protection Act2 (the “CPA”).
The draft Regulation respecting the application of the Consumer Protection Act (the “Regulation”) has now been published to the Gazette officielle du Québec,3 perfecting the scope and extent of the modification to the CPA and implementing important novel measures in relation to various types of contact.
Aside from certain provisions, and unless a change was to occur, the Regulation will enter into force simultaneously with the new provisions of the CPA on July 25, 2019, at which time new obligations will be imposed on Quebec merchants and new types of contract ought to be used.
A. Novel framework pertaining to contracts of credit
The Act is creating a new framework for consumer credit and ensuing obligations for merchants.
Quite expectedly, the Regulation defines what is a “high-cost credit contract”, being a contract for which the credit rate is 22 percentage points higher that the official discount rate of the Bank of Canada at the time it is entered into. This type of contract triggers the obligation for the merchants to assess the consumer’s debt ratio as per a specific formula provided in the Regulation and disclosure additional information to the consumer.
The Regulation also specifies how to assess the consumer’s capacity to repay that must be performed for every credit agreement, but by the entities that are deemed to comply with this obligation.
The Regulation further imposes a mandatory content and format for many credit contracts and contracts involving credit. As a reminder, any contract offering the consumer to pay with a delay is a contract involving credit within the meaning of the CPA. The Regulation specifically addresses the following types of contract:
- Contract for the loan of money
- Revolving Credit Agreement
- Instalment Sale Agreement
- Contract involving credit
For credit card issuers, a new information box is now imposed on the application form, in addition to the mandatory content within the revolving credit agreement itself.
The Regulation also provides for revised content applicable to lease with residual value, involving mostly automotive vehicles.
All merchants extending credit in a way or another should carefully consider the Regulation and anticipate an important transition in the conduct of their business.
B. Loyalty Programs
The Regulation also determines the new legal framework for loyalty programs, now widely used by merchant from many horizons.
The new rules for loyalty programs apply to any type of points program, or programs where the consumer receives free products or services upon reaching a threshold of purchases. These programs may be offered by a specialized firm the merchant associates itself with, or they may be created by the merchant for the benefit of its own clientele.
Merchants who currently offer a loyalty program in Quebec or anticipate doing so will have to change their practices in order to comply with this new environment.
C. Mortgage and Brokerage
Lastly, the Regulation excludes from the ambit of various provision of the CPA mortgages (hypothecs) and contracts involving same, as well as various brokerage operations. These changes will simplify the contractual requirements for such agreements.