Consumer Protection
Doing Business In Canada
Each of the Canadian provinces and territories have
consumer protection laws governing transactions with
consumers. The legislation applies, subject to specified
exemptions, to a variety of consumer transactions and
agreements including credit agreements, lease agreements
and internet agreements. Though there are often many
similarities, consumer protection legislation is not
harmonized in Canada. Accordingly, it is important when
engaging in a consumer transaction to be cognizant of the
laws of the respective Canadian jurisdiction.
Types of Consumer Agreements
In most instances, Canadian consumer protection
legislation categorizes consumer agreements by type.
In Ontario, consumer agreements include internet
agreements, future performance agreements, direct
agreements, time share agreements, lease agreements
and credit agreements. The other provinces may use
different terminology, but generally have the same
categorization (e.g. a distance sales agreement is an
internet agreement). Under the Ontario legislation, an
agreement can be categorized as more than one type;
for example, a lease agreement may also be a future
performance agreement and a direct agreement. Due to
certain overlap rules in the Ontario legislation, such an
agreement is subject to exemptions from certain disclosure
required under the Ontario legislation.
Credit agreements are further categorized as either fixed
credit or open or variable credit. An open or variable credit
agreement provides multiple advances in unspecified
amounts, and may also impose a credit limit (i.e., a credit
card or line of credit). A fixed credit agreement is one
that is not open credit (e.g., specifies the amount of the
advance to be made).
Gift Cards
The consumer protection legislation in respect of gift
cards varies across the provinces. Subject to specified
exceptions, expiry dates are prohibited. Gift cards issued
for charitable or promotional purposes may have an expiry
date. In certain instances, fees cannot be charged other
than fees associated with personalizing a gift card or for
a lost or stolen gift card. Consumers may be charged
dormancy fees – to a specified maximum amount in the
applicable legislation – for non-use of gift cards associated
with multi-vendors (i.e. mall gift cards).
Disclosure Requirements
Disclosure requirements differ by type of consumer
agreement. The consumer protection legislation sets out
a list of disclosure required to be made to a consumer, in
writing, under particular agreements. Disclosure must be
made prior to the consumer entering into the agreement.
Cost of Credit Disclosure
Cost of credit (also referred to as cost of borrowing) refers
to all amounts a lender must disclose to a borrower, as
specified in the applicable consumer protection legislation,
and to amounts the borrower is required to pay under
or as a condition to entering into a credit agreement or
a lease agreement. The Harmonization of Cost of Credit
Disclosure Laws in Canada Drafting Template (developed
as a result of proposed uniform cost of credit disclosure)
serves as a drafting guide for provinces in respect to
cost of credit disclosure. Most of the provinces have
harmonized cost of credit legislation. Credit and lease
agreements must contain the required cost of credit
disclosure set out in the consumer protection legislation.
An initial disclosure statement is to be delivered to a
borrower at or before the time the borrower enters into
an agreement. Subsequent disclosure statements must
be delivered in prescribed circumstances. Generally, a
borrower will not be liable to pay the cost of borrowing
under an agreement if the lender has not provided the
borrower with the disclosure required under the respective
consumer protection legislation.
Prepayment
A borrower can prepay the full outstanding balance under
a credit or lease agreement at any time without incurring
any prepayment charge or penalty.
Default Charges
Generally, under the consumer protection legislation, a
lender can only charge the following default charges under
a credit agreement:
ŠŠReasonable legal fees in connection with enforcing
the agreement
ŠŠReasonable costs in realizing or protecting its
security under the agreement
ŠŠReasonable charges in connection with dishonoured
payments
Default charges are charges imposed on a borrower when
the borrower does not make a payment as it becomes due
or does not comply with any other obligation under the
credit agreement.
Unfair Practices
Unfair practices (also referred to as deceptive acts or
practices) are prohibited under Canadian consumer
protection legislation. Unfair practices address specific
market behaviour that mislead consumers (e.g. misleading
advertising), subject consumers to undue pressure to
enter into a transaction, or take advantage of particular
consumers (e.g. a consumer who cannot reasonably
protect his or her own interest due to disability, ignorance
or illiteracy). The majority of consumer protection
legislation sets out non-exhaustive lists of examples of
what constitutes unfair practices. It is a serious offence to
breach the prohibition against unfair practices. Penalties
for breaches include significant monetary fines and, in
the case of individuals, imprisonment of up to two years.
Consumers may also pursue remedies available to them
under the respective consumer protection legislation or at
law (including awards for damages).
Unsolicited Goods and Services
Under the consumer protection legislation, a consumer
has no legal obligation to pay for unsolicited goods or
services. Some provinces refer to this practice as negative
option marketing or billing, which is a circumstance where
a consumer is billed for a good or service that has not
been requested, but, as the consumer has not explicitly
rejected it, it is assumed that the consumer has accepted
the good or service. Credit cards cannot be issued
unless there is an express request or acceptance of the
cardholder. If a consumer uses an unsolicited credit card,
then he or she will be liable to pay the amount incurred
in connection with the use of the card. In Ontario, if a
consumer makes a payment in respect of an unsolicited
good or service, it cannot be inferred that the consumer
requested or accepted the good or service. The consumer
will be entitled to a refund of the payment. This is
typically the state of the law in the other provinces.
Consumer Sales Warranties
In some provinces, the consumer protection legislation
deems certain minimum statutory warranties (under
provincial legislation in respect of sales of goods) as implied
in every sales transaction. Deemed warranties include an
implied warranty or condition as to the quality or fitness of
any particular purpose of goods supplied or a warranty that
the good is durable and fit for its intended use.
Offences and Penalties
Most offences are related to general contraventions of, or
failure to comply with, the consumer protection legislation;
however, in respect of certain provinces, the offences
are expressed in respect to contraventions or breaches
of certain provisions of the applicable legislation. Both
individuals and corporations are subject to monetary fines.
An individual who is guilty of an offence is subject to a fine, imprisonment or both. Under most of the consumer protection
legislation, an individual includes employees, agents, directors and officers of a corporation. The maximum amount of the
fines differ under the applicable legislation. The Ontario legislation provides for fines of up to $250,000 for corporations.
An individual can be fined up to $50,000, imprisoned for two years less a day, or receive both the fine and imprisonment.
In Alberta, the fine for any person convicted of an offence is up to $300,000 or three times the amount obtained as a
result of the offence, whichever is greater. In Saskatchewan, a corporation is liable of fines up to $500,000.
© 2016 Cassels Brock & Blackwell LLP. All rights reserved.
This document and the information in it is for illustration only and is subject
to changes in the law and its interpretation. It does not constitute, and is not
a substitute for, legal or other professional advice. For advice on the matters
discussed in this document, please consult legal counsel.
Cassels Brock & Blackwell LLP
Toronto | Vancouver | Calgary
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