The Government of Ontario has recently introduced proposed amendments to collection agency, consumer protection and payday loan legislation. Bill 156 – An Act to amend various Acts with respect to financial services (Bill 156) went through first reading in the Ontario legislature on December 9, 2015. The following proposed amendments are noteworthy:
Collection and Debt Settlement Services Act
The definition of “collection agency” would be expanded to include individuals and businesses that purchase debts and collect such debts, subject to certain exceptions. This means that businesses that purchase debts would be subject to the registration requirement and to the requirements that apply to collection agencies.
An administrative monetary penalties regime would be added as additional tool to enforce compliance with this legislation.
Consumer Protection Act, 2002
New provisions would be added to regulate service providers that cash government cheques for consumers. These provisions will not apply to banks or credit unions. The new provisions would require certain disclosures and would limit the fee that may be charged for cashing a government cheque. The specifics of the disclosures and the permissible amount of the fee would be prescribed by regulations which have not yet been published.
Regulation-making powers would be added in connection with consumer loans and leases. Some of new proposed regulation-making powers would allow regulations to: (a) govern the factors that a lender must take into account before entering into a credit agreement with a borrower and to require additional disclosure in this regard; (b) prescribe the maximum amounts that lenders may lend to consumers and the maximum charges that are not included in the cost of borrowing under a credit agreement; (c) govern the penalties to a lessee for making late payments under a lease; and (d) govern the rights and obligations of lessors and lessees as a result of a termination of a lease.
Payday Loans Act, 2008
Additional requirements would apply if a lender enters into a third payday loan agreement with a borrower within 62 days of having entered into a first payday loan agreement.
New inspection powers would be added under which businesses may be inspected if the registrar has reasonable grounds to believe that a person or entity is acting as a payday lender or a loan broker while not licensed.
We understand that if Bill 156 is passed, the Government intends to conduct further consultations regarding the potential regulatory changes that will be needed to give effect to the proposed changes to the statutes.
Businesses that purchase portfolios of consumer debts should monitor the developments of this legislation and should prepare to be registered as collection agencies, unless they fit within an exemption. Although we do not yet know the specifics of the new requirements consumer protection requirements, it appears that the Government intends to introduce new regulations that will provide consumer borrowers and lessees of goods with additional consumer protections. These new consumer protections may impose significant obligations upon lenders and lessors and may require changes of practice and changes to customer-facing documents.