The Government of Ontario announced on December 9, 2015 that it will introduce legislation to increase protections for consumers who use high-cost alternative financial services, such as payday loans, instalment loans, rent-to-own services and cheque-cashing services and to better protect those with debts in collection.
The legislation has not yet been introduced. The announcement provides that the proposed Alternative Financial Services Statute Law Amendment Act would amend various existing consumer protection legislation to increase protections for consumers as follows:
- Consumers cashing cheques at alternative financial service providers would have more information made available to them and would benefit from a cap on the rate of cheque-cashing services;
- Consumers using rent-to-own services would benefit from a grace period for repayment;
- Consumers using instalment loans would be certain that the costs of optional insurance would not be excessive; and
- Consumers who are repeat payday loan borrowers would have the option of a longer repayment period.
The announcement follows a consultation on this topic that took place earlier this year. The Government published a consultation paper and sought submissions from the public, which were due on August 14, 2015. Submissions in response to the consultation have not been made public.
If the proposed legislation is enacted and brought into force, providers of financial services to Ontario consumers will likely have to revise their customer-facing disclosures and some of their business practices.