On May 1, 2022, British Columbia will become the fourth Canadian province (along with Alberta, Manitoba and Quebec) to regulate high-cost credit products. After that date, there will be additional disclosure requirements and consumer rights for consumer credit products with interest rates above 32%, as well as licensing requirements for lenders offering such products.
The new high-cost credit rules in British Columbia are set out in the Trade Practices and Consumer Protection Act (pending amendments here) and the High Cost Credit Products Regulations. The rules apply to credit products for personal (not commercial) purposes with an annual percentage rate (“APR”) of 32% or more. It is important to note that the high cost credit rules do not apply to a “credit sale” (sale of a product whose purchase is financed by the seller or manufacturer of the product or by an associate of the seller or manufacturer) or a consumer lease. In addition, the rules do not apply to business loans, nor to “payday loans” (small, short-term credit agreements, which are already subject to regulation). Beyond these exceptions, the high-cost credit rules will apply to most other consumer loans or lines of credit in British Columbia where the APR (effective interest rate including additional charges other than interest expense) exceeds the 32% threshold.
A lender offering high credit products in British Columbia must be licensed, and a separate license must be obtained for each location from which the high credit lender operates in British Columbia. The high-cost lender must not operate its business under a name other than that indicated on the license. Details of the licensing process are here. Licenses must be in place by May 1.
The new part 6.3 of the Trade Practices and Consumer Protection Act sets out disclosure requirements for high-cost credit products. These go beyond what is required for other consumer credit contracts. This will likely require the preparation of new or updated consumer loan documents when the APR is above 32%. Another important change is that consumers have a unilateral one-day right of cancellation (cooling-off period) for any high-cost credit product, as well as a continuing right of cancellation where the credit provider does not provide full disclosure.