July 15, 2010
FREDERICTON (CNB) - New disclosure requirements are in place to provide greater protection to consumers against unfair credit practices by helping them choose whether to use credit or pay cash.
The changes to the Cost of Credit Disclosure Act - reflecting changing patterns of credit use among Canadians - will help consumers compare the cost of credit.
"This legislation will increase consumer protection against unfair credit practices," said Justice Minister Bernard LeBlanc said. "It will ensure that consumers have accurate and comparable information to help them make better-informed credit decisions. It will help consumers access and compare credit options. It will also protect them by prohibiting certain finance charges and penalties on prepayment of most consumer loans or leases."
The Cost of Credit Disclosure Act protects consumers by ensuring that the true cost of borrowing is accurately disclosed to them. This includes contractual requirements as well as advertising requirements. The act also prohibits certain collection practices to avoid harassment.
Several key changes have been made:
Assuming the consumer is committed to using credit, the legislative changes can help him or her locate the least-expensive credit source available.
The changes are intended to warn the debtor that the cost of a transaction he or she is contemplating is unusually high. Because the legislation requires the disclosure of an annual percentage rate calculated according to a prescribed statutory method, it will protect the consumer by enabling him or her to compare rate figures calculated using the same formula criteria.
The act applies to provincially regulated lenders, including credit unions, trust companies and leasing companies, and to retailers who offer credit to people borrowing for personal, family or household purposes.
The Consumer Affairs Branch is authorized to investigate complaints and perform audits where necessary under this legislation. The act provides penalties for companies that fail to comply.
These changes have been implemented to keep up with the evolving credit environment; to enhance consumer protection; and to harmonize the act with similar legislation across Canada.
This initiative is one of many being made under an agreement on internal trade. Similar harmonized rules are in force in Alberta, Ontario, British Columbia, Saskatchewan and Manitoba.
MEDIA CONTACT: Marc Belliveau, communications, Department of Justice and Consumer Affairs, 506-453-4138.