On January 29, the federal government of Ontario circulated its assessment paper on managing Alternative Financial Services (AFS) and credit that is high-cost en en titled “High-Cost Credit in Ontario: Strengthening Protections for Ontario Consumers” (Consultation Paper).
What you should understand
- Growing in popularity, AFS are high-cost services that are financial away from traditional finance institutions like banking institutions and credit unions. Typical AFS offerings consist of payday advances, instalment loans, credit lines, and automobile name loans.
- The Consultation Paper seeks input on developing a credit that is high-cost, licensing high-cost credit providers, managing costs, charges and fees, and imposing disclosure, cooling-off period and commercial collection agency needs, amongst others.
- The federal government is certainly not taking into consideration the legislation of high-cost credit given by banking institutions or credit unions, and payday advances would keep on being managed beneath the pay day loans Act and its own laws.
- Presently, British Columbia, Alberta, Manitoba and QuГ©bec would be the only Canadian provinces with legislation respecting credit that is high-cost.
- The Consultation Paper requests the views of stakeholders on its proposals by March 31, 2021.
Government of Ontario’s Consultation Paper and customer protection
Presently, aside from for payday advances (that are controlled), Ontario legislation will not offer consumers with defenses particular to high-cost economic solutions. High-cost loans, that are typically for bigger quantities and a longer duration than payday loans, create a better prospect of injury to consumers that are economically vulnerable such as the possible to trap them with debt rounds. The Consultation Paper proposes to protect consumers by establishing a threshold interest rate, several protective requirements and a licensing regime to address this gap in legislation. Read more