ARCHIVED — Regulations Amending the Cost of Borrowing (Canadian Insurance Companies) Regulations

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Vol. 143, No. 20 — September 30, 2009

Registration

SOR/2009-262 September 9, 2009

INSURANCE COMPANIES ACT

P.C. 2009-1533 September 9, 2009

Her Excellency the Governor General in Council, on the recommendation of the Minister of Finance, pursuant to sections 479 to 485 (see footnote a), 488 (see footnote b) and 1021 (see footnote c) of the Insurance Companies Act (see footnote d), hereby makes the annexed Regulations Amending the Cost of Borrowing (Canadian Insurance Companies) Regulations.

REGULATIONS AMENDING THE COST OF BORROWING (CANADIAN INSURANCE COMPANIES) REGULATIONS

AMENDMENTS

1. Section 2 of the Cost of Borrowing (Canadian Insurance Companies) Regulations (see footnote 1) is amended by striking out “or” at the end of paragraph (a) and by adding the following after paragraph (b):

(c) under the terms of the Canada Student Loans Act; or

(d) under the terms of any Act of Parliament or of the legislature of a province that relates to student loans and that requires the rate of interest or the discount that may apply to the borrower to be disclosed to the borrower.

2. (1) Section 6 of the Regulations is amended by adding the following after subsection (2):

(2.1) For a disclosure statement that is part of a credit agreement in respect of a loan, a line of credit or a credit card or an application for a credit card,

(a) the disclosure statement must be presented in a consolidated manner in a single location in that agreement or application; and

(b) the applicable information box, as set out in one of Schedules 1 to 5, containing the information referred to in that Schedule, must be presented at the beginning of the agreement or application.

(2.2) For a disclosure statement that is separate from the credit agreement or the application,

(a) the disclosure statement must be provided before entering into the agreement or together with the agreement or the application; and

(b) the applicable information box, as set out in one of Schedules 1 to 5, containing the information referred to in that Schedule, must be presented at the beginning of the disclosure statement.

(2.3) Numbers that are set out in the information box, including numbers that refer to an interest rate, a time period, a date or a dollar amount, are not required to be repeated in the disclosure statement but may instead be referenced in it.

(2.4) In order to maximize its legibility, the information in the information box must be presented with

(a) text in an easily readable font style and font size of at least

(i) 12 points, with bold font for titles and numbers, including numbers that refer to an interest rate, a time period, a date or a dollar amount, and

(ii) 10 points for any other text;

(b) standard spacing between words and characters, such that the text does not appear to be in a font smaller than a 10-point font;

(c) sufficient margins above, below and to either side of the text such that sufficient white space is provided around the text; and

(d) dark text on a light background in order to maximize the contrast so that the text is clearly visible.

(2) Subsection 6(4) of the Regulations is replaced by the following:

(4) Any disclosure that is required to be made by a company under these Regulations must be made in language, and presented in a manner, that is clear, simple and not misleading.

(3) Subsection 6(5) of the Regulations is repealed.

(4) Subsection 6(6) of the Regulations is replaced by the following:

(6) A disclosure statement that is sent to the borrower by mail is considered to be provided to the borrower on the fifth business day after the postmark date.

3. The Regulations are amended by adding the following after section 6:

6.1 (1) Subject to subsections (2) and (3), if a company enters into a credit agreement with two or more borrowers, it must provide the disclosure statement referred to in subsection 6(1) to all of the borrowers.

(2) If all of the borrowers have consented, orally or in writing, in paper or electronic form, to the provision of the disclosure statement to one of the borrowers on their behalf, the company must provide the statement to that borrower.

(3) If two or more but not all of the borrowers have consented, orally or in writing, in paper or electronic form, to the provision of the disclosure statement on their behalf to one of the consenting borrowers, the company may provide the statement to that borrower on their behalf, if it also provides the statement to every borrower that has not so consented.

(4) If the consent referred to in subsection (2) or (3) is given orally by a borrower, the company must, without delay, provide confirmation of that consent to the borrower in writing, in paper or electronic form.

4. (1) The portion of subsection 7(1) of the French version of the Regulations before paragraph (a) is replaced by the following:

7. (1) La société qui se propose de conclure une convention de crédit avec un emprunteur lui remet la première déclaration exigée par le présent règlement à l’une ou l’autre des dates ci-après, selon le cas, mais au plus tard à la date où il effectue le premier versement, autre que des frais de débours, lié à la convention de crédit :

(2) Subsection 7(2) of the Regulations is replaced by the following:

(2) Paragraph (1)(a) does not apply if

(a) the borrower consents to being provided with the initial disclosure statement for the credit agreement in accordance with paragraph (1)(b);

(b) the borrower obtains independent legal advice;

(c) a rescission period is provided in the credit agreement; or

(d) favourable terms, such as imposing no penalty or fee for early payment, are provided in the credit agreement.

5. (1) The portion of subsection 10(3) of the Regulations before paragraph (a) is replaced by the following:

(3) Subject to subsections (4) and (5), the company must, at least once a month, provide the borrower with a subsequent disclosure statement that contains the following information:

(2) Section 10 of the Regulations is amended by adding the following after subsection (4):

(5) The subsequent periodic disclosure statement may be provided once in a three-month period, either in respect of that period or in respect of the last month of that period, if, during that period,

(a) there have been no advances or payments;

(b) there is an outstanding balance of less than $10; and

(c) no interest or fee is being charged or accrued.

6. Subsections 11(2) and (3) of the Regulations are replaced by the following:

(2) If the information box set out in Schedule 4, containing the information required by paragraph 6(2.1)(b) or (2.2)(b), as applicable, is included in an application form for a credit card or accompanies that application form, the company is considered to have met the requirements of subsection (1).

(3) If an applicant for a credit card applies by telephone or any electronic means, the company must disclose to them the information required by paragraphs (1)(a) to (c) at the time of the application.

7. (1) Paragraph 12(1)(d) of the French version of the Regulations is replaced by the following:

d) une mention indiquant que, dans le cas d’une opération effectuée à un guichet automatique à l’aide du numéro d’identification personnel de l’emprunteur, celui-ci, malgré l’alinéa c), est tenu responsable de la somme maximale;

(2) Subsection 12(3) of the Regulations is amended by striking out “and” at the end of paragraph (d), by adding “and” at the end of paragraph (e) and by adding the following after paragraph (e):

(f) a decrease in the fixed rate of interest or a decrease in the fixed percentage rate of interest referred to in subparagraph 11(1)(a)(ii).

(3) Subsection 12(4) of the Regulations is replaced by the following:

(4) An amendment referred to in any of paragraphs (3)(a) to (d) or (f) must be disclosed not later than in the first subsequent periodic disclosure statement that is provided after the date of the amendment.

(4) The portion of subsection 12(5) of the Regulations before paragraph (a) is replaced by the following:

(5) Subject to subsections (8) and (9), a company that issues credit cards must provide borrowers with supplementary disclosure statements on a regular periodic basis, at least once a month, that disclose the information referred to in paragraphs 10(3)(a) and (d) to (h) and that, in addition, contain the following information:

(5) Subsection 12(5) of the Regulations is amended by striking out “and” at the end of paragraph (b) and by adding the following after paragraph (c):

(d) subject to subsection (7), an estimate of the length of time in months and years that would be required to pay in full the outstanding balance set out in the supplementary disclosure statement, based on the assumption that

(i) the minimum payment set out in that statement and in each subsequent supplementary disclosure statement will be made on its corresponding due date,

(ii) the annual interest rate that applies on the date of the supplementary disclosure statement in respect of purchases of goods or services, or that, based on the information available on that date, is expected to apply in respect of such purchases after a period during which a promotional or special introductory interest rate applies, will be applied to the outstanding balance until it is paid,

(iii) the outstanding balance is rounded up to the nearest hundred dollars for the purpose of arriving at that estimate, and,

(iv) a year is considered to consist of not less than 360 days and not more than 366 days; and

(e) if the annual interest rate that applies on the date of the supplementary disclosure statement, other than a variable interest rate referred to in subparagraph 11(1)(a)(ii) or an interest rate that has been disclosed to a borrower under subsection (3), could increase in the next period, the circumstances that would give rise to that increase and any new rate of interest that would apply in the next period as a result of the increase.

(6) Section 12 of the Regulations is amended by adding the following after subsection (6):

(7) The estimate referred to in paragraph (5)(d) is not required to be provided if the borrower is required to pay the outstanding balance in full on receiving a statement of account.

(8) The supplementary disclosure statement is not required to be provided for a period during which there have been no advances or payments and

(a) there is no outstanding balance at the end of the period; or

(b) the borrower has notice that their credit agreement has been suspended or cancelled due to default and the company has demanded payment of the outstanding balance.

(9) The supplementary disclosure statement may be provided once in a three-month period, either in respect of that period or in respect of the last month of that period, if, during that period,

(a) there have been no advances or payments;

(b) there is an outstanding balance of less than $10; and

(c) no interest or fee is being charged or accrued.

8. Section 13 of the Regulations is replaced by the following:

13. (1) Subject to subsection (2), if a credit agreement is amended, the company must, not later than 30 days after the day on which the amendment is made, disclose in writing to the borrower any resulting changes to the information that was required to be disclosed in the initial disclosure statement.

(2) If a credit agreement for a fixed amount has a schedule for instalment payments and the schedule is amended, the company must, not later than 30 days after the day on which the amendment is made, disclose in writing to the borrower the amended payment schedule and any increase in the total amount to be paid or in the cost of borrowing as a result of that amendment.

9. The description of m in subsection 17(4) of the French version of the Regulations is replaced by the following:

m la période écoulée du moment où les frais ont été imputés au moment du remboursement anticipé.

10. Section 20 of the French version of the Regulations is replaced by the following:

20. La société qui, dans une publicité sur un prêt comportant une marge de crédit, précise le taux d’intérêt annuel ou le montant de tout versement ou des frais non liés aux intérêts, doit également y indiquer le taux d’intérêt annuel en vigueur au moment de la publicité et le montant des frais initiaux ou périodiques non liés aux intérêts. Ceux-ci doivent être présentés de la même façon et avoir au moins la même importance, sur les plans visuel ou sonore, ou les deux, le cas échéant, que les autres renseignements.

11. The Regulations are amended by adding, after section 25, the Schedules 1 to 5 set out in the schedule to these Regulations.

12. The French version of the Regulations is amended by replacing “la mention” with “une mention” in the following provisions:

(a) paragraph 12(1)(c); and

(b) paragraph 12(1)(e).

COMING INTO FORCE

13. (1) Subject to subsections (2) and (3), these Regulations come into force on January 1, 2010.

(2) Subsection 2(3) comes into force on the day on which section 138 of An Act to amend certain Acts in relation to financial institutions, chapter 54 of the Statutes of Canada, 2005, comes into force.

(3) Subsections 7(5) and (6) come into force on September 1, 2010.

N.B. The Regulatory Impact Analysis Statement for these Regulations appears following SOR/2009-257, Credit Business Practices (Banks, Authorized Foreign Banks, Trust and Loan Companies, Retail Associations, Canadian Insurance Companies and Foreign Insurance Companies) Regulations.

SCHEDULE
(Section 11)

SCHEDULE 1
(Subsections 6(2.1) and (2.2))

INFORMATION BOX — CREDIT AGREEMENT FOR A FIXED INTEREST LOAN FOR A FIXED AMOUNT REFERRED TO IN SUBSECTION 8(1)

Principal Amount

(Indicate the principal amount of the loan.)

Annual Interest Rate

(Indicate the applicable annual interest rate and provide a brief description of how the interest is compounded, if applicable, and charged.)

Annual Percentage Rate

(Indicate the APR, if it differs from the annual interest rate, and provide a brief description of how it is determined.)

Term

(Indicate the number of months or years of the term of the loan and whether the term is open or closed, and provide a brief explanation of what “open” or “closed”, as applicable, means.)

Date of Advance

(Indicate the date on which the principal amount of the loan is to be advanced and the date on which interest is to begin to be charged.)

Payments

(Indicate the amount of each payment and the date on which
each payment is due and provide a brief description of the components of a payment and the frequency of the payments.)

Amortization Period

(Indicate the number of months or years of the
amortization period, if that period is different from the term of the loan.)

Prepayment Privilege

(Provide a brief description of the conditions under which a borrower may repay a greater portion of the loan than required in any given period without incurring penalty charges for the prepayment of the loan, if applicable.)

Prepayment Charges

(Indicate the amount of the penalty charges, if any, for prepayment of the loan or provide a brief explanation of the manner in which the penalty charges are calculated.)

Default Insurance

(Indicate the amount of charges for insurance against default on a high-ratio mortgage or hypothec, if any.)

Other Fees

(Provide a list of the types and amounts of any other charges, other than interest charges.)

SCHEDULE 2
((Subsections 6(2.1) and (2.2))

INFORMATION BOX — CREDIT AGREEMENT FOR A VARIABLE INTEREST LOAN FOR A FIXED AMOUNT REFERRED TO IN SUBSECTION 9(1)

Principal Amount

(Indicate the principal amount of the loan.)

Annual Interest Rate

(Indicate the annual interest rate that applies on the date of the disclosure statement and provide a brief description of how the interest is compounded, if applicable, and charged.)

Determination of Interest

(Provide a brief description of the method for determining the annual interest rate and the date that the determination is made.)

Annual Percentage Rate

(Indicate the APR, if it differs from the annual interest rate, and provide a brief description of how it is determined.)

Term

(Indicate the number of months or years of the term
of the loan, and whether it is open or closed, and provide a brief explanation of what “open” or “closed”, as applicable, means.)

Date of Advance

(Indicate the date on which the principal amount of the loan is to be advanced and the date on which interest is to begin to be charged.)

Payments

(Indicate the amount of each payment, based on the annual interest rate that applies on the date of the disclosure statement, and the date on which each payment is due and provide a brief description of the components of a payment and the frequency of the payments.)

Amortization Period

(Indicate the number of months or years of the amortization period, if that period is different from the term of the loan.)

Prepayment Privilege

(Provide a brief description of the conditions under which a borrower may repay a greater portion of the loan than required in any given period without incurring penalty charges for the prepayment of the loan, if applicable.)

Prepayment Charges

(Indicate the amount of the penalty charges, if any, for
prepayment of the loan or provide a brief explanation of
the manner in which the penalty charges are calculated.)

Default Insurance

(Indicate the amount of charges for insurance against default on a high-ratio mortgage or hypothec, if any.)

Other Fees

(Provide a list of the types and amounts of any other charges, other than interest charges.)

SCHEDULE 3
(Subsections 6(2.1) and (2.2))

INFORMATION BOX — CREDIT AGREEMENT FOR A LINE OF CREDIT REFERRED TO IN SUBSECTION 10(1)

Initial Credit Limit

(Indicate the initial credit limit, if it is known on the date of the disclosure statement.)

Annual Interest Rate

(Indicate the applicable annual interest rate and, if it is a variable rate, provide a brief description of the method for determining it.)

Date from which Interest Is Charged

(Indicate the date on and after which interest accrues and provide information respecting the grace period or, if no grace period applies, an indication to that effect.)

Minimum Payment

(Indicate the amount of the minimum payment required in each payment period and provide a brief description of the method for determining the amount of the minimum payment.)

Foreign Currency Conversion

(Indicate the conversion rate for foreign currency, provide a brief description of how it is determined and indicate the date on which it is applied.)

Annual Fees

(Indicate the amount of any non-interest charges that
are levied on an annual basis and the date on which
they are levied or, if no annual charges are levied, an indication to that effect.)

Other Fees

(Provide a list of the types and amounts of any other non-interest charges and indicate the date on which they are applied.)

SCHEDULE 4
(Subsections 6(2.1) and (2.2) and 11(2))

INFORMATION BOX — APPLICATION FORM FOR A CREDIT CARD REFERRED TO IN SUBSECTION 11(1)

Annual Interest Rate

(Indicate the applicable annual interest rate or, if it is a variable rate that is determined by adding or subtracting a fixed percentage rate of interest to or from a public index, the name of the public index and the fixed percentage rate to be added to or subtracted from that index and the date on which that rate takes effect.)

Interest-free Grace Period

(Indicate the length of the interest-free grace period in days, if any, and the circumstances in which it applies or, if no interest-free grace period applies, an indication to that effect.)

Minimum Payment

(Indicate the amount of the minimum payment required in each payment period and provide a brief description of the method for determining the amount of the minimum payment.)

Foreign Currency Conversion

(Indicate the conversion rate for foreign currency, provide a brief description of how it is determined and indicate the date on which it is applied.)

Annual Fees

(Indicate the amount of any non-interest charges that are levied on an annual basis and the date on which they are levied or, if no annual charges are levied, an indication to that effect.)

Other Fees

(Provide a list of the types and amounts of any other non-interest charges and indicate the date on which they are applied.)

SCHEDULE 5
(Subsections 6(2.1) and (2.2))

INFORMATION BOX — CREDIT AGREEMENT FOR A CREDIT CARD REFERRED TO IN SUBSECTION 12(1)

Initial Credit Limit

(Indicate the initial credit limit, if it is known on the date of the disclosure statement.)

Annual Interest Rate

(Indicate the applicable annual interest rate or, if it is a variable rate that is determined by adding or subtracting a fixed percentage rate of interest to or from a public index, the name of the public index and the fixed percentage rate to be added to or subtracted from that index and the date on which that rate takes effect.)

Interest-free Grace Period

(Indicate the length of the interest-free grace period in days, if any,
and the circumstances in which it applies or, if no interest-free grace period applies, an indication to that effect.)

Determination of Interest

(Provide a brief description of the manner in which interest is calculated and the date on which that calculation is made.)

Minimum Payment

(Indicate the amount of the minimum payment required in each payment period and provide a brief description of the method for determining the amount of the minimum payment.)

Foreign Currency Conversion

(Indicate the conversion rate for foreign currency, provide a brief description of how it is determined and indicate the date on which it is applied.)

Annual Fees

(Indicate the amount of any non-interest charges that are levied on an annual basis and the date on which they are levied or, if no annual charges are levied, an indication to that effect.)

Other Fees

(Provide a list of the types and amounts of any other non-interest charges and indicate the date on which they are applied.)

Footnote a
S.C. 1997, c. 15, ss. 256 to 259; S.C. 2001, c. 9, s. 423; S.C. 2007, c. 6, s. 229

Footnote b
S.C. 1997, c. 15, s. 262

Footnote c
S.C. 2005, c. 54, s. 364

Footnote d
S.C. 1991, c. 47

Footnote 1
SOR/2001-102