With a regime that came into force in May 2022, British Columbia became the fourth province to regulate high-cost credit products. Under this regulatory regime, anyone who offers high-cost credit products with interest rates greater than 32% annual percentage rate (“APR”) must be licensed and follow specific requirements. This blog post explains how the regime works and what some of those requirements are.
The legislative framework governing high-cost credit products is set out in Part 6.3 of the Business Practices and Consumer Protection Act (the “BPCPA”) and the High-Cost Credit Products Regulation (the “Regulation”).
As defined in the BPCPA, high-cost credit products include fixed credit (such as a loan), open credit (such as a line of credit) and leases with an interest rate of more than 32% APR. “High-cost credit grantors” (“lenders”) means anyone who “offers, arranges, provides or facilitates high-cost credit products to or for consumers,” including loan brokers. Under BC’s laws, lenders must obtain licenses and comply with the consumer protection requirements outlined in the BPCPA and the Regulation.
The law: Licensing and consumer protection
To operate in BC, lenders must be licensed by Consumer Protection BC. Our skilled lawyers can assist you with the licensing process, including obtaining and providing these necessary documents:
- Proof of registration or incorporation;
- Municipal business licence;
- Criminal record checks;
- Sample credit agreements and other business documents; and
- A licence application form and fee.
Licenses are valid for up to three years, and they can be renewed. Lenders must obtain a separate license for each location from which they conduct business in BC. The legislation also requires lenders to display their license wherever they offer credit products, including in-store and online. High-cost credit lenders must obtain separate licenses for each province they operate in, with each province having different requirements.
BC’s regulatory framework also requires lenders to comply with a number of consumer protection measures. One of the many ways our team can assist you as a lender is by developing a plan to ensure compliance with these measures, which include:
- Cancellation rights for borrowers;
- Disclosure requirements from lenders to borrowers;
- Prohibited fees and practices; and
- A mandatory contribution to the Consumer Financial Education Fund.
What this means for lenders
If you are a high-cost credit lender operating in more than one province, you must be aware of the different regulatory regimes governing your business. Lenders must follow the applicable regulatory framework and obtain licenses from each of the provinces they operate in.
Credit agreements must be revised to comply with the requirements of each province you are lending in. For high-cost credit agreements to be valid, they must include mandatory terms the BPCPA prescribes. Lenders whose agreements do not contain these terms may be denied licenses by Consumer Protection BC. In our experience, many loan documents from other provinces fail to comply with BC’s more stringent standards and require substantive revision.
MLT Aikins extensive experience and expertise in advising and representing clients in the high-cost credit lending industry. For each province you operate in, we can help you with:
- Applying for or renewing your licence to operate as a lender;
- Drafting or reviewing your high-cost credit agreements and other documents to ensure they comply with the regulatory regime;
- Advising you on your disclosure, transparency, and consumer protection obligations when entering into high-cost credit agreements with borrowers; and
- Assisting you with resolving any disputes or complaints that may arise from your high-cost credit lending activities.
Contact one of the authors to find out how we can help you navigate the evolving regulatory landscape of high-cost credit lending in Canada.
This article is of a general nature only and is not exhaustive of all possible regulatory requirements, legal rights or remedies. Laws may change over time and should be interpreted only in the context of particular circumstances. These materials are not intended to be relied upon or taken as legal advice or opinion. Readers should consult a legal professional for specific advice in any particular situation.