First Session, 48th

General Assembly

65 Elizabeth II,

BILL 52

AN ACT TO AMEND THE CONSUMER

PROTECTION

AND BUSINESS PRACTICES ACT

Received

and Read the First Time ................................................................

Second

Reading ............................................................................................

Committee .....................................................................................................

Third

Reading ...............................................................................................

Royal

Assent .................................................................................................

HONOURABLE EDDIE

JOYCE

Minister of Service

Newfoundland and Labrador

Ordered to be printed by

the Honourable House of Assembly

EXPLANATORY NOTES

This Bill would require a payday

lender to be licensed under the Consumer

Protection and Business Practices Act and would impose certain restrictions

and obligations on a payday lender for the protection of borrowers.

This Bill would

limit the total cost of

borrowing for payday loans;

require payday loan agreements

to include specified terms, information and disclosure statements;

give borrowers early

cancellation rights;

provide for certain payday

lender practices to be prohibited by regulation; and

provide borrowers with remedies

for payday lender contraventions.

A BILL

AN ACT TO AMEND THE CONSUMER PROTECTION AND

BUSINESS PRACTICES ACT

Analysis

S.2 Amdt.

Definitions

S.46 Amdt.

Application

Part VII.1 Added

PART VII .1

PAYDAY LOANS

83.1

Definitions

83.2 Application

83.3 Limits on total cost of

borrowing

83.4 Prohibited practices

83.5 Cooling off period

83.6 Agreement and

advance

83.7 Receipt for payment

83.8 Payout of balance on

cash card

83.9 Prepayment

83.10 Consequence of

failure to comply

83.11 Regulations

S.84 Amdt.

Definitions

S.85 Amdt.

Licence required

S.86 Amdt.

Denial of licence

S.88 Amdt.

Suspension and cancellation of a licence

S.89 Amdt.

Production of licence

S.90 Amdt.

Certificate of registrar

10. Commencement

Be it enacted by the Lieutenant-Governor and

House of Assembly in Legislative Session convened, as follows:

SNL2009 cC-31.1

Section 2 of the Consumer Protection and Business Practices Act is amended by adding

immediately after paragraph (

h) the following:

(h.1) "payday loan" has the meaning given

to it in

section 83.1;

Section 46 of the Act is amended by adding

immediately after subsection (3) the following:

(4) For the purpose of credit agreements that are

payday loans,

Part VII.1 applies instead of this Part.

3. The Act is amended by adding immediately after

section

83 the following:

PART VII.1

PAYDAY LOANS

Definitions

83.1 In

this Part

(a) "advance" has the same meaning as in

Part VII;

(b) "APR" has the same meaning as in

Part VII;

(c) "borrower" means an individual who

has entered into or who is negotiating to enter into a payday loan agreement

for primarily a personal, family or household purpose, where that individual,

under that agreement, receives or is to receive a payday loan from a payday

lender;

(d) "cash card" means a card or other

device issued by a payday lender to the borrower of a payday loan instead of

advancing cash or transferring money to the order of the borrower that can be

used to obtain cash or acquire goods and services, but does not include a

credit card;

(e) "credit card" has the same meaning

as in

Part VII;

(f) "interest" means charges that accrue

over time and are determined by applying a rate to the principal of a payday

loan from time to time under the payday loan agreement;

(g) "payday lender" means a person who

offers, arranges or provides payday loans to or for consumers; and

(h) "payday loan" means an advance of

money with a principal of $1,500 or less and a term of 62 days or less made in

exchange for a post-dated cheque, a pre-authorized debit or a future payment of

a similar nature, but not for a guarantee, suretyship, overdraft protection or

security on property and not through a margin loan, pawnbrokering, a line of

credit or a credit card.

Application

83.2

(1) This

Part applies

(

a) to every payday lender who offers, arranges or

provides a payday loan to a borrower in the province, whether the payday lender

operates from business premises, by telephone or on the internet; and

(

b) to each payday loan, regardless of the number

of payday lenders involved in the payday loan.

(2) This Part does not apply to a payday loan made

before the coming into force of this Part, except to the extent that it relates

to an extension or renewal of a payday loan made or granted after the coming

into force of this Part.

Limits on total

cost of borrowing

83.3

(1) The

Lieutenant-Governor in Council may, by regulation, set the amount, or establish

a rate, formula or method of determining the amount, respecting the maximum

total cost of borrowing that may be charged by a payday lender.

(2) The Lieutenant-Governor in Council may, in

addition to subsection (1) and by regulation, determine a charge, fee, penalty,

rate or commission that may be charged by a payday lender.

(3) A payday lender shall not charge, require or

accept from the borrower an amount that exceeds a maximum set or determined

under subsection (1) or (2).

Prohibited

practices

83.4 A

payday lender shall not engage in a prohibited practice as prescribed by the

regulations.

Cooling off

period

83.5

(1) A

borrower under a payday loan agreement may, without a reason, cancel the

agreement at a time before the end of

(

a) the second day after the payday lender gives a

copy of the agreement to the borrower, if the payday lender is open for

business on that day; or

(

b) the next day that the payday lender is open

for business following the second day described in paragraph (a), if the payday

lender is not open for business on that second day.

(2) A borrower who wishes to cancel a payday loan

agreement shall

(

a) give written notice within the time period set

out in subsection (1) to the payday lender; and

(

b) return the full amount received by the

borrower to the payday lender.

(3) In giving notice of cancellation under

subsection (2), a borrower may

(

a) use the copy of the cancellation notice

provided by the payday lender under

section 83.6; or

(

b) provide notice in writing, signed by the

borrower, of the borrower's intention to cancel the payday loan agreement.

(4) On receiving notice of cancellation from a

borrower under this section, the payday lender shall give the borrower a

receipt in the form approved by the minister acknowledging receipt of the loan

cancellation.

(5) A payday lender shall not charge a fee for the

cancellation of a payday loan.

Agreement and

advance

83.6

(1) A

payday lender shall ensure that the terms, information and statements contained

in its standard loan agreement are written in a clear and comprehensible

manner.

(2) A payday lender shall ensure that the payday loan

agreement includes all of the following terms, information and statements:

(

a) the payday lender's name and, where different,

the name under which the payday lender carries on business;

(

b) the payday lender's business address and,

where different, the payday lender's mailing address;

(

c) the payday lender's licence number, telephone

number and where the payday lender has a fax number or email address, that fax

number and email address;

(

d) the borrower's name;

(

e) the date of the agreement and the date or

dates on which the first advance and other advances shall be made to the borrower

or to the order of the borrower;

(

f) the principal of the payday loan;

(

g) the term of the payday loan;

(

h) the amount of cash advanced to the borrower or

the amount of money transferred to the borrower or to the order of the

borrower;

(

i) the amount of credit available on a cash card

issued to the borrower;

(

j) where a cash card issued to the borrower has

an expiry date, the date of that expiration;

(

k) the total cost of borrowing and the APR for

the payday loan;

(

l) a statement that interest applies only to the

principal of the payday loan;

(

m) the rate of interest that applies to the

principal of the payday loan, together with a statement of the total amount of

interest that is payable under the loan;

(

n) each of the other charges that apply, together

with a statement of the amount of each of those charges;

(

o) the date on which each payment is due to the

payday lender and the amount of each of those payments;

(

p) a statement that the payday loan is a

"high cost loan";

(

q) a statement that the supply of goods or

services is separate and optional from the payday loan;

(

r) a statement of the borrower's rights of cancellation

under

section 83.5, setting out how those rights can be exercised and

identifying the time by which the borrower can exercise them;

(

s) a statement of the remedies available to the

borrower under

section 83.10;

(

t) where a cash card is to be issued to the

borrower, a statement identifying that third party service charges may apply

for the use of the card;

(

u) the agreement number of the payday loan; and

(

v) another term, information or statement that

may be prescribed by the regulations.

(3) Before the borrower signs the loan agreement,

the payday lender shall

(

a) review with the borrower the matters described

in paragraphs (2)(k), (

q) and (r); and

(

b) require that the borrower initial each of those

matters in the agreement.

(4) A payday lender shall give a borrower a copy

of the agreement at the time it is signed and dated by the borrower, together

with a copy of the cancellation notice that may be used by the borrower for the

purpose of

section 83.5.

(5) A payday lender shall ensure that the proceeds

of the payday loan are delivered to the borrower no later than at the time of

entering into the agreement.

(6) In the case of a payday loan obtained by means

of the internet or by telephone, the payday lender is considered to have

complied with subsection (5) where the payday lender delivers instructions to

the payday lender's financial services provider to transfer the amount of the

advance to the borrower on the same day as the day on which the agreement is

entered into by both the borrower and the payday lender.

(7) For the purpose of subsection (6),

"financial services provider" includes a bank listed in

Schedule I,

II or III of the Bank Act ( Canada ), a

credit union, a trust corporation or loan corporation registered under the Trust and Loan Corporations Act or an

organization that provides remote funds transfers, electronic funds transfers

or a similar method of transferring money.

Receipt for

payment

83.7 A

payday lender shall give a receipt to a borrower in the form approved by the

minister immediately upon receipt of payment.

Payout of balance

on cash card

83.8

(1) Where

the payday lender issues a cash card to the borrower in respect of a payday

loan, the borrower is entitled to be paid in cash the amount of credit remaining

on the card where

(

a) the balance of credit remaining on the cash

card is less than the amount prescribed by the regulations; or

(

b) the payday loan has been repaid by the

borrower and the cash card has expired.

(2) Where the borrower is entitled to be paid a

balance under subsection (1) and returns the cash card to the payday lender,

the payday lender shall immediately pay the balance on demand by the borrower.

(3) On return of a cash card under this section,

the payday lender shall immediately give the borrower a receipt for the cash

card in the form approved by the minister and the receipt shall specify the

amount paid to the borrower.

(4) The balance of credit remaining on an expired

cash card issued to a delinquent borrower may be applied by the payday lender

as payment towards the payday loan, where prescribed by and in accordance with

the regulations.

(5) In subsection (4), "delinquent

borrower" means a borrower who fails to repay a payday loan by the end of the

payday loan term under the loan agreement.

Prepayment

83.9 A

borrower may prepay a full or partial amount before it is due under the payday

loan agreement, without incurring a prepayment charge or penalty.

Consequence of

failure to comply

83.10

(1) Where

a payday lender fails to comply with a requirement of

section 83.3, 83.4, subsection

83.6(3), 83.6(4), 83.6(5),

section 83.7, 83.8 or 83.9 or the regulations made under

paragraphs 83.11(a), (b), (f), (

g) or (i), the borrower is not liable to pay

the payday lender an amount that exceeds the principal of the payday loan.

(2) The remedies under this

section are in

addition to another remedy that may be available to the borrower under the

common law or under another Part.

Regulations

83.11

(1) The

Lieutenant-Governor in Council may make regulations for the purpose of this

Part

(

a) prescribing the maximum total cost of

borrowing;

(

b) specifying fees, penalties, rates, commissions

or charges allowed to be charged by payday lenders for or in relation to a

payday loan;

(

c) prescribing a term, information or statement

to be included in a payday loan agreement and, where applicable, to be initialled

by a borrower;

(

d) respecting payday loan agreements between

borrowers and payday lenders that are not entered into in person;

(

e) regulating or prohibiting the offering,

arrangement or provision of payday loans by means described in paragraph (d);

(

f) prohibiting certain practices with respect to

payday loans or payday lenders;

(

g) prescribing an amount of credit remaining on a

cash card for the purpose of

section 83.8;

(

h) respecting the expiry of cash cards and

setting minimum terms;

(

i) prescribing the information to be required for

signs, notices, representations and advertisements;

(

j) defining a word for the purpose of this Part

where that word is not defined in this Part; and

(

k) generally, to give effect to the purpose of

this Part.

(2) Regulations made under this

section may be

made with retroactive effect.

Section 84 of the Act is amended by deleting

the word "and" at the end of paragraph (a), by deleting the period at

the end of paragraph (

b) and substituting a semicolon, and by adding immediately

after paragraph (

b) the following:

(c) "payday lender" means payday lender

as defined in

section 83.1; and

(d) "payday loan business" means the

activity of offering, arranging or providing payday loans by a payday lender.

(1) Section 85 of the Act is amended by

adding immediately after subsection (2) the following:

(2.1) A person shall not carry on business as a

payday lender unless he or she obtains a licence from the director.

(2) Subsection 85(3) of the Act is repealed and

the following substituted:

(3) An application for a licence shall be in the

form required by the minister and the applicant shall pay the fee set by the minister.

(3) Subsection 85(5) of the Act is repealed and

the following substituted:

(5) The director may require a statement made in

support of an application for a licence to be verified by an affidavit.

Section 86 of the Act is amended by adding

immediately after subsection (2) the following:

(3) An applicant for a licence to carry on a

payday loan business is entitled to be granted the licence unless, in the

opinion of the director,

(

a) his or her financial responsibility or record

of past conduct is such that it would not be in the public interest for the

licence to be granted;

(

b) the applicant is an undischarged bankrupt;

(

c) where the applicant is a corporation, its

financial responsibility or the record of past conduct of the corporation or

its officers or directors is such that it would not be in the public interest

for the licence to be granted; or

(

d) where the applicant is a partnership, its

financial responsibility or the record of past conduct of the partnership or

its members is such that it would not be in the public interest for the licence

to be granted.

7. Subsection 88(1) of the Act is repealed and the

following substituted:

Suspension and

cancellation of a licence

(1) The

director may suspend or cancel the licence of a direct seller, a credit

reporting agency or a payday lender upon a ground on which he or she might have

refused to grant the licence under

section 86

or where he or she is satisfied that the licensee

(

a) has contravened this Part or the regulations

or has failed to comply with the terms, conditions or restrictions to which the

licence was subject;

(

b) has made a material misstatement in the

application for a licence or in the information or material submitted to the registrar

under subsection 85 (4);

(

c) has been guilty of misrepresentation, fraud,

deceit or dishonesty;

(

d) is not carrying on business in the province;

(

e) being a corporation, has been dissolved or has

been struck off the register under the Corporations

Act ;

(

f) being a natural person, has died; or

(

g) has become bankrupt.

Section 89 of the Act is amended by adding

immediately after subsection (3) the following:

(4) A payday lender licensed under this Act shall

produce his or her licence for inspection when requested to do so by a person

whom he or she has solicited as a payday lender or with whom there is an

agreement to borrow.

9. Paragraphs 90(

b) and (

c) of the Act are

repealed and the following substituted:

(

b) a licence was issued to a direct seller,

credit reporting agency or payday lender; or

(

c) the licence of a direct seller, credit

reporting agency or payday lender was suspended, cancelled or reinstated,

Commencement

10. This Act shall come into force on a day to be

proclaimed by the Lieutenant-Governor in Council.

Queen's Printer