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12. Offences Relating to Loans and Credit Agreements
(a) Overview
The law governing all the offences set out in this section is discussed in greater detail in the sector-specific chapter entitled "Loans and Credit Agreements".
(b) Failure to Correct Error in Open Credit Agreement Statement of Account
The behavioural element for this offence is committed when a lender fails to properly correct any error in an open credit agreement statement of account "in accordance with the prescribed requirements" [CPA 71]. The phrase "prescribed requirements" means in accordance with the CPA Regulation, but I have been unable to locate any Regulation provision setting out details. This lack may render any charge under this provision a legal nullity.
(c) Failure of Lender Who Offers Credit Agreement Insurance to Disclose to Borrower that Borrower May Purchase Own Insurance
The behavioural element for this offence is committed when a lender "offers to provide or to arrange insurance required under a credit agreement" but fails to "at the same time disclose to the borrower in writing that the borrower may purchase the insurance through an agent or an insurer of the borrower's choice" [CPA 72(2)].
(d) Failure of Lender to Refund or Credit Cost of Borrowing Monies, Other than Interest, on Prepayment by Borrower of Credit Agreement for Fixed Credit
The behavioural element for this offence is committed where a borrower prepays in full a credit agreement for fixed credit and the lender fails to refund the appropriate amount of 'cost of borrowing', other than interest [CPA 76(2)].
(e) Lender Making Prohibited Representation
The behavioural element for this offence is committed when a lender makes or causes to be made representations regarding a credit agreement that are not CPA-compliant [CPA 77].
(f) Failure of Lender to Disclose Details of Any Loan Brokerage Fees
The behavioural element for this offence is committed when a lender fails to include with the initial disclosure statement the amount of any loan brokerage fee or to account for such loan brokerage fee in the annual percentage rate or in the cost of borrowing [CPA 78(1)].
(g) Where Credit Application Sent to Lender, Failure of Loan Broker to Deliver Proper Initial Disclosure Statement to Borrower
The behavioural element for this offence is committed when a loan broker sends a credit application to a lender but fails to deliver to the borrower an initial disclosure statement that contains the required information" [CPA 78(2)].
(h) Failure of Lender to Deliver CPA-Compliant Initial Disclosure Statement to Borrower
The behavioural element for this offence is committed when a lender fails to "deliver an initial disclosure statement for a credit agreement to the borrower at or before the time that the borrower enters into the agreement, unless the lender has adopted the loan broker's initial disclosure statement as his, her or its own" [CPA 79(1)].
(i) Failure of Lender to Deliver CPA-Compliant Subsequent Disclosure Where Fixed Credit and Floating Interest Rate
The behavioural element for this offence is committed when a lender under a fixed credit, floating rate credit agreement fails to deliver, at least once every twelve months, a subsequent disclosure statement [CPA 80(1)].
(j) Failure of Lender to Deliver CPA-Compliant Subsequent Disclosure Where Fixed Credit and Variable Interest Rate
The behavioural element for this offence is committed when a lender under a fixed credit agreement which "allows the lender to change the interest rate" fails to deliver - "within 30 days after increasing the annual interest rate to a rate that is at least 1 per cent higher than the rate most recently disclosed to the borrower" - a CPA-compliant subsequent disclosure statement" [CPA 80(2)].
(k) Failure of Lender to Notify Borrower When Scheduled Payments for Fixed Credit Agreement Insufficient to Pay Off Interest Accrued Because Principal Increase Due to Default Charges or Missed Payments
The behavioural element for this offence is committed when a lender fails to "deliver to the borrower notice if the amount of the borrower's scheduled payments required by a credit agreement for fixed credit is no longer sufficient to cover the interest accrued under the agreement because the principal set out in the agreement has increased as a result of default charges or the failure of the borrower to make payments under the agreement" [CPA 80(3)].
(l) Failure of Lender to Deliver Supplementary Disclosure Statement After Amendment to Fixed Credit Agreement
The behavioural element for this offence is committed when a lender fails to, within 30 days after the parties have amended a credit agreement for fixed credit and the amendment changes any of the information set out in the initial disclosure statement, deliver a CPA-compliant supplementary disclosure statement [CPA 80(5)]. There is an exception to this requirement.
(m) Failure of Lender to Deliver CPA-Compliant Monthly Statement of Account Where Open Credit Agreement
The behavioural element for this offence is committed when a lender under an open credit agreement fails to "deliver a statement of account to the borrower at least once monthly after entering into the agreement" [CPA 81(1)]. There is an exception to this requirement.
(n) Failure of Lender under Open Credit Agreement to Provide Toll-Free Inquiry Phone Number
The behavioural element for this offence is committed when a lender fails to "provide to the borrower a telephone number at which the borrower can make inquiries about the borrower's account during the lender's ordinary business hours without incurring any charges for the telephone call" [CPA 81(3)].
(o) Failure of Lender Under Open Credt Agreement to Deliver Subsequent Disclosure Statements Before and After Interest Rate Change
The behavioural element for this offence is committed when a lender under an open credit agreement fails to deliver CPA-compliant subsequent disclosure statements before, or after an interest rate change (both are required) [CPA 81(5)].
There are more details and exceptions to this requirement.
(p) Failure of Lender Under Open Credit Agreement to Deliver Supplementary Disclosure Statement Within 30 Days After Amendment
The behavioural element for this offence is committed when a lender fails, within 30 days after "the parties have agreed to amend a credit agreement for open credit and the amendment changes" any of the information required in the initial disclosure statement, to deliver to the borrower a CPA-compliant supplementary disclosure statement [CPA 81(6)].
(q) Failure of Lender Under Credit Card Agreement to Deliver Supplementary Disclosure Statements As Required
The behavioural element for this offence is committed when a lender fails, in relation to an amendment to a credit card agreement which changes the information required in the initial disclosure statement, to deliver to the borrower a CPA-compliant supplementary disclosure statement [CPA 81(6)]. There are more details to this requirement.
(r) Failure of Assignor of Negotiable Instrument Given Under Credit Agreement to Deliver to Assignee Required Documentation
The behavioural element for this offence is committed when a person "assigns a negotiable instrument given to secure credit or a loan of money" but fails to deliver to the assignee with the negotiable instrument a copy of the initial disclosure statement, and also - if the person is a supplier creditor - a copy of the consumer agreement for the goods or services that were obtained with the fixed credit." [CPA 82(1)].
(s) Failure of Assignee of Negotiable Instrument On Re-Assignment to Give Re-Assignee Required Documentation
The behavioural element for this offence is committed when a person being an "assignee of a negotiable instrument who reassigns the instrument" fails to "deliver to the person to whom the instrument is being reassigned the statement and the consumer agreement, if any, received by the assignee in respect of the instrument" [CPA 82(2)].
13. Offences Relating to Chattel Leases
(a) Overview
The law governing all the offences set out in this section is discussed in greater detail in the sector-specific chapter entitled "Chattel Leases".
(b) Making CPA Non-Compliant Representations Re Chattel Lease Cost
The behavioural element for this offence is committed when a person makes CPA non-compliant representations or causes such representations to be made about the cost of a chattel lease, whether orally, in writing or in any other form [CPA 88].
(c) Failure to Deliver CPA-Compliant Disclosure Statement re Chattel Lease
The behavioural element for this offence is committed when a supplier fails to deliver a CPA-compliant disclosure statement for a chattel lease to the lessee before the lease execution or the date of the first payment, whichever is earlier [CPA 89(1)].
14. Who May be Charged
(a) Overview
One technique used by suppliers, advertisers and others to avoid legal liability for their sometimes unscrupulous behaviour is to present a confusing or inaccurate picture of their legal identity. Thus, when trying to find out who is legally responsible for an act or omission, consumers may be faced with several different and inaccurate 'business-sounding' names, or subsidiary corporations with vague relationships to each other. With such practices consumers may find themselves presented with certain 'external' business names and then be asked to write the cheque to another legal entity entirely, or find their credit card charged to a business name they have never heard of.
To assist with this problem of locating legal liability on the correct parties, the CPA offers the following interpretive provision (which apply to the enforcement of civil and administrative remedies as well) [CPA 3]:CPA 3
In determining whether this Act applies to an entity or transaction, a court or other tribunal shall consider the real substance of the entity or transaction and in so doing may disregard the outward form. This does not mean that charges will always and only be brought against the individual persons truly responsible, as this provision is not a solvent against the limited liability protection provided by a corporation (below), but it will help a court to cut through the clutter to locate liability where it thinks it ultimately lies. However, if they are truly separate legal entities then all of those should be named at the commencement of the prosecution.
In a further attempt to bring liability home to real persons, the CPA provides for two 'forms' of offence: main and 'officer or director'. Any CPA offence [see s.3 above] can be committed in either (or both) of these forms and both are strict liability offences, although they have different actus reus elements.
(b) Persons
Of course, 'natural persons' (real, flesh and blood human beings), can be charged with CPA offences. Even if a natural person is operating as a sole proprietor under a "business name" (registered or unregistered), they will still be charged under their personal name, usually with a suffix 'John Smith cob Acme Moving' (company operating business as).
(c) Corporations
Because a "person" in Ontario law includes a "corporation" (Legislation Act, s.87) a corporation as such is also liable to prosecution for any of the CPA offences. The essence of the corporate form is that, when the corporation is sued or charged in the corporate name, only the assets of the corporation can be collected against if a court judgement or fine is awarded ("limited liability").
(d) Partnerships and Sole Proprietorships
The two other common forms of business organization, partnerships and sole proprietors, do not have a distinct legal identity from the persons that make it up, so they cannot be charged in that separate capacity. In those cases the people behind the business organizations are prosecuted personally under the main form of the offence. Again, use of a business name, registered or unregistered, will not protect them and they will be charged in their personal names. In such case it is common to append their name as stated in the information (charge-initiating document) with something like "cob Acme Movers", the "cob" standing for "company operating business as".
That said, the CPA establishes a second 'officer or director' form of the offence for partnerships (sole proprietors have no 'officers' as there is just the one person).
(e) 'Officer or Director' Form of Offences
For CPA purposes, 'officers or directors' are [CPA 1]:For Corporations- directors of the Board of Directors;
- chairpersons or vice-chairpersons of the Board of Directors;
- the president or vice-presidents;
- the secretary or secretary,
- the treasurer or assistant treasurer
- the general manager or assistant general manager,
- "any other individual designated as an officer by by-law or resolution', and
- "any other individual who performs functions normally p erformed by an individual occupying such office".
For Partnerships- a partner;
- a general manager or assistant general manager;
- "any other individual designated as an officer by by-law or resolution', and
- "any other individual who performs functions normally performed by an individual occupying such office".
(partnerships do not have directors in the same sense that corporations do) Under the CPA, officers or directors may be liable for 'officer or director' forms of offences, based on the same transaction that grounds other 'main' forms of offence - "if he or she fails to take reasonable care to prevent the corporation" from committing any of the offence listed in ss.3-13 above [s.116(3)]. Such charges may be charged in the same information (charge-initiating document) but they are separate 'counts' from any 'main' form offences also charged.
The normal actus reus of this form of an offence is inaction (an omission) or inadequate action (omission and/or commission). It is inherently a strict liability negligence offence: ie. "fails to take reasonable care".
15. Evidence
(a) Overview
It is beyond the scope of this Isthatlegal.ca Consumer Law (Ontario) Guide to full explore the law of evidence in Provincial Offences Court, where any CPA prosecutions would be conducted.
That said, there are some specific provisions unique to CPA law that deserve mention.
(b) Evidence from CPA Investigations
Subject to rules of court, the evidentiary fruits of most of the CPA's administrative investigative powers can be used in prosecutions [see Ch.8, ss.2-5: "CPA Administrative Enforcement: Investigation"].
(c) Use of Evidence Certificates
To facilitate the proof of basic procedural facts such as the filing of CPA documents and when limitation periods start to run (they are triggered by the knowledge of the CPA Director), the CPA provides that written 'director-certified' statements attesting to such evidence may be admitted, in the absence of evidence to the contrary. This is done to avoid excessive time demands on consumer protection staff and officials [CPA 122(1)].
As well, certificates from similar agencies of the federal and provincial governemnts are similarly admissible [CPA 122(2), CP Reg 92].
(d) Testimonial Evidence of CPA Staff
The above-mentioned certificates are limited to the simple procedural facts noted, and they are only admissible "in the absence of evidence to the contrary" [CPA 122(1)]. Where in-person testimony of CPA officials is sought, a private prosecutor would have to use normal witness summons procedures to compel their attendence.
Most institutions resist having their staff compelled to testify in legal proceedings (and the Director and Ministry will probably not be exceptions). However, and while the CPA asserts a general duty of confidentiality over staff and officials respecting information and evidence obtained during their duties, the CPA does allow them to testify in court proceedings "under this Act" [CPA 120(1,2)].
More specifically, in addition to confidentiality exceptions for normal inter-governmental and law enforcement use - and with the consent of the party to whom the information relates - such evidence may also be disclosed "as required in connection with a proceeding under this Act or in connection with the administration of this Act or the regulations". This exception authorizes both attendence at hearings and pre-hearing documentary release to interested parties such as a private prosecutor.
Again, it is not generally safe to rely on verbal assurances that government or organizational personnel will show up to testify, so where such evidence is required, summons should be obtained and properly served (personally) on the witnesses. Additionally, a summons enables the party issuing it to specify what documentation and other physical evidence they want the witness to bring with them to the trial.
16. Limitations
The limitation period for commencing any CPA prosecution commences on the date that "the facts upon which the proceeding is based first came to the knowledge of the Director" and runs for two years after that [CPA 116(6)].
Triggering the commencement of the limitation from the Director's knowledge suggests that only the Director and the Ministry in concert can lay charges under the CPA. While the Director's date of such 'knowledge' will still trigger the running of the limitation period, there is nothing to prevent private prosecutors from laying charges on their own as long as they meet the limitation period and otherwise have legal merit.
Note however that the Attorney-General (AG) of Ontario has a statutory duty to oversee such prosecutions, which usually means that they will undertake a brief assessment of them to ensure that they have some basis in evidence and that they are competently prosecuted. Where not satisfied that these criteria are met the AG has the legal right to take over carriage of the prosecution of a case, which will almost always be followed by it being 'stayed' (cancelled) by the court at the AG's request.
17. Penalties
On conviction of a CPA offence a person [and a director or officer of a corporation: see s.14(e) above] is liable to [CPA s.116(5)]:- a fine of up to $50,000, and
- imprisonment for up to two years less a day.
A corporation, on conviction for a CPA offence, is liable to [CPA s.116(5)] a fine of up to $250,000.
18. Compensation and Restitution Orders on Prosecution
A court convicting a person or corporation of a CPA offence may also order the defendant "to pay compensation or make restitution" as it sees fit (ie. to consumers) [CPA s.117].
'Restitution' as the term is used here should extend to restitution of monies paid under a now-rescinded consumer agreement, recovery of CPA-illegal charges, and most any amount of money that could be recovered by civil action as discussed in Ch.7, s.9(b) ["General CPA Rights That May be Civilly-Enforced"], as well as court-related costs. Additionally, the term 'compensation' is broader and seems to give a convicting court a 'damages'-like remedial authority, the same as is discussed in Ch.7, s.9(d). However, punitive damages will be be included in this 'compensation' as any fines issued by the court already serve that punitive purpose.
19. Collection of Fines
(a) Overview
Aided by powers to suspend provincially-issued licenses and permits [see POA 69], the conventional manner of collecting regulatory fines is through use of the Small Claims Court collection procedures, which are explained at this link:
Small Claims Court (Ontario) Legal Guide: Ch.16 - Collections
(b) Consumer (Credit) Reporting
If a CPA fine is unpaid for more than 60 days after it is due it can be reported by the Director to a consumer reporting agency in the same fashion as a bad debt is 'put on a credit record'[CPA s.118(1)]. However, upon being notified of full payment the Director must notify the agency of that fact within 10 days [CPA s.118(2)].
(c) Liens
. Overview
Liens are creditor claims against property which can be asserted in law either by direct possession of the property (essentially holding it hostage) or by registration of the lien in either the Personal Property Security Act (PPSA) (in the case of chattel property) or (in the case of real estate) in either of the two real property registration systems that operate in Ontario (Registry or Land Titles). Registration operates to give notice to potential purchasers of the subject property, and to lenders (seeking to secure it in payment of new debts) that the property is 'encumbered'. A purchaser would take the property 'subject to' the lien debt, which invariably results in the debt being paid out of the purchase funds. A lender on the other hand may choose not to accept the property as security (as the previously-registered lien has 'priority') - and this may result in the denial of credit.
If a fine is unpaid for more than 60 days after it is due, the Director can order the creation of a lien against any property of the fine debtor [CPA 119(1)].
. Liens on Chattels Registered under PPSA
Where the property is personal property (ie. non-real estate, aka chattels) then the Director can register the lien under the Personal Property Security Act (PPSA) system [119(2)].
. Lien Against Real Estate Registered 'On Title'
Where the 'liened' property is real estate the Director can register it against title and then the lien has the security effect noted above [CPA 119(3)]. However, unlike other forms of security registration (such as mortgages or writs of seizure and sale) the Director may not force the sale of the secured real property [CPA 119(4)]. Thus the only practical method of realizing payment on the lien is when the property is sold and the debt is discharged out of the purchase price, or paid by the defendant to clear title to the liened property [CPA 119(5)].
. Discharge of Lien
In either the case of a PPSA registration or a land registry registration, sale of the liened property will result in the fine being paid out of the proceeds and the lien being thereby discharged [CPA 119(5)]. Further, if the fine is paid in full then the Director shall discharge the registrations within 10 days after becoming aware of the payment in full [CPA 119(6)].
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