From vehicles to houses and trips, we often buy items on credit rather than pay the full amount at the time of purchase.  Buying an item on credit has advantages including not waiting until you have saved up the full purchase price of an item.  When you purchase an item on credit, however, you are paying for the privilege of using somebody else’s money.  Before buying an item it is important to know the price difference between paying with credit or paying cash.

The Business Practices and Consumer Protection Act requires credit grantors to disclose both the total cost of credit, and the annual percentage rate (APR).

The cost of consumer credit is the total cost that you will pay when you purchase an item on credit. This includes all additional finance charges such as application, administration and services charges and applies to leases, mortgages loans and credit cards.

The Annual Percentage Rate (APR) shows customers the interest rate on a loan while taking into consideration any additional charges such as administration fees and brokerage fees.  This rate is often higher than an annual interest rate because it includes the additional charges.

By requiring that lenders disclose these costs and by requiring that suppliers follow specific advertising, disclosure and renewal requirements consumers can compare costs before making a purchase.

The Act also covers what information a creditor must include in an ad, what information must be disclosed to you about a credit agreement, and your rights and obligations concerning the credit agreement.

The Act only applies to individuals who enter into a credit agreement for primarily personal, family or household purposes and the credit agreement is entered into with a:

• credit grantor who grants credit in the ordinary course of business;
• loan broker; or
• prescribed credit agreement.

There are exemptions to when the legislation applies to credit sales. These include but are not limited to:

• the sale of a service by a public utility, as defined in the Utilities Commission Act;
• a student loan made under the provincial Student Assistance Program, or under the federal Canada Student Financial Assistance Act or the Canada Student Loans Act;
• municipal taxes;
• the payment of fees or charges to a local authority;
• overdraft protection on a deposit account;
• a loan made under the Homeowner Protection Act