Any business that offers, arranges, provides, or facilitates high-cost credit products for (or to) British Columbians must be licensed with us and follow certain laws. But what is a high-cost credit product?
The definition of a high-cost credit product applies to three different types of credit – open credit, fixed credit, and leases, They must be used for a personal, family, or household purpose and have an annual percentage rate (APR)/annual interest rate (AIR) that is more than 32%.
It is not a payday loan or a mortgage. It also does not include credit from banks, credit unions, or extra-provincial trust corporations. For example, your line of credit from your bank is not a high-cost credit product.
Let’s talk more about the three credit types and when they are considered to be “high-cost”.
Open credit is a type of credit where you can borrow up to a certain amount and borrow and repay money as many times as you like as long as you stay under the credit limit. Open credit is considered high-cost when it has an annual interest rate (AIR) that is more than 32% and is used for a personal, family, or household purpose. An example of high-cost open credit is a line of credit that is offered by a lender other than a bank or credit union.
Fixed credit is credit under an agreement that is not for open credit and typically, you pay a set amount in regular installments. Fixed credit is considered high-cost when it has an annual percentage rate (APR) that is more than 32% and is used for a personal, family, or household purpose. An example of fixed credit is an installment loan where you borrow $5,000 and repay that amount, plus interest, in equal installments over a few years.
Leases are considered high-cost when they have an annual percentage rate (APR) that is more than 32% and is used for a personal, family, or household purpose. An example of a high-cost lease is one where are supplied with a TV or furniture to use for a weekly or monthly fee and you haven’t bought the item like you would in a traditional sale.
There are businesses that are not considered high-cost credit grantors:
- Any business that only offers, arranges, provides or facilitates a credit product for or to borrowers that has an APR or Annual Interest rate AIR, as applicable, that is less than 32%.
- Savings institutions like banks, credit unions, and extra-provincial trust corporations
If you want to know more about your rights when it comes to high-cost credit products, visit the Consumer Help section of our website. We also offer explanations of an APR and an AIR.
If you want to read more about the law that came into force on May 1, 2022, look through Business Practices and Consumer Protection Amendment Act, 2019 and the High-Cost Credit Products Regulation (currently available through OIC 635/2021).
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About Consumer Protection BC
We are responsible for regulating specific industries and certain consumer transactions in British Columbia. If your concern is captured under the laws we enforce, we will use the tools at our disposal to assist you. If we can’t help you directly, we will be happy to provide you with as much information as possible. Depending on your concern, another organization may be the ones to speak to; other times, court or legal assistance may be the best option. Explore our website at www.consumerprotectionbc.ca.