Anyone who offers, arranges, provides, or facilitates high-cost credit products to or for consumers in BC needs a licence with us and must follow certain laws. This includes loan brokers.
What is a high-cost credit product?
The definition of a high-cost credit product applies to three different types of credit â open credit, fixed credit, and leases â that is used for a personal, family, or household purpose and has 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.
Open credit: 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: 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: 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 havenât bought the item like you would in a traditional sale.
The following businesses 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 AIR (as applicable) that is less than 32%.
Savings institutions like banks, credit unions, and extra-provincial trust corporations
There is no maximum amount of interest that a high-cost credit product can cost you, as long as the annual percentage rate (APR) is not more than 60%, per section 347 of Canadaâs Criminal Code.
Based on the legal definition of a high-cost credit product, you can be charged anywhere from 32% up to 60% interest.
When getting a loan or credit, itâs important to understand the total cost of borrowing. High-cost credit products (or installment loans) are just that â high-cost. That means that they have a high interest rate, high fees and are more expensive to borrow than from a loan from a bank or credit union. These amounts can quickly add up so we strongly recommend that you know what you are paying to borrow.
Your high-cost credit agreement must include the principal amount or the amount that is available to you, the amount of each payment, fees, optional credit products like insurance, the annual interest rate (AIR) and the annual percentage rate (APR), if applicable, and the total cost of the credit in a dollar amount.
Read the next section on AIR and APR, to understand the actual cost of borrowing. Find out more about the cost of consumer credit.
An APR is different than an AIR (which is usually just called an interest rate). It can be hard to understand interest but itâs important to know the difference so that you can make an informed decision about how much it will cost you to repay a loan.
AIR
An AIR is the annual interest rate â the cost you pay each year to borrow money and itâs referenced as a percentage (fixed or variable). It doesnât include any of the fees or costs charged for taking out a loan.
APR
An annual percentage rate (APR) is a yearly interest rate that includes the extra fees and costs that you must pay to borrow money. This APR will reflect what you actually have to pay over the term of the loan, and itâs higher than your interest rate. The rate is calculated by taking the average compound interest rate over the term of the loan.
You have the right to change your mind and cancel the high-cost credit agreement before the end of the next business day. You would still need to pay back the money you borrowed but there should be no additional charges for cancelling the agreement.
Read the Business Practices and Consumer Protection Act, Section 112.20
Beyond what is in the section above, you have other cancellation rights.
You can cancel your high-cost credit agreement if:
your high-cost credit agreement doesnât tell you about your cancellation rights
the agreement doesnât have all the required contents
the high-cost credit grantor doesnât meet specific requirements regarding their business practices. Read more about your right in the sections below.
To cancel your high-cost credit agreement, you must:
fill out the Cancellation Notice that the high-cost credit grantor was required to give you when you entered the contract and give them that notice
repay (by cash, certified check, money order or other methods accepted by the high-cost credit grantor) the outstanding balance that was advanced to you under the high-cost agreement, less any amount of the cost of credit that was already repaid by you, as of the date of cancellation
Once you cancel appropriately, the high-cost grantor must immediately give you a receipt for the amount you repaid or returned to them.
This is not a full list of all your cancellation rights or everything that you must do to cancel your high-cost credit agreement. We recommend that you review all your rights and obligations.
Some high-cost credit grantors offer optional products like insurance or loan protection as part of their high-cost credit agreement. These are optional which means that itâs your choice whether to purchase them or not.
By law, you do not have to buy an optional product to enter into a high-cost credit agreement.
The law defines an optional product as âa good or service, or both, that is offered to a borrower in connection with a high-cost credit agreement and that the borrower does not have to accept in order to enter into the high-cost credit agreement.â
Read the Business Practices and Consumer Protection Act, section 112.16
you must not be charged any fees that arenât disclosed, or that are more than what is in your high-cost credit agreement
you have the right to cancel your high-cost credit agreement in certain circumstances. You must not be charged a fee for cancelling the high-cost credit agreement in those instances
you must not be charged a fee for making early payments
you must not be charged a fee if the high-cost credit agreement is refinanced, restructured or the terms are changed
These are some of the rules. Thereâs more to know – we recommend that you review all your rights and obligations.
Beyond your cancellation rights and forbidden charges, here are some of the other rights that you have when entering into a high-cost credit agreement:
your high-cost credit agreement must be written in a clear and comprehensible way, and include certain information
the high-cost credit grantor must review all the required terms with you (verbally or online) and have you initial each section before the high-cost credit agreement is signed. This helps you to make an informed decision.
you must get a copy of your high-cost credit agreement at the time its signed, along with a copy of a cancellation notice (so that you can cancel if you have the right to do so)
you must get a receipt of the payments you make on your high-cost credit agreement
the high-cost credit grantor must not withhold any of the cost of credit from the principal advanced or made available to you
a high-cost credit grantor must not entice you into a high-cost credit agreement or falsely advertise a high-cost credit product as a way to improve your credit rating
a high-cost credit grantor must not offer or promise to give you any prize or reward as an incentive to enter into a high-cost credit agreement
a high-cost credit grantor must not attempt to collect a scheduled payment before itâs due (as stated in the high-cost credit agreement)
Here are a few things to look for before signing a high-cost credit agreement:
is the business licensed with us? Find out by doing a search on our website.
do you know who you are doing business with? This can be harder than it seems, especially with online businesses. The laws in BC apply to online high-cost credit grantors too.
understand what allowable extra fees you may be paying. For example, charges and expiry dates may apply for cash cards.
By law, you must get a copy of your high-cost credit agreement (not just be given access to a copy but actually get a copy).
Your high-cost credit agreement must include:
the principal amount or the amount of the funds available to you
the terms of the agreement
the dates that your payments are due and the amounts of those payments
the annual interest rate (and the APR if applicable)
the total cost of the credit, in a dollar amount
what happens if you miss a payment
a statement of your cancellation rights
To make an informed decision, thereâs more to know before agreeing to a high-cost credit agreement. Please do your research first and make sure you understand all the terms of the agreement.
