Older Uniform Acts

Commentary on Cost of Credit Disclosure Act 1998

OVERVIEW

The Uniform Cost of Credit Disclosure Act (" CCDA" or " Act") results from a project undertaken by the Uniform Law Conference of Canada (" ULCC") in 1990 in cooperation with the Alberta Law Reform Institute (" ALRI"). Between 1990 and 1993 the ULCC and ALRI developed draft legislation that differed from existing cost of credit disclosure legislation in certain key respects. The most notable characteristic of the draft CCDA as it stood in 1993 was that it would not have required disclosure of the cost of credit as an "annual percentage rate" (commonly abbreviated as " APR"). Instead of requiring disclosure of the APR, the 1993 draft would have combined a requirement to disclose the annual interest rate and non-interest charges with certain restrictions on the non-interest charges that could be imposed in connection with consumer credit arrangements. However, that approach to cost of credit disclosure was overtaken by developments in another arena.

In the fall of 1993 the ALRI and ULCC were informed that cost of credit disclosure legislation was part of the agenda for internal trade negotiations between the federal government and the several provinces and territories. Upon learning of this intergovernmental initiative, the ULCC decided to delay finalization of its uniform CCDA in order to consult with government officials responsible for the consumer related measures sector of the internal trade negotiations. The Agreement on Internal Trade (" AIT") was signed in the summer of 1994. The AIT called for jurisdictions to harmonize their cost of credit disclosure legislation but did not specify the detailed content of such legislation. Instead, the AIT called for an agreement on the details of harmonized legislation by January 1, 1996 with implementation by January 1, 1997.See footnote 11 The AIT called for the parties to establish an interjurisdictional group of officials called the Committee on Consumer- Related Measures and Standards (" Committee"). One of the Committee's responsibilities was to work out the text of an agreement on the detailed policies to be implemented by harmonized cost of credit disclosure legislation.

In 1994, rather than adopting a Uniform Act that would reflect its own views on the relevant policy issues, the ULCC resolved to proceed in the following manner. The ULCC would present its views on relevant policy issues to the Committee. Ultimately, however, the ULCC would defer to the Committee on the policies to be implemented in harmonized cost of credit disclosure legislation. On the other hand, the ULCC also resolved to apply its own legislative drafting standards and exercise its own judgment to develop model legislation that would implement the policy decisions reached by the Committee. The Uniform Act as adopted by the ULCC reflects the foregoing resolutions.

In 1995 the Committee circulated a document entitled "Proposals for Harmonization of Cost of Credit Disclosure Laws in Canada." In 1996, after consultation with interested parties and further deliberations, the Committee issued a revised version of the 1995 document. After further consultation and deliberation the Committee is expected to adopt a final version of the harmonization agreement in the spring of 1998. The CCDA and this Commentary reflect the draft text of the harmonization agreement as it read at the beginning of June 1998. The June 1998 draft text of the harmonization agreement is referred to herein as the " Draft Harmonization Agreement" or " DHA." The ULCC's understanding is that the final text of the harmonization agreement will not differ in any material respect from the DHA. The ULCC believes that the CCDA implements all of the policy decisions articulated in the Draft Harmonization Agreement. However, in order to achieve what the ULCC considers to be an optimal legislative implementation of the policy decisions embodied in the DHA, the structure and terminology of the CCDA depart from the DHA's structure and terminology.

Not every provision in the Uniform CCDA corresponds to a policy decision embodied in the DHA. Some provisions of the Uniform CCDA deal with issues that are passed over by the DHA. The best example of this is in the area of compliance. The DHA makes no recommendations regarding the consequences of non-compliance, but the Uniform CCDA contains detailed provisions regarding the civil consequences of non-compliance. In other cases, the Uniform Act deals with issues that, although not directly addressed by the DHA, are related to issues that it does address. For example, the DHA deals with disclosure requirements where mortgage loans are renewed but does not deal with the issue of disclosure when non-mortgage loans are renewed. The Uniform Act deals with renewal in both contexts. The ULCC believes that the Uniform Act's approach to issues not addressed by the DHA is reasonable and, where the DHA addresses related issues, consistent with the Agreement's approach to those related issues.

References to DHA

This Commentary contains many cross-references to the DHA, but the task of cross- referencing is complicated by the manner in which the latter document is organized. The DHA is divided into numbered headings. Typically, under each heading a short discussion of the relevant issues is intermingled with one or more concrete proposals. The discussion and proposals are not formally separated, and some of the headings actually encompass several proposals that are not individually numbered. This Commentary refers to each of the numbered headings in the DHA as a "Proposal," which it identifies as " Proposal #," where "#" is the number of the relevant heading. Since many of the "Proposals" actually consist of several related proposals, cross-references sometimes identify particular paragraphs or even sentences within a Proposal to make the cross- reference as precise and unambiguous as possible.

In addition to the proposals that set out the agreed policies, the DHA contains what it describes as drafting template proposals: provisions that express agreed policies in legislative language. Most of the drafting template proposals are based on provisions of an earlier draft of the CCDA. Although there are obvious similarities between the drafting template provisions and provisions of the Uniform Act _ in some cases they are identical _ there are also differences in terminology and structure. It is not one of the purposes of this Commentary to compare provisions of the CCDA with corresponding provisions in the drafting template proposals, so references to the latter are relatively rare in this document.

References are made to drafting template proposals where this is necessary to explain how a provision of the CCDA relates to the presumed intent of the Committee regarding a certain policy issue. This is necessary because in some cases the DHA sets out a drafting template proposal without describing the policy that the provision is intended to implement. This is particularly true in Part II of the DHA, entitled LEASES, where many of the agreed policies are not set out separately from the drafting template proposals.

Implementation Considerations

The Uniform Act is presented as a comprehensive, self-sufficient cost of credit disclosure statute. Although there are some references to regulations, the Act itself deals quite comprehensively with the details of cost of credit disclosure. This reflects the ULCC's view that a uniform act on cost of credit disclosure that left most of the messy details to be worked out in regulations "to be done by others" would not be of much assistance to anyone. At the same time, it is recognized that the Uniform Act contains many detailed provisions that jurisdictions may consider would be more at home in regulations than in an Act.

The Uniform Act is structured as a standalone statute. Some Canadian jurisdictions presently have standalone enactments that deal with pretty much the same subject matter as the Uniform CCDA. However, other jurisdictions include their cost of credit disclosure requirements in broader consumer protection legislation. The Uniform Act could be adapted to form one part of a broader consumer protection enactment without too much difficulty. It should be emphasized, however, that the provisions of the Uniform Act are highly integrated with each other, and any modifications, deletions, additions or tinkering should be effected with great care. 

DETAILED COMMENTARY

The following comments elaborate the Uniform CCDA on a section-by-section basis. The level of detail of the comments varies from section to section. In some cases, the comment on a particular provision consists of little more than a reference to the proposal of the DHA that the provision is intended to implement. In some cases the comment contains a brief explanation of how the relevant provision of the CCDA is intended to implement a particular proposal, where the terminology and structure of the provision depart from that of the proposal. Some comments are intended to point out nuances of provisions or relationships between provisions that might not be immediately obvious to all readers. The operation of some provisions is illustrated through brief examples. In general, the comments do not discuss the policy basis for provisions, as this is considered to be the office of the DHA. However, brief references to the policy underlying a particular provision are made when this will help explain the provision's intended effect or where the provision does not relate directly to a proposal in the DHA.

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