Key takeaways regarding the proposed new Ontario Consumer Protection Act

Significant changes are coming to the Ontario consumer protection regime. On October 23, the Ontario government provided a first glimpse of the legislation that will replace the Consumer Protection Act, 2002 (Current CPA). The Ontario government introduced Bill 142, Better for Consumers, Better for Businesses Act, 2023, which, if passed, will repeal the Current CPA and enact the Consumer Protection Act, 2023 (New CPA). Bill 142 will also amend the Consumer Reporting Act. As of the date of this update, Bill 142 is in second reading.

In this update, we highlight some of the general changes that may be relevant to any business dealing with consumers. For a discussion of the litigation and class action implications of the New CPA, see our other update here.

Prohibited contractual terms

Under the Current CPA, certain contractual terms are deemed void and invalid in any consumer contract but are not expressly prohibited. This includes terms that (a) provide for mandatory arbitration, (b) prevent the consumer from commencing a class proceeding, (c) waive implied or statutory conditions or warranties or (d) allow the supplier to acquire title to or possession of the consumer’s goods (other than goods passing to the consumer under the agreement). In our experience, businesses sometimes include these terms in consumer contracts even though they are not legally enforceable.

The New CPA expressly prohibits the terms listed above and other terms that were not previously addressed by the Current CPA, in particular:

• terms requiring disputes arising from a right of action under the New CPA to be adjudicated by a court other than the Ontario Superior Court (e.g., a forum selection clause that selects the courts of a jurisdiction other than Ontario);
• terms that place a monetary limit on claims made under an implied or statutory condition or warranty;
• terms that prevent a consumer from publishing a review; and
• terms that prevent a consumer from filing a complaint with the Ministry.

The New CPA also imposes consequences for including any prohibited term in a consumer contract: 

• In relation to credit agreements, borrowers will not be liable to pay the cost of borrowing. 
• In relation to leases, lessees will not be liable to pay the implicit finance charge.
• In relation to consumer contracts other than credit agreements and leases (but including supplier credit agreements), consumers have a right to cancel the contract within one year of entering into the contract.

Moreover, as there is now a clear prohibition, the inclusion of a prohibited term could be considered an offence and subject to regulatory enforcement (see “Increased penalties for contravention” section below). 

Given the potentially serious consequences for non-compliance, businesses should ensure their contracts with Ontario consumers do not contain any prohibited terms when the New CPA comes into force. As regulations governing transitional matters from the Current CPA have not yet been made, it is not clear whether and to what extent the New CPA will allow for a grace period for businesses to bring their contracts into compliance or allow contracts to be “grandfathered.”

Changes to unfair practices framework

The Current CPA prohibits unfair practices, namely, making (a) false, misleading or deceptive representations or (b) unconscionable representations. The New CPA makes several changes to this framework in favour of strengthening protections against unfair practices.

First, the New CPA expands the definition of unfair practices to include “unconscionable acts” in addition to unconscionable representations. While there is significant overlap between these two concepts, this change will likely broaden the prohibition against unfair practices because an unfair practice can be found under the New CPA even in the absence of an unconscionable representation. For example, the Current CPA prohibits a representation made in circumstances where the person knows or ought to know the price grossly exceeds the price at which similar goods or services are readily available to like consumers (commonly referred to as “price gouging”). The New CPA prohibits the act of price gouging even in the absence of any representation.¹ 

Second, while both the Current CPA and New CPA contain lists of examples of representations (or acts) that constitute unfair practices, the New CPA adds several more examples to the lists. For example, the New CPA makes clear that inaccurately representing the condition of a consumer’s goods, or entering into a consumer contract knowing there is no reasonable probability the consumer can pay the total amount owing, constitutes unfair practices. These additional examples result in greater certainty in understanding what is prohibited as an unfair practice, but arguably do not materially alter the scope of the prohibition as the prohibition was never limited to the examples listed.

Third, under the Current CPA, a consumer is entitled to rescind a contract if an unfair practice occurs before or while the consumer enters into the contract. The consumer must give notice of the rescission within one year of entering into the contract. The New CPA expands the consumer’s right of rescission by (a) stating that an unfair practice can also occur after the consumer enters into the contract, and (b) allowing the consumer to give notice of rescission within one year of entering into the contract or the occurrence of the unfair practice, whichever is later.

Fourth, under the New CPA, an unfair practice can occur even if no consumer contract is entered into. While an unfair practice in the absence of an executed consumer contract would not trigger any rescission right, it could be considered an offence and result in regulatory enforcement.

Unilateral amendments

The New CPA will set out rules in its regulations governing the unilateral amendment or continuation (i.e., renewal or extension) of consumer contracts by a business. 

While the exact rules are yet to be prescribed, we note that in the second reading of Bill 142, the minister explained that, more than before, businesses would need to obtain clear consent from their customers for contract amendments, renewals and extensions. Moreover, the regulations will also require that automatic renewals or extensions of contracts, where permitted, include an ongoing right to exit the contract.² 

Changes to disclosure requirements

The Current CPA sets out disclosure and other related requirements that vary depending on the category of consumer contract at issue, such as future performance agreements (including gift card agreements), internet agreements, remote agreements, credit agreements and leases. 

The New CPA consolidates the requirements applicable to several categories of contracts, including those considered under the Current CPA to be future performance agreements, internet agreements or remote agreements, into a single set of requirements under Part III of the New CPA. Credit agreements, leases³ and gift card agreements (referred to as “prepaid purchase card contracts” under the New CPA) are regulated separately outside of this consolidated framework.

Most of the requirements applicable to these contracts will be set out in regulations to be promulgated under the New CPA. Given the early stage of the legislative process, no regulations have been published yet, so it remains to be seen whether there will be any substantive changes to the mandatory disclosures or other requirements.

Increased penalties for contravention

Under both the Current CPA and New CPA, any contravention of the legislation is an offence and may result in regulatory enforcement. The New CPA will double the potential fines for offences: individuals could face fines of up to $100,000 and corporations could face fines of up to $500,000. The potential term of imprisonment for individuals convicted of an offence under the New CPA remains two years. However, the minister explained in the second reading of Bill 142 that the government will be taking an evidence-based and proportionate response to non-compliance, and before using its strongest enforcement tools, the government must be satisfied the public interest demands action to be taken.⁴ 

In addition, if a consumer is successful in an action brought concerning a refund under the New CPA, the court must order three times the amount of the refund (unless in the circumstances it would be inequitable to do so). This is a significant increase from the Current CPA, which only permitted recovery for the amount of the refund.

Conclusion

The New CPA, if passed, makes a number of significant changes that may require businesses to amend or review their existing contracts, policies and practices. Given that the requirements may evolve through the legislative process and further details are yet to be released in the regulations, we recommend businesses dealing with consumers to closely monitor the new legislation to ensure they are in a position to adapt and comply when needed.

If you wish to comment or have any questions on the New CPA, please contact one of our financial services and regulation or consumer markets lawyers in Ontario and we would be happy to assist.