New Ontario Consumer Protection Act, 2023: Key takeaways for the retail and financial services sectors

In our previous update, we discussed some of the general changes that will be made by Bill 142, Better for Consumers, Better for Businesses Act, 2023 that, if passed, will repeal the Consumer Protection Act, 2002 (Current CPA) and enact the Consumer Protection Act, 2023 (New CPA). 

In this update, we focus on certain additional changes made by the New CPA that would particularly affect businesses in the retail and financial services sectors.

Limitation of liability for unauthorized use of credit cards

The New CPA makes certain changes likely to have a significant impact on credit card issuers.

Under the Current CPA, a cardholder is not liable for any charges incurred after giving notice of loss or theft of the credit card, and the cardholder’s liability is limited to $50 or the maximum amount provided in the cardholder agreement for any charges incurred before giving such notice.

Under the New CPA, the protection of the limitation of liability provision is broader. It applies not only in circumstances where the credit card is lost or stolen, but also where there is “unauthorized use” of the credit card. This change brings it in line with similar provisions in British Columbia, Manitoba, Saskatchewan, Quebec, New Brunswick and Newfoundland. 

This change means cardholders will benefit from the limitation of liability provision if the credit card is used without their consent, even if the credit card was not lost or stolen. For example, case law from other jurisdictions with similar provisions suggests a cardholder could challenge transactions by (a) a relative, friend or employee who had access to the card and abused the privilege by exceeding the scope of the limited permission granted; or (b) a merchant who refused to honour a demand by the cardholder to discontinue use of a pre-authorization to charge given, but later withdrawn, by the cardholder.¹ 

Purchase-cost-plus leases

The New CPA specifically regulates a new category of consumer contracts referred to as “purchase-cost-plus leases,” which are leases under which the total amount payable exceeds 90% of the estimated retail value of the leased goods. 

Purchase-cost-plus leases are subject to the general requirements applicable to consumer contracts under Part III of the New CPA. In addition, the lease must allow the lessee to purchase the leased goods and terminate the lease at any point during the lease term, at a price pursuant to a buyout schedule that decreases to $0 over the lease term. An exception is provided where the lease does not impose any early termination charges, other than the supplier’s reasonable cost-recovery charges or other prescribed charges.

New consumer right of action under Consumer Reporting Act 

Bill 142 also amends the Consumer Reporting Act. While most of the amendments apply only to consumer reporting agencies, it should be highlighted that one of the amendments will create a new consumer right of action for any damages sustained as a result of a contravention of the Consumer Reporting Act. 

Given this additional risk of civil liability (including class action litigation risk), businesses that are subject to requirements under the Consumer Reporting Act, such as lenders, should ensure their credit assessment practices are compliant with applicable requirements. For example, lenders must ensure they only obtain a credit report for permitted purposes and provide the required notice to the consumer before obtaining a credit report or denying a benefit to the consumer on the basis of a credit report.

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 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.