September 12, 2024, Quebec passed the new Bill 72, proposed by the Minister of Justice and named the Act to protect consumers against abusive commercial practices and to offer better transparency with respect to prices and credit.
The bill arrives at a critical time, as the average household debt in Quebec—excluding mortgages—reached $18,562 in the first quarter of 2024. A 1.48% increase from the previous year in Q1 of 2023. With Canadian and Quebec citizens struggling to keep up, Bill 72 aims to address key consumer issues by regulating food pricing practices, tipping, credit contracts, long-term leases, and fraud protections.
How Will Bill 72 Affect Borrowers And Lenders In Quebec?
A part of Bill 72 is intended to make finances simpler. Canadian consumer debt in the second quarter of 2024 reached its highest level since 2007. With average Canadian credit card balances at $4,300 and 22% of Quebecers only making minimum payments, the bill aims to simplify credit card payments and reporting.
Changes To Credit Card Contracts and Limits Under Bill 72
Bill 72 introduces new amendments targeting credit card membership fees, limits, high-interest debt, and NSFs. Consumers will be provided clear information about fees, charges and balances on their credit accounts.
Now under Bill 72, unless fees are charged on an annual basis, they must be included in the credit rate calculation. For example, if a credit card charges a monthly fee, that fee must be added to the total cost of credit when calculating the interest rate. The goal here is to ensure that consumers have a clear view of the true cost of borrowing.
In addition, consumers will also benefit from:
Credit Limits
Credit card applications will now require applicants to state what they want their credit limit to be or else the application will be denied. Moreover, creditors will not be allowed to grant an amount higher than the requested amount. The application must also indicate the minimum payment or how it’s calculated.
Allocation Of Debt Payments
Under Bill 72, if a consumer has multiple credit accounts with the same lender, that lender must allocate any payments made by the consumer to the debts with the highest interest rates first.
Lenders will also have to take into account any minimum payment requirements when allocating the payments. If installment loans are involved, the merchant will need to ensure the minimum payments on the credit card accounts are fulfilled before putting the payment toward the installment loan.
This helps consumers pay down the most expensive debt first and reduce the total interest owed over time.
Insurance Cancellation
If a consumer wants to cancel their credit insurance, new rules require the creditor to amend the contract within 10 days.
Changes To Long-Term Leasing Contracts Under Bill 72
Bill 72 introduces changes to long-term leasing contracts to protect consumers. These changes will set a consistent APR for leases, making it accessible and convenient to compare lease costs.
They also introduced ‘Cooling off periods’, which is a period of 10 days, during which consumers can cancel the lease. This has to be done within a specified time frame and essentially allows the consumer to reconsider their agreement. The bill will also see a restriction on wear and tear charges, with a new set of conditions under which wear and tear charges can be imposed.
Finally, advertising restrictions will implement rules on disclosing implied credit rates in advertisements and cracking down on predatory lending practices.
Pitfalls of Bill 72
While Bill 72 introduces measures that benefit consumers, some provisions have been added that favour merchants. As a result, certain financial liabilities may fall onto the consumer.
Consider the following changes the next time you use your card:
Non-Sufficient Funds (NSF)
Currently, creditors do not know whether NSF charges are supposed to be included in the credit card rate due to certain ambiguities in the law. With Bill 72, NSF fees will be considered separate from the regular credit card rate which will allow lenders to charge NSF fees on top of the credit card interest.
Learn more: Everything You Need To Know About NSF Fees & Bounced Cheques
Reclamation Rights
The bill is set to support merchants in cases of fraud or non-payments by allowing merchants to reclaim goods under specific conditions. Though this is positive for merchants as it can reduce financial risks this may be of disadvantage to consumers dealing with sudden financial setbacks.
Bill 72: Proposed Changes For Lenders and Lessors
Under the new changes, credit card issuers and providers of long-term, high-cost leases must get permits from Québec’s Office de la Protection du Consommateur. Banks, insurance companies, and mortgage lenders are exempt unless they offer open credit or leases. In addition, non-compliance could lead to penalties and a refund of credit charges.
Lenders and lessors will also be required to:
- Consumer-Initiated Amendments – Merchants can only make amendments to increase credit rates or charges if requested by the consumer, limiting unilateral changes.
- Consent Requirements – Any amendment added via a rider requires the consumer’s explicit consent, ensuring they are fully aware of any cost increases or adjustments.
- Restrictions for Vehicle Dealers – Bill 72 prevents vehicle dealers from requiring consumers to agree to credit or lease terms as a condition for purchase.
Conditions On Debt Transfers
Bill 72 requires merchants to follow clear rules when adding prior debt to a new credit or lease contract.
Imagine you’re trading in your old car to buy a new one. Let’s say, you still owe $2,000 on your old car loan. Under Bill 72, if the dealership wants to add that $2,000 debt to your new car loan, they must:
- Get Permission: The dealership must get your consent to add the remaining $2,000 debt onto the new loan.
- Show the Previous Debt Balance: The contract must clearly list the $2,000 from your old loan balance separately so you can see exactly what’s being carried over.
- Include the Debt in the Total Cost: The total loan amount should reflect both the new car price and the $2,000, giving you a clear picture of what you’re paying overall.
This transparency ensures you’re familiar with the full financial obligation upfront, avoiding surprises about extra debt.
Consumer Fraud Protection
If Bill 72 passes, merchants will be increasingly responsible for fraud and unauthorized use of a consumer’s demand deposit account (i.e. chequing or savings account). Merchants will have to refund the consumer for any unauthorized or authorized debits if it was fraudulent. In such a case, merchants will be required to refund the consumer within 5 days, with the consumers only liable for up to $50.
However, if the merchant can prove that the losses incurred were due to the consumer’s negligence in protecting their SIN, then the consumer may be liable.
Non-Credit Related Consumer Protection
In addition to these credit-related regulations, Bill 72 also proposed some regulations regarding tipping and food prices.
Proposed Food Pricing Regulations
To prevent unfair pricing practices and ensure consumers are well-informed, Bill 72 proposed the following provisions:
- Price discrepancies: The maximum compensation will be raised from $10 to $15 when the advertised price is not the same as the checkout price. If the item is $15 or less, the item will be given to the customer for free. If the item is over $15, the $15 reduction will be applied.
- Loyalty program prices: Loyalty program prices and regular prices will have to be displayed side by side.
- Price uniformity: Merchants will have to display prices by unit of measure (e.g. cost per 100g) and goods within the same nature must use the same unit of measurement to make prices easily comparable.
- Taxes: All prices should indicate clearly if taxes are to be added at the checkout.
Proposed Tipping Regulations
Bill 72 also sets forth a few propositions for tipping:
- Tips must be calculated on the price of the goods or services before tax.
- If the tip amounts are displayed, each option must be the same size to ensure equal visibility.
- Consumers must be able to easily see and choose how much they want to tip.
How Can Consumers Benefit From Bill 72?
Bill 72 intends to create more transparency between consumers, merchants, and credit lenders. One of the big changes is that credit card APRs are now calculated consistently, so it’s easier to understand what you’re paying. This is a great opportunity for consumers to familiarize themselves with their finances. With clearer food pricing and credit lending, consumers have the time and ability to compare and make the most out of their money. Ultimately, making it easier for consumers to make informed decisions and avoid hidden fees.
Empowering Consumers Through Bill 72
While Bill 72 may have a big impact on how businesses operate across Quebec, it’s a big step in ensuring consumer rights are protected. Next time you’re out shopping for a new credit product or even just picking up groceries, pay close attention to the pricing and advertisements around you. Small print matters, and understanding what you’re being charged or offered can help you make smarter financial choices. Whether it’s the fine print on your credit card terms or how discounts are advertised at checkout, staying informed can save you money in the long run.
