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Third Session, Thirty-Ninth Legislature

This version is based on the printed bill that was distributed in the Legislature after First Reading.   It is not the official version.   If accuracy is critical, you can obtain a copy of the printed bill from Statutory Publications or view the online bilingual version (PDF).

Bill 14

THE CONSUMER PROTECTION AMENDMENT ACT (PAYDAY LOANS)


Explanatory Note

(Assented to                                         )

HER MAJESTY, by and with the advice and consent of the Legislative Assembly of Manitoba, enacts as follows:

PART 1

AMENDMENTS TO

THE CONSUMER PROTECTION ACT

C.C.S.M. c. C200 amended

1           The Consumer Protection Act is amended by this Part.

2           Section 137 is amended

(a) by adding the following definitions:

"cash card" means, subject to the regulations, a card or other device issued to a borrower to enable him or her to access the money advanced under a payday loan. (« carte de paiement »)

"Internet payday loan" means a payday loan under an agreement between a borrower and a lender that is formed by Internet communications or by a combination of Internet and fax communications. (« prêt de dépannage par Internet »)

(b) by replacing the definition "payday loan" with the following:

"payday loan" means an advance of money in exchange for a post-dated cheque, a pre-authorized debit or a future payment of a similar nature, but not for any guarantee, suretyship, overdraft protection or security on property and not through a margin loan, pawnbroking, a line of credit or a credit card. (« prêt de dépannage »)

3           The following is added after section 137:

Application

138(1)      Subject to the regulations, this Part applies to a payday loan if

(a) the amount initially advanced under the loan is no more than $1,500 and its initial term, ignoring any extension or renewal, is no longer than 62 days; or

(a) it is a replacement loan.

Limited application to existing loans

138(2)       A section of this Part does not apply in respect of a loan that was made before the day that section came into force, but it does apply in respect of any extension or renewal of such a loan on or after that day.

4           The following is added after subsection 148(2):

Interpretation of ambiguous statement

148(3)      If a provision or statement in a payday loan agreement or in any related document provided to the borrower is ambiguous, it must construed in favour of the borrower.

5           The following is added after section 148:

Cash card

148.1(1)    If a cash card is issued in respect of a payday loan, the lender must

(a) provide to the borrower, on demand by the borrower and at no cost to the borrower, a statement of the cash card balance; and

(b) pay to the borrower in cash, on demand by the borrower or the director and at no cost to the borrower, the amount of the cash card balance

(i) if the balance is less than the prescribed amount, or $25 if no amount is prescribed, or

(ii) if the loan has been repaid and the card has expired.

Balance applied to repayment

148.1(2)    Despite clause (1)(b), but subject to the regulations, the lender may apply the cash card balance as payment towards the loan if the borrower has failed to repay the loan by the end of the term of the payday loan agreement.

6           The following is added after section 151:

Maximum amount of loan

151.1(1)    No payday lender shall enter into a payday loan agreement with a borrower for a loan that exceeds the proportion of the borrower's net pay prescribed by regulation.

Consequence of failure to comply

151.1(2)    If a payday lender contravenes subsection (1) and the borrower has not misrepresented to the lender the amount of the borrower's net pay,

(a) the borrower is not liable for any amount charged as a cost of credit for the payday loan; and

(b) the lender must immediately reimburse the borrower, in cash, on demand by the borrower or the director, for

(i) the total of all amounts paid, and

(ii) the value of any other consideration given,

as a cost of credit for the loan, including any amount paid or consideration given to a person other than the payday lender.

This is in addition to any penalty that the lender may be subject to under any other provision of this Act or the regulations.

7           The following is added before section 155:

Discounting prohibited

154.1       No payday lender shall discount the principal amount of the payday loan by deducting or withholding from the advance an amount representing any portion of the cost of credit or any component of the cost of credit.

Tied selling restricted

154.2       No payday lender shall make a payday loan contingent on the purchase of another product or service, unless the borrower's cost of it is included in the borrower's cost of credit for the payday loan.

8           The following is added after section 161:

ORDERS

Director may charge costs

161.1(1)    In the circumstances described in subsection (2), the director may, by written order, require a payday lender to pay the following costs:

(a) fees paid to an auditor, private investigator or other expert retained by the director as an inspector to assist the director in determining whether the lender is in compliance;

(b) the cost of any equipment or software required by an inspector or the director to read or interpret the lender's records;

(c) the cost of obtaining a warrant;

(d) the costs of legal services provided to the director in relation to an inspection or to a review of the lender's payday loan agreements or lending practices, including legal services provided by a department or branch of the government.

Circumstances in which costs may be charged

161.1(2)    The director may charge the costs referred to in subsection (1) to a payday lender in any of the following circumstances:

(a) the director determines that the lender has not complied with a provision of this Part or the regulations or with a condition of the lender's licence; or

(b) the director is unable to determine whether the lender is in compliance because the lender

(i) has failed to produce records, or make them available for inspection, in the form required by an inspector, or

(ii) has failed to provide satisfactory answers to questions asked by an inspector.

Costs are a debt

161.1(3)    The costs charged under subsection (1) are a debt owing to the government by the payday lender.  The lender must pay it within 30 days after receiving the order.

Certificate

161.1(4)    The director may file with the court a certificate certifying the amount of the debt. When so filed, the certificate has the same force and effect as a judgment of the court for the recovery of a debt in the amount specified in the certificate plus the cost of filing the certificate.

Order for compliance

161.2(1)    If, in the director's opinion,

(a) a payday lender is not complying with this Part or the regulations under this Part; or

(b) a statement made by or on behalf of a payday lender in relation to a payday loan or payday loan agreement is false or misleading;

the director may, by written order, require the lender to do or refrain from doing one or more things specified in the order, within the time limits specified in the order.

Criteria for order

161.2(2)    The director's order must be designed to achieve one or more of the following objectives:

(a) to ensure compliance with this Part and the regulations;

(b) to correct the false or misleading statement or to bring such a correction to the attention of borrowers, or both.

Service of order

161.3(1)    A copy of an order under section 161.1 or 161.2 must be given to or served on the payday lender as follows:

(a) by delivering a copy of it to the lender or to an officer or employee of the lender;

(b) by sending a copy of it by registered mail, or by another service that provides the sender with proof of delivery, to the lender at the last address appearing in the director's records for the lender or the lender's business; or

(c) in any other manner prescribed in the regulations.

Deemed receipt

161.3(2)    An order sent to a payday lender in accordance with clause (1)(b) is deemed to have been received on the date shown on the confirmation of delivery obtained from the Canada Post Corporation or the other service.

Actual notice is sufficient

161.3(3)    Despite the fact that an order is not given or served in accordance with this section, it is sufficiently given or served if it actually came to the attention of the person for whom it was intended.

Appeal of director's order

161.4(1)    An order under section 161.1 (costs) or section 161.2 (compliance order) may be appealed to the court.

How to appeal

161.4(2)    To appeal the order, the payday lender must file an application with the court within 14 days after a copy of the order is given to or served on the lender.  The lender must provide a copy of the application to the director as soon as practicable after filing the application, and the director may appear as a party to the appeal.

Court's decision

161.4(3)    The court may

(a) confirm or vary the director's order; or

(b) allow the appeal, on any terms or conditions the court considers appropriate.

The court may make any order as to the costs of the appeal that it considers appropriate.

Public disclosure

161.5       Despite subsection 73(4), the director may issue public reports disclosing details of compliance orders under section 161.2 that have not been overturned on appeal. This disclosure may include personal information.

FINANCIAL LITERACY FUND

Fund established

161.6(1)    The Manitoba Payday Borrowers' Financial Literacy Fund is hereby established for the purpose of funding, or supplementing the funding of, programs designed to improve the financial literacy of borrowers and potential borrowers of money under payday loans.

Deposit in Consolidated Fund

161.6(2)    Money in the fund is to be deposited in a separate, interest-bearing account in the Consolidated Fund in trust for the fund.

Payments into the fund

161.6(3)    Despite The Financial Administration Act, the following are to be paid or credited to the fund:

(a) the levies paid under section 161.7 (financial literacy support levy);

(b) amounts authorized to be so paid and applied by an Act of the Legislature;

(c) interest and other income earned on the amounts paid or credited to the fund.

Management of fund

161.6(4)    The minister is responsible for managing the fund, and may make or authorize payments from the fund

(a) for the purpose of the fund; and

(b) to pay administrative expenses of operating the fund.

Annual report

161.6(5)    For each fiscal year, the annual report of the department over which the minister presides must include a report of the accounts and transactions of the fund.

Financial literacy support levy

161.7       Subject to the regulations, a licensed payday lender must pay to the government each year, at the time or times prescribed by regulation, a financial literacy support levy.  The amount of the levy is to be determined in accordance with the regulations.

9(1)        Subsection 163(1) is amended

(a) by replacing clause (a) with the following:

(a) exempting any class of payday loans from the application of this Part or any provision of this Part;

(b) by adding the following after clause (a):

(a.1) extending or limiting the meaning of "cash card";

(a.2) specifying transactions or series of transactions for the purpose of clause (b) of the definition "replacement loan" in section 137;

(c) by adding the following after clause (c):

(c.1) for the purpose of protecting borrowers, prescribing responsibilities of payday lenders and governing their activities;

(d) by adding the following after clause (e):

(e.1) respecting the timing or manner of delivery of advances under payday loans;

(e) by adding the following after clause (f):

(f.1) for the purpose of section 147,

(i) fixing the maximum cost of credit for a payday loan, or establishing a rate, formula or tariff for determining it, and

(ii) fixing the maximum amounts for components of the cost of credit, or establishing rates, formulas or tariffs for determining them;

(f) by adding the following after clause (g):

(g.1) respecting cash cards, including

(i) prescribing the cash card balance below which the borrower is entitled to a cash payment under clause 148.1(1)(b), and

(ii) respecting the circumstances and manner in which a cash card balance may be applied under subsection 148.1(3) to the outstanding balance of a payday loan;

(g) by adding the following after clause (h):

(h.1) for the purpose of section 151.1, defining "net pay" and prescribing the proportion of a borrower's net pay that must not be exceeded by a payday loan;

(h) by replacing clause (i) with the following:

(i) for the purpose of section 152, prescribing fees or costs — or establishing rates, formulas or tariffs for determining fees or costs — that may be charged, required or accepted in relation to a replacement loan or an extension or renewal of a payday loan;

(i) by adding the following after clause (i):

(i.1) for the purpose of section 153, prescribing a penalty or other amount — or establishing a rate, formula or tariff for determining a penalty or other amount — that may be charged, required or accepted in relation to a default by the borrower under a payday loan;

(i.2) specifying circumstances in which no amount may be charged, required or accepted in respect of a payday loan, the extension or renewal of a payday loan, or a default under a payday loan;

(j) by renumbering clause (m) as clause (r) and adding the following after clause (l):

(m) respecting Internet payday loans;

(n) respecting the manner in which an order under section 161.1 or 1.61.2 may be given to or served on a payday lender;

(o) respecting advertising in relation to payday loans;

(p) respecting the collection practices of payday lenders, including regulations that restrict or prohibit activities that are not restricted or prohibited under Part XII;

(q) respecting the financial literacy support levy, including

(i) prescribing the amount of the levy or a rate or formula for determining the amount of the levy,

(ii) prescribing the time for payment of the levy, and

(iii) requiring payday lenders to file reports or returns of information that the director considers necessary to determine or verify the amount of the levy payable by them;

9(2)        Subsection 163(2) is replaced with the following:

Scope and application of regulation

163(2)      A regulation under subsection (1)

(a) may be general or particular in its application; and

(b) may establish classes of payday loans, payday lenders or borrowers and may apply differently to different classes.

Regulations about Internet payday loans

163(3)      Without limiting clause (1)(m), a regulation made under that clause may do one or more of the following:

(a) designate another jurisdiction as a reciprocating jurisdiction if, in the opinion of the Lieutenant Governor in Council, it has similar law for the regulation of payday loans;

(b) authorize the minister, on behalf of the government, to enter into an agreement with the government of a reciprocating jurisdiction respecting the application, administration or enforcement of this Part or the law of that jurisdiction in respect of Internet payday loans;

(c) in accordance with any agreement made under clause (b), specify which law applies or does not apply when both this Part and the law of the reciprocating jurisdiction purport to apply to an Internet payday loan;

(d) extend, modify or limit the application of any provision of this Part in relation to an Internet payday loan.

10          Section 164 is replaced with the following:

"Board" defined

164(1)      In this section and sections 164.1 and 164.2, "board" means The Public Utilities Board.

Review within 3 years

164(2)      Within three years after the first regulation under clause 163(1)(f.1) (maximum cost of credit) comes into force, the board must commence a review of

(a) the meaning of "cost of credit" for the purposes of this Part;

(b) the maximum cost of credit — or any rate, tariff or formula for determining the maximum cost of credit — that may be charged, required or accepted in respect of a payday loan; and

(c) the maximum amounts, or the rates, tariffs or formulas for determining the maximum amounts, that may be charged, required or accepted

(i) in respect of any component of the cost of credit for a payday loan,

(ii) in respect of the extension or renewal of a payday loan,

(iii) in respect of a replacement loan, or

(iv) in respect of a default by the borrower under a payday loan.

Public consultation

164(3)      In the course of the review, the board must provide an opportunity for public consultation in order to obtain advice and recommendations from experts and persons or groups of persons affected by this Part.

Form of consultation

164(4)      The board may decide how to conduct the public consultation, which may include a public hearing, and may establish its own procedures for the consultation.

Rules of evidence

164(5)      If the board holds a hearing, it is not bound by the technical rules of legal evidence, but the board may allow or require evidence to be provided, and witnesses to be examined, under oath or affirmation.

Participant's costs

164(6)      On the application of a participant in the consultation, the board may require some or all of the participant's costs relating to the consultation to be reimbursed by the government.

Advisers to the board

164(7)      The board may appoint one or more experts, or persons having special knowledge about payday lending, to assist the board in the review.

Report to minister

164(8)      Within six months after commencing the review, or within any longer period allowed by the minister, the board must prepare and submit its report to the minister.  The report

(a) must include

(i) a description of the board's consultation and the results of the consultation, and

(ii) the board's recommendations about the matters reviewed under subsection (2); and

(b) may include any other recommendations about the regulation of payday lenders or payday loans.

Board to publish its report

164(9)      After submitting the report to the minister, the board must publish it on the Internet.

Board's costs

164(10)     The board's costs of the review and the report, including the cost of any assistance obtained under subsection (7), and any costs payable by the government under subsection (6) are payable out of the Consolidated Fund with money authorized by an Act of the Legislature to be so paid and applied.

Minister may seek advice

164.1(1)    The minister may at any time seek the advice and recommendations of the board with respect to any matter relating to the regulation of payday lenders or payday loans.

Further reviews

164.1(2)    Within three years after the board completes its latest review and report to the minister under section 164, and every third year after that, the minister must review the effectiveness of this Part and the regulations under this Part and decide

(a) whether to require a further review by the board in accordance with section 164; and

(b) whether to recommend changes to this Part or the regulations under this Part.

Limited application of Public Utilities Board Act

164.2        The Public Utilities Board Act, other than sections 20 and 23, does not apply in respect of any review conducted by the board, or any advice or recommendations given by the board under this Part.

PART 2

AMENDMENTS TO THE CONSUMER PROTECTION

AMENDMENT ACT (PAYDAY LOANS)

Unproclaimed provisions amended

11          This Part amends The Consumer Protection Amendment Act (Payday Loans), S.M. 2006, c. 31, (the "amending Act").

12          Section 138, as enacted by section 3 of the amending Act, is repealed.

13(1)       Subsection 147(1), as enacted by section 3 of the amending Act, is amended in the part after clause (b) by striking out "by or under an order of The Public Utilities Board" and substituting "by regulation".

13(2)       Subsection 147(2), as enacted by section 3 of the amending Act, is amended in the part of clause (b) after subclause (ii) by adding ", including any amount paid or consideration given to a person other than the payday lender" after "payday loan".

14(1)       Subsection 152(1), as enacted by section 3 of the amending Act, is amended by striking out "by or under an order of The Public Utilities Board" and substituting "by regulation".

14(2)       Subsection 152(2), as enacted by section 3 of the amending Act, is amended in the part of clause (b) after subclause (ii) by adding ", including any amount paid or consideration given to a person other than the payday lender" after "replacement loan".

15          Subsection 153(1), as enacted by section 3 of the amending Act, is amended by striking out "by or under an order of The Public Utilities Board" and substituting "by regulation".

16          Subsection 154(2), as enacted by section 3 of the amending Act, is amended in the part of clause (b) after subclause (ii) by adding ", including any amount paid or consideration given to a person other than the payday lender" after "new loan".

17          Section 156, as enacted by section 3 of the amending Act, is amended in the part before clause (a) by striking out "is licensed to offer, arrange or provide" and substituting "offers, arranges or provides".

PART 3

RESCISSION OF ORDER AND

COMING INTO FORCE

Public Utilities Board Order rescinded

18          Public Utilities Board Order 39/08, as varied by Public Utilities Board Order 89/08, is hereby rescinded.

Coming into force

19(1)       Subject to subsections (2) and (3), this Act comes into force on the day it receives royal assent.

Coming into force:  sections 5 and 7

19(2)       Sections 5 and 7 come into force on September 1, 2009, or 60 days after the day this Act receives royal assent, whichever is later.

Coming into force:  section 6 and part of section 8

19(3)       The following provisions come into force on a day to be fixed by proclamation:

(a) section 6;

(b) section 8 insofar as it enacts sections 161.6 and 161.7.

Explanatory Note

This Bill amends provisions of The Consumer Protection Act relating to payday loans, including some provisions that were enacted in 2006 and are not yet in force.

In 2008, the Public Utilities Board held hearings about the cost of credit under payday loans, and issued an order setting formulas for determining the maximum cost of credit for a payday loan.  That order is under appeal.

Under this Bill, the Public Utilities Board order is rescinded, and the Lieutenant Governor in Council is empowered to make regulations governing the maximum cost of credit for payday loans.  The Public Utilities Board will review these regulations within three years after they come into force, will conduct public consultations in the course of that review, and will make recommendations to the minister.

The Bill prohibits a payday lender from making a loan for more than a specified percentage of a borrower's net pay.  It also prohibits lenders from discounting loans and restricts "tied selling".

The Bill strengthens the government's ability to regulate the activities of payday lenders and to enforce payday loan provisions of the Act and the regulations.  It also enables the regulation of Internet payday loans.

It also establishes the Manitoba Payday Borrowers' Financial Literacy Fund in order to fund programs for improving the financial literacy of borrowers.  Payday lenders will be required to contribute to the fund in accordance with the regulations.