Lines of credit: know your rights

From: Financial Consumer Agency of Canada

Your express consent for a line of credit

Federally regulated financial institutions can only provide you with a line of credit if they have your express consent. If you give verbal consent, they must provide you with confirmation of your consent, in writing, without delay.

Banks must also obtain your express consent before increasing the limit on your line of credit.

Learn more about giving express consent for financial products and services.

Your right to information about lines of credit

Federally regulated financial institutions must provide you with information about your line of credit. The information must be disclosed in a manner, and using language, that is clear, simple and not misleading.

Before you sign a credit agreement, take the time to read and understand the terms and conditions. Ask questions if anything is unclear or if you’re not sure about what you’re signing.

Information when you get your line of credit

Federally regulated financial institutions that issue a line of credit must disclose certain information.

They must provide this information in a disclosure statement that is:

  • part of the application
  • part of the credit agreement, or
  • set out in a separate document

They must also provide certain information in an information box.

It can be at the beginning of your credit agreement or in a separate document you receive with it. If you’re dealing with a bank, they must present it in a single prominently displayed information box.

This includes information such as:

  • the initial credit limit if they know it at the time of disclosure
  • the annual interest rate, or, if it’s a variable rate, a brief description of the method for calculating it
  • the date when they start charging interest, and information concerning the interest-free grace period, if any
  • the amount of the minimum payment required in each payment period and a brief description of how they calculate it
  • the foreign currency conversion rate, how it’s determined and when it applies
  • any non-interest fees charged on an annual basis
  • any other fees they may charge and the dates they apply

See an example of an information box in a line of credit agreement.

Your credit agreement or disclosure statement must also include:

  • each period for which they’ll provide an account statement
  • the description of any asset (what you own) you might have provided as security for the line of credit
  • information about any related optional product or service that you accept. This includes the charges for each optional service and how you may cancel the service. This applies if they didn’t disclose the information in a separate statement before providing the optional service
  • a telephone number to get information about the account during regular business hours. The number must be:
    • local
    • toll-free, or
    • with a prominent indication that they accept collect calls

Your federally regulated financial institution may not know the initial credit limit when they provide the initial disclosure statement. In that case, they must disclose it in:

  • the first account statement you receive, or
  • a separate statement that you receive before or at the same time you receive your first account statement

Information in your line of credit statement

Federally regulated financial institutions must give you, at least once a month, another disclosure statement that includes:

  • the period covered and the opening and closing unpaid balances in the period
  • a detailed account statement that discloses:
    • each amount they credited or charged, including interest
    • the dates when they posted these amounts to the account
  • the total payments, the total credit advances and the interest and non-interest charges
  • the annual interest rate that applied on each day in the period. It must also include the total interest charged under those rates
  • the credit limit and the amount of credit available at the end of the period
  • the minimum payment and its due date
  • your rights and obligations regarding any billing error that may appear in the account statement
  • a telephone number to get information about the account during regular business hours. The number must be:
    • local
    • toll-free, or
    • with a prominent indication that they accept collect calls

Exceptions

You might not get the additional disclosure statement if there haven’t been any advances or payments, and:

  • there’s no unpaid balance at the end of the period, or
  • you’ve defaulted on your payments, and they suspended or cancelled your agreement and demanded payment of the unpaid balance. They will send you a notice about this

You might only get the additional statement every 3 months if:

  • there haven’t been any advances or payments
  • the unpaid balance is less than $10
  • no fee or interest is being charged or accumulated

Display of information about credit agreements

Banks must disclose required information about credit agreements by:

  • making it available:
    • at each of their branches in Canada and points of service
    • on each of their websites through which they offer products or services in Canada
  • providing or sending it to you, upon request

Information when advertising lines of credit

Federally regulated financial institutions may promote a line of credit by advertising:

  • the annual interest rate
  • the amount of any payment, or
  • any non-interest charge in relation to the loan

If they do, they must disclose the annual interest rate and all non-interest charges and present it at least as prominently as the other information.

Any advertisement in Canada that a bank makes must be accurate, clear and not misleading.

Learn more about lines of credit.

Your right to receive electronic alerts

Your bank must send you an electronic alert in 2 situations:

  • when the balance of your chequing or savings account falls below $100 or an amount you’ve set
  • when the credit available on your credit card or personal line of credit falls below $100 or an amount you’ve set

Your bank will automatically set the electronic alerts to $100. You may ask your bank to set them to a different amount.

The alerts must tell you:

  • that the balance of your account has fallen below the amount described above
  • that the credit available on your credit card or line of credit has fallen below the amount described above
  • what charges or penalties may apply to current or future transactions
  • what steps to take to avoid charges or penalties and the deadline for doing this

Your bank will send these alerts to you automatically. You don’t have to sign up, but you may opt out at any time by informing your bank in writing. This could be done by email.

The alerts don’t apply to accounts opened for business purposes.

Your bank will send the alerts via push notifications, text messages or emails. It will depend on your contact information with the bank, the preferences you’ve set-up and the systems your bank has in place.

You won’t receive the new alerts if you didn’t provide your bank with the necessary contact information. For example, you didn’t provide your mobile phone number or email address.

For more information on electronic alerts, contact your bank or visit their website.

Other financial institutions may choose to offer electronic alerts. Contact yours to find out if they offer them.

When these rights apply to you

These rights apply when you’re dealing with a federally regulated financial institution like a bank or federal credit union.

Find out if your financial institution is federally regulated.

Learn more about how your banking rights are protected.

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