Toronto, May 21, 2009
2009-048
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Delivering on the Government's promise to help consumers of financial products, the Honourable Jim Flaherty, Minister of Finance, today released new proposed regulations aimed at limiting business practices that are not beneficial to consumers and providing clear and timely information to Canadians about credit cards.
"Close to 25 million Canadians have credit cards, and most of them pay their balance in full, which is a great credit to how prudent Canadians are generally," said Minister Flaherty. "Through Canada's Economic Action Plan, we are helping consumers by mandating a 21-day grace period on new purchases made with credit cards during the month, when a full payment is made at the end of that month.
"As for those circumstances when Canadians don't pay off their outstanding balance, we want to ensure they are treated fairly, that interest rates and penalties are clearly shown, and that companies use only appropriate debt collection practices."
The proposed Credit Business Practices Regulations will:
- Mandate an effective minimum 21-day, interest-free grace period on all new credit card purchases when a customer pays the outstanding balance in full.
- Lower interest costs by mandating allocations of payments in favour of the consumer.
- Allow consumers to keep better track of their personal finances by requiring express consent for credit limit increases.
- Limit debt collection practices that financial institutions use in contacting a consumer to collect on a debt.
- Prohibit over-the-limit fees solely arising from holds placed by merchants.
In addition, amendments to the Cost of Borrowing Regulations will:
- Provide clear information in credit contracts and application forms through a summary box that will set out key features, such as interest rates and fees.
- Assist consumers to manage their credit card obligations by providing information on the time it would take to fully repay the balance, if only the minimum payment is made every month.
- Mandate advance disclosure of interest rate increases prior to their taking effect, even if this information had been included in the credit contract.
"Understanding interest rates, fees and increases to monthly payments are key challenges many Canadians face when managing their credit cards," said Casey Cosgrove, Director of the Social and Enterprise Development Innovations' Canadian Centre for Financial Literacy. "The measures announced by the government today will contribute to financial literacy by bringing clearer and more transparent information to consumers."
The proposed regulations would apply to credit cards issued by federally regulated institutions. Some provisions in the regulations would have broader application to other financial products, such as fixed- and variable-rate loans and lines of credit.
"These proposed amendments will ensure Canada remains at the forefront of consumer protection in the financial services sector," said Minister Flaherty.
The regulations will be published in the Canada Gazette on May 23, and the deadline for submissions is June 13. Contact information for forwarding comments is provided with the proposed regulations.
For further information, media may contact:
Chisholm Pothier
Press Secretary
Office of the Minister of Finance
613-996-7861
Jack Aubry
Media Relations
Department of Finance
613-996-8080
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