Modernizing Ontario’s Consumer Protection Act: Consultation Paper Released

On February 6, 2023, the Ontario Ministry of Public and Business Service Delivery (Ministry) released a consultation paper entitled Modernizing Consumer Protection in Ontario: Strengthening the Consumer Protection Act, which proposes substantive changes to the province’s Consumer Protection Act, 2002 (CPA). If adopted, the proposed changes to the CPA will impact most businesses providing goods and services to consumers in Ontario.

The revisions are designed to both increase protections for consumers and reduce burdens on businesses operating in Ontario. The substantiative proposals fall into two categories: broad consumer protection and empowerment, as well as sector-specific protections. This bulletin summarizes some of the important provisions concerning businesses.

The Ministry is accepting feedback on the proposed changes until March 17, 2023. The public can provide feedback by email here.

BACKGROUND

In 2019, the Government of Ontario announced its Rebuilding Consumer Confidence strategy, the first major review of the CPA in 15 years. The government published an initial consultation paper on the strategy in 2020 (see our bulletin Ontario Seeks Input on Proposed Changes to Consumer Protection Laws). Consultations concluded in February 2021.

Notably, this new consultation paper does not reference the High-Cost Credit Consultation Paper published in January 2021, nor does it explicitly address credit agreements or gift cards.

BROAD CONSUMER PROTECTION

Under the proposed changes, only one set of core rules would govern consumer contracts, regardless of the type of contract, the sector and how the business operates — whether online, by phone or in person.

All contract disclosure provisions would be combined into a single set of core rules that would apply to most consumer contracts, including direct, remote, internet, future performance, timeshare, personal development service, loan brokering, credit repair services and certain lease agreements.

Businesses would also be required to disclose the key terms of the contract. A business would need to provide the consumer with an express opportunity to accept or decline a contract before entering into it. Finally, it would need to deliver a copy of the contract to the consumer.

The new rules would require explicit consent for contract amendments and contract continuations, with certain exceptions. Exceptions would include amendments that do not increase the obligations of the consumer or decrease the obligations of a business. Parties would also be able to amend the contract by notice if an amendment was required for compliance with a new law.

For indefinite-term contracts, amendment by notice — rather than by explicit consent — would be permitted if the business meets certain conditions. Similar provisions would define contract continuation rules. Any rules governing the transition of contract amendment rules would be established following consultation on regulations.

The Ministry proposes to update and expand the existing examples of unfair practices, which include false, misleading or deceptive representations, as well as unconscionable conduct. The new examples, which remain non-exhaustive, aim to address practices that have emerged since the CPA came into effect in 2002, including in areas like door-to-door sales. New examples of unconscionable conduct that may be added to the CPA include taking advantage of a consumer’s inability to understand a contract’s language, price gouging and using undue pressure on a consumer to enter into, amend or terminate a contract.

The proposed changes could also expand the timeframe under which consumers can seek to rescind a contract for unfair practices. The current CPA allows consumers to rescind a contract when they are subject to an unfair practice for the first year after they enter the contract. The Ministry is now proposing that consumers could rescind a contract for one year after entering the contract or one year after an unfair practice takes place, whichever is later. The courts would also retain the ability to disregard the one-year time limit, depending on the circumstances of the case.

The Ministry is proposing new measures to deter businesses from failing to provide consumers with the refunds they are entitled to under the CPA. Customers who take legal action to obtain a refund and are successful will have the right to recover three times the amount of the refund that the business did not provide. If adopted, this proposal will result in increased damages for businesses who are subject to successful litigation for failing to comply with their CPA obligation to provide a refund.

Under the new proposals, the Ministry wishes to prohibit businesses from using contract terms that dissuade consumers from exercising their statutory rights under the CPA. The proposed reforms include:

• setting out a list of prohibited terms and acknowledgements in consumer contracts;

• voiding such contractual terms;

• allowing customers the right to cancel any contract up to one year after entry if the contract contains prohibited terms or acknowledgements;

• prohibiting clauses that prevent consumers from sharing fair public reviews;

• prohibiting clauses that limit businesses’ liability for product failures; and

• prohibiting businesses from misleading consumers about their statutory rights.

Under the new proposals, a business intermediary that facilitates the misconduct of a person under the CPA could face compliance orders issued by the Ministry. This could open third-party businesses to increased risk of non-compliance with the CPA without being subject to the transaction in question.

The Ministry’s previous consultation paper considered allowing price escalation clauses only where the consumer explicitly consents to the increase as an amendment to the agreement, and in writing (if the initial contract requires written consent), or where the contract provides the consumer with a cost-free right to cancel at any time. The Ministry is now looking at placing these rules in a regulation rather than a new act.

Any necessary disclosures by businesses required under the CPA will need to be delivered in a form that is likely to come to the consumer’s attention.

The Ministry is examining business practices that make it difficult to unsubscribe from, or terminate, a subscription or a membership-based contract.

SECTOR-SPECIFIC PROTECTIONS

The new proposals include a prohibition on advance payments to services that promise to help consumers exit or break contracts. Payment would only be allowed after the consumer receives at least the outcome specified in the contract.

The consultation paper proposes to define a category of lease — “purchase-cost plus lease” — where the total amount payable under the lease exceeds 90% of the estimated retail value of the leased goods. For these types of leases, the new rules propose a cooling-off period, increased disclosure requirements, limits on termination fees and rights to terminate optional services.

The new rules would clearly identify obligations for businesses to discharge NOSIs for consumer goods registered in the Land Registry System when the contract is terminated in accordance with the CPA. Additionally, the proposals include an alternate process to assist a consumer looking to discharge a NOSI when a business fails to do so, allowing the consumer to avoid using the courts.

For more information, please contact:

Alan Fraser                 +1-416-863-3172
Emily Hazlett              +1-416-863-2494

or any other member of our Financial Services Regulatory, Litigation & Dispute Resolution and Consumer Protection groups.