Modernizing Consumer Protection Laws in Ontario: the New Consumer Protection Act, 2023

On October 23, 2023, the Ontario government introduced Bill 142, An Act to enact the Consumer Protection Act, 2023, to amend the Consumer Reporting Act and to amend or repeal various other Acts (Bill). If passed by the Ontario legislature, among other changes to other acts, the Bill will introduce a new Consumer Protection Act, 2023 (New CPA), which will repeal and replace in its entirety the current Consumer Protection Act, 2002 (Current CPA) and amend Ontario’s Consumer Reporting Act (CRA). The Bill has passed first reading, but the supporting regulations required to implement changes to the New CPA and CRA amendments are pending. The Bill is significant as Ontario’s consumer protection framework has remained virtually unchanged since the Current CPA took effect in 2005. This Bill is a culmination of three years of public consultations on the matter and follows the provincial government’s consultation paper released in February 2023 (see Blakes Bulletin: Modernizing Ontario’s Consumer Protection Act: Consultation Paper Released). It represents the Ontario government’s attempt to develop a new and modernized Consumer Protection Act, the primary statute that sets the rules for consumer protection in Ontario. If passed, the Bill is intended to strengthen protections and make life easier for consumers and businesses. For Ontario consumers, the Bill is significant because the consumer protection framework impacts many of the most common types of consumer transactions in Ontario. For businesses, the Bill will introduce sweeping changes to the Current CPA and likely affect any business dealings with Ontario consumers.

The Bill addresses a variety of topics and issues set out in the government’s previous consultation papers to accommodate a rapidly evolving consumer marketplace. It also includes amendments that were not signalled in earlier consultations such as, prepaid purchase card contracts, which are referred to as “gift cards” in the Current CPA but, notably, it does not contemplate high-cost credit provisions, which were the subject of an earlier public consultation, nor does it specifically regulate buy now pay later products as a prescribed type of credit contract, despite their continued exponential growth since the start of the pandemic and their increasing scrutiny from critics as potentially “unregulated” consumer products.

The Bill will also amend Ontario’s CRA, allowing consumers to get access to a free electronic copy of their credit report and credit score once a month. Consistent with safeguards in place under the consumer reporting legislation in other provinces and in an effort to protect against and prevent identity theft, the amendments will also allow consumers to place security freezes on their credit information, as well as provide consumers the right to add an explanatory statement to contextualize credit information in their consumer file.

Below are highlights of some of the Bill’s key provisions.

Consumer Protection Provisions

Automatic Contract or Service Renewals

The Bill will void any amendment or continuance of a consumer contract that is not made in accordance with the regulations (yet to be drafted).

In the Ontario Government's 2023 Consultation Paper titled Modernizing Consumer Protection in Ontario (2023 Consumer Consultation), the government stated that the:

…rules for amending contracts need to better protect consumers from unilateral changes, especially in longer-term, subscription-based services. This way, consumers could exit a contract when changes occur, without paying prohibitive termination costs, while also allowing businesses to recover permitted contract-end charges.

To address this concern, the 2023 Consumer Consultation proposed strengthening the regulatory protections for amending or continuing contracts by replacing the existing rules with simpler, clearer provisions. Section 19 of the Bill provides the definitions for a continuation and amendment. Blakes will provide further details on the draft regulations once available.

Streamlined Disclosure Framework

The 2023 Consumer Consultation noted that disclosure requirements that vary with the type of contract (e.g., remote and future performance agreements) can be confusing, particularly when a consumer agreement can be considered more than one type of agreement under the Current CPA. Additionally, disclosure requirements that were viewed as necessary two decades ago no longer reflect the current consumer landscape. This concern was also noted in the government’s earlier December 2020 consultation titled Improving Ontario’s Consumer Protection Act (2020 Consumer Consultation). As the government noted at that time, “…basic rights and obligations should not differ between different ways of shopping…” The new Bill has incorporated these recommendations and included a single set of core rules in Part III of the Bill.

Subject to certain exceptions, these provisions generally apply to the following types of consumer contracts:

• An agreement in respect of which delivery, performance or payment in full is not made when the parties enter into the contract (i.e., a “future performance contract” under the Current CPA).

• An agreement that is entered into when the parties are not present together, including a contract entered into online, currently referred to as a “remote agreement” and an “internet agreement,” respectively.

• Direct, time share, personal development, loan brokering and credit repair contracts, each of which is considered under the Current CPA.

• The newly defined “purchase-cost plus lease” agreement, which is a new category of consumer leases, which are not differentiated from other leases in the Current CPA.

• A “contract breaking” agreement, which is a new consumer contract category, that will apply to agreements for goods and services that are designed to assist a consumer in terminating or reducing their obligations under a consumer contract.

Notably, Part III will not apply to all consumer agreements. Certain types of contracts or provisions are excluded, including prepaid purchase card contracts, credit agreements, contract provisions that relate to the provision of rewards points, consumer contracts for motor vehicle repairs, or other consumer contracts that may be prescribed in the regulations.

Unfair Practices

The Bill introduces new examples of unfair practices and unconscionable acts. Consumers will continue to have the right to rescind a contract for one year after entering that contract if an unfair practice has taken place and have a new right to rescind for up to one year after an unfair practice takes place — whichever is later. Under the Current CPA, section 19 provides that any agreement entered into by a consumer after or while a person has engaged in an unfair practice may be rescinded by the consumer. Subsection 49(3) of the Bill introduces the concept of consumer notice given, “…with the later of one year after entering into the consumer contract and one year after the unfair practice occurs…”

Purchase-Cost-Plus Leases

A purchase-cost-plus lease is described as a lease or rental agreement where the consumer eventually pays more than they would to buy the item outright. The Ontario government notes in its 2020 Consumer Consultation that it has received worrying feedback about the punitive nature of these consumer agreements.

Under the Current CPA, long-term leases and loan agreements are treated differently. While section 76 of the Current CPA allows a borrower to pay the full outstanding balance of their loan at any time without penalty, it does not limit the cost to end a long-term lease, even if the term is for the entire life of the product. As the 2020 Consumer Consultation notes, “This means a consumer who leases a water heater or furnace may face much higher termination costs than a consumer who finances the purchase of the same item.”

The Bill introduces the concept of long-term leases for the rental or leasing of HVAC equipment, water heaters, and other “home comfort equipment.” The proposed legislation provides the consumer with the option to terminate the lease and purchase the equipment in question. The buyout amount cannot exceed the amount to be determined by regulation. A purchase-cost-plus lease is also entitled to cancellation rights as it has also been added to the list of contracts entitled to a cooling-off period under subsection 50(1) of the Bill.

Notices of Security Interest (NOSIs)

Under the Current CPA, when a consumer contract is cancelled, the consumer contract and all related agreements, including guarantees and security-like registered notices, are cancelled as if they never existed. However, the Current CPA imposes no positive obligation on businesses to ensure notices of security interests are discharged. There are also no statutory powers under the Current CPA to address this issue.

In an effort to address consumer complaints and issues related to the harms associated with NOSIs, the Bill introduces positive obligations on businesses with respect to discharging NOSIs. Specifically, under the Bill, where a consumer rescinds or cancels a contract, or terminates a lease, subject to certain exceptions, the supplier must, within 15 days of the recission, cancellation or termination, register a certificate of discharge, to discharge any NOSI that has been registered on title to land under the Personal Property Security Act. The Bill will also provide the Director, designated by the Ministry of Public and Business Services Delivery, the power to assist consumers in discharging a NOSI where a supplier is tardy or fails to do so.

These NOSI changes are the first step of a larger government strategy to address consumer harm and frustration that has resulted over the years from the delay or failure of a business to discharge a NOSI. It should be noted that, separately from the introduction of the Bill, the Ontario government released its Notices of Security Interest Consultation Paper on October 17, 2023 (NOSI Consultation) as part of its stated intention to encourage a fair and competitive economy. As part of the NOSI Consultation, public and industry stakeholders have been asked to provide comments and feedback to identify potential solutions to consumer harms caused by NOSIs. That consultation is open until December 1, 2023.

Timeshares

As part of the government’s stated intention to provide fairer exit options from long-term contracts for Ontario consumers, the Bill will allow a consumer to terminate a timeshare contract on or after the 25-year anniversary of entering into the timeshare contract. The 2020 Consumer Consultation suggested a 10-year period before a consumer could exercise their statutory exit right and a maximum exit fee. The statutory exit right is found in subsection 56(3) of the Bill and it provides that the consumer must also give notice and pay an exit fee — both to be prescribed in more detail by regulation. The explanatory notes to the proposed legislation suggest that the regulations may address the scenario where a consumer dies while being a party to a timeshare contract.

Prepaid Purchase Card Contracts — “Gift cards”

The Bill introduces the term “prepaid purchase card” as a replacement for “gift card,” which is used in the Current CPA. While the non-expiry provisions for prepaid purchase card contracts are not new, the Bill notably incorporates the consumer protection provisions for prepaid purchase cards into the Bill itself. The Current CPA has the requirements located in the general regulation. Under the Bill, the regulations will prescribe detailed information for prepaid purchase card contracts. It will be interesting to see whether more extensive and prescriptive disclosures will be introduced as part of the regulations.  

Right to Review

Online reviews are useful for consumers and businesses alike. The Ontario government has received complaints that some businesses try to control what consumers say about businesses using “anti-disparagement clauses” in the consumer contract. The Current CPA does not address this concern. This illustrates how online commerce has developed in the last two decades and, in particular, since the pandemic. The Bill will prohibit businesses from incorporating contractual terms into a consumer contract that dissuade or prohibit a consumer from providing a review concerning the business in question, effectively prohibiting the anti-disparagement clauses. If passed, under the New CPA, consumers will be able to express their opinions following their interactions with businesses in Ontario, subject to any defamation considerations.

Strengthening Compliance

The Bill also introduces stronger enforcement powers against non-compliant businesses, and increases the maximum fines that courts can impose for offences under the New CPA. Specifically, the proposed changes doubles the maximum monetary penalties for offences, making an individual liable to a fine of C$100,000 and corporations liable to a fine of C$500,000. While the Current CPA does contemplate administrative monetary penalties, these are not yet in force. The new Bill also contains administrative monetary penalty provisions, with a cap of C$50,000.
Under the Bill, where a consumer fails to receive a refund to which it is entitled, and the consumer is successful with its action before the Superior Court of Justice, the consumer may recover up to three times the amount of the refund.

Access to Credit Information

In February 2021, the Ontario government published The Consumer Reporting Act – Proposals Under Consideration for Providing Access to Security Freezes, Credit Scores and Reports (Consumer Reporting Consultation), which was meant to build on unproclaimed amendments found in the Access to Consumer Credit Reports and Elevator Availability Act, 2018 (Unproclaimed Provisions). The amendments in the Unproclaimed Provisions will provide consumers with free electronic consumer reports twice per year and allow a consumer to provide an explanatory statement about information in the consumer’s file.

Schedule 2 of the Bill amends the Consumer Reporting Act and allows consumers to receive free electronic access to their consumer reports and credit scores once a month, as opposed to twice per year. Additionally, consumers will be able to provide a consumer reporting agency an explanatory statement about the information contained in their credit file. The Consumer Protection Consultation suggested a 200-word consumer statement, which the Bill has adopted. The Bill will also provide a consumer with the statutory right to commence an action for damages sustained by the consumer as a result of a person’s contravention of the Consumer Reporting Act. Where a consumer believes that nefarious activity related to their credit report is occurring, the consumer will have the ability to implement a security freeze on credit reports. This is consistent with the credit reporting legislation in other provinces. The Bill also includes amendments that will allow consumers to take legal action against credit reporting agencies to seek damages in circumstances where the credit reporting agency is in breach of the legislation.

Next Steps

The government has announced that it will consider additional measures during the regulation development stage, including making it easier for a consumer to cancel subscriptions and membership agreements. According to the government, the regulations will, “prohibit businesses from creating unnecessary barriers” when consumers wish to cancel subscription or membership-based contracts. As the proposed New CPA is an enabling statute, and it is clear from many of the proposed provisions that additional details will need to be fleshed out in the regulations, it is expected that more detailed substantive and potentially prescriptive provisions will be included in the regulations. Businesses offering products and services to Ontario consumers are encouraged to carefully review the proposed changes, stay apprised of the Bill’s progress, and stay tuned for the release of draft proposed regulations.

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or any member of our Financial Services Regulatory Group.