Canada: Ontario Introduces New Consumer Protection Act, 2023 And Amendments To The Consumer Reporting Act

The Government of Ontario (the "Government") has introduced Bill 142, Better for Consumers, Better for Businesses Act, 2023 (the "Bill") that, if passed, would replace the existing Consumer Protection Act, 2002 ("Existing CPA") with the new Consumer Protection Act, 2023 ("the Proposed CPA") and would also amend the current Consumer Reporting Act. The Bill can be found here.

The introduction of the Proposed CPA follows an extensive three year consultation period in which the Government engaged the public and various stakeholders with regards to proposed amendments to the Existing CPA (see our prior blog post on the Government's most recent Consultation Paper from February 2023 (the "Consultation Paper")).

The goals of the Proposed CPA are to enhance consumer protection, increase and simplify business compliance, increase public confidence in the marketplace, support Ontario's economic growth and adapt consumer protection laws to the increasingly digital-first marketplace.

To achieve its goals, the Proposed CPA includes a number of substantial initiatives – many of which were proposed in the above-mentioned Consultation Paper – that will significantly affect consumer-facing businesses. The Proposed CPA would have retroactive effect and apply to current consumer contracts. Significant elements regarding transitional and other matters are proposed to be dealt with by way of Regulation, which have not yet been released.

The new initiatives of the Proposed CPA include:

Disclosure Requirements

• The Proposed CPA will consolidate and combine current contract disclosure requirements into a single set of "rules respecting various consumer contracts" rather than the prior structure of having different sections and different rules applying to different types of contracts (including those previously defined as direct, remote, internet, future performance, timeshare, personal development service, loan brokering, credit repair services and certain lease agreements).
• The application of the disclosure requirements is to any contract for future performance or delivery, online agreements and those contracts made where the parties are not together, and direct contracts which are negotiated and concluded at consumers' homes. The section includes those agreements which were previously defined, but is expressly not defined as a closed list, and leaves the option for further Regulation to prescribe any types of contracts that expressly come within the disclosure provisions.

Fair Marketplace Rules

• The Proposed CPA creates a new section on "fair marketplace rules", which strengthens existing prohibitions against unfair practices, including prohibitions on:
  • Additional unfair practices, such as price gouging or exploiting consumers' inability to understand contracts;
  • Deceptive or misleading representations, specifically referring to practices that businesses are forbidden to use such as false claims of government oversight and false prize offers;
  • Making statements of opinion, if misleading and which a consumer could rely on to their disadvantage, as they are a form of deceptive representation; and
  • Subjecting any consumer to undue pressure beyond entering into agreements, including prohibition on any pressure relating to amending, continuing, canceling or terminating any consumer contract.
• Importantly, the Proposed CPA clarifies that unfair practices will give rise to consumers' rights and remedies, whether engaged before, or after the consumer contract is entered into, and apply during the entire period of contract performance.
• In the event of an unfair practice, the Proposed CPA grants consumers the right to rescind a contract for one year after entering into the contract or one year after an unfair practice takes place – whichever is later. This change effectively provides an open ongoing right for consumers to rescind in the event they are subject to any unfair practices.

Prohibited Contract Terms

• The Proposed CPA also sets out a list of prohibited contract terms. Of note, suppliers cannot include a term that prevents consumers from publishing a review about the supplier, its goods or services or a term that limits the monetary limit for a breach of warranty under the Sales of Goods Act or any deemed warranty under the Proposed CPA (e.g. services provided to a consumer are deemed to be of reasonable acceptable quality).
• The addition of any prohibited clause in a contract is considered void, and further, a consumer can cancel a contract that includes such terms within one year of entering into the contract with the supplier.

Limitations on Unilateral Amendments

• The Proposed CPA limits instances when a business can make contract amendments, renewals, and extensions unilaterally without consumer consent. Regulations (not yet issued) under the Proposed CPA could also require that automatic renewals be accompanied by a continued cancellation right by the consumer.
• Further, there may be regulations that govern price escalation clauses—specifically, prescribing how suppliers must disclose information regarding potential increases and specifying limits to the price increases.

New Provisions Relating to Certain Leasing Agreements

• The Proposed CPA defines a new category of "purchase-cost-plus lease" agreements, where the total amount payable exceeds 90% of the estimated retail value (defined as the price a lessor usually sells the good at, or, if they do not sell the good in the usual course, a reasonable estimate of the retail price) of the leased goods. The definition will be subject to further Regulation to prescribe the "total amount payable" which will inform the types of contracts and goods that will be caught by the provision.
• There are obligations of disclosure for these types of contracts, and consumers have the right to terminate and buy-out the lease at any time. The allowable cost under the buy-out schedules will be prescribed by Regulation.

Additional Penalties and Consumer Rights

• The Proposed CPA provides consumers with additional statutory rights and the Government with additional enforcement powers to further deter offences, including:
  • Doubling Fines for Illegal Business Activity: The Proposed CPA will double the maximum fines for individuals from $50,000 to $100,000 and for corporations from $250,000 to $500,000.
  • Right of Action in Ontario: Consumers have the legal right to pursue claims in Ontario courts. Accordingly, the Proposed CPA further clarifies that businesses will not be allowed to include terms in a contract that mislead consumers about their right to have disputes adjudicated in an Ontario court. Any purported term of a contract that submits any dispute to arbitration or limits consumers' rights to commence or participate in a class proceeding are void.
  • Enhancing Statutory Refund Rights: Currently, when a consumer is entitled to a refund and has not received that refund within 15 days of the consumer providing notice, the consumer has the right to sue the business. The Proposed CPA will give consumers who have taken their claim to court the right to recover three times the original refund amount they were entitled to.
  • Cooling-off: The Proposed CPA leaves open the potential for further regulation to prescribe types of contracts which may be subject to a cooling-off period, in addition to the types of contracts already identified.
• The Proposed CPA also provides the Director with the power to make orders against any person who is "facilitating" contravention of any requirement under the Act. This could apply to extend to any online platforms and billing services, as the original consultation paper proposed.

Industry-Specific Amendments

Other industry-specific amendments in the Proposed CPA include:

• Prepaid Purchase Cards: The Proposed CPA would replace the term "gift card" with ""prepaid purchase card" and would make it clear that gift cards and other forms of prepaid purchase do not expire – regardless of their form (physical or digital) or the manner in which they were purchased (in store or online).
• Timeshare Contract Exit Rights: The Proposed CPA would allow consumers to exit time share contracts after 25 years, and this will apply for both new and existing timeshare contracts as well as those who may inherit a timeshare contract upon an owner's death.
• Notices of Security Interest ("NOSI"): The Proposed CPA would make clear the circumstances under which a business is obliged to discharge a NOSI. In addition, consumers would be allowed to solicit the assistance of the Ministry of Public and Business Service Delivery to enforce a discharge. The goal of these amendments is to alleviate the burdens consumers may face when discharging a NOSI from their title.
• Subscription and Membership Agreements: The Proposed CPA would simplify the cancellation of subscription and membership agreements.

Amendments to the Consumer Reporting Act

The Bill also includes a number of proposed changes to the Consumer Reporting Act, including:

• Increasing consumer access rights to credit information, including free electronic access to credit scores once a month;
• Granting consumers a statutory right to provide context for some of the information in their credit reports through an explanatory statement;
• Clarifying the specific information that consumer reporting agencies must disclose in consumer reports, removing the requirement for consumer reporting agencies to provide disclosures to consumers in person and amending the circumstances when consumer reporting agencies may charge fees for disclosures to consumers;
• Specifying that the method used to generate a consumer score in response to a consumer request must be similar to the method used in response to a creditor request;
• Granting consumers the right to commence a claim for damages as a result of a contravention of the Consumer Reporting Act or its regulations; and
• Increasing the amounts of the maximum penalties and fines for offences under the Consumer Reporting Act, from $25,000 to $50,000 for individuals and from $100,000 to $250,000 for corporations.

Transition

• The Proposed CPA does not contain any express transition provisions, but leaves numerous issues to be dealt with by way of Regulation. These are not yet proposed, however, the Proposed CPA expressly suggests that any such Regulation may specify that it applies with retroactive effect to consumer contracts and related agreements entered into before the Proposed CPA comes into force.
• This indicates that many of these new provisions are likely to apply retroactively to current contracts, and may require significant efforts by business to review and consider any necessary amendments to current agreements.

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