Canada: Proposed Modernization Of Ontario's Consumer Protection Act
Financial Services Bulletin

On February 6, 2023, the Ministry of Public and Business Service Delivery (the "Ministry") released a consultation paper titled "Modernizing Consumer Protection in Ontario" (the "Paper"), which seeks public feedback on proposed amendments to Ontario's Consumer Protection Act (the "Act"). This consultation follows the Government of Ontario's 2019 announcement of its intention to undergo the first comprehensive review of the Act in 15 years, which is intended to strengthen protections for consumers and adapt to marketplace modernization. The Paper is a continuation of the review process, which commenced with a consultation paper released in 2020. The Paper expands on proposals from the previous consultation, some of which have been updated to reflect feedback received, and also introduces new proposals. Highlights from the Paper are summarized below.

Continued Proposals

Consolidating Contract Disclosure Rules

The current Act has prescribed requirements that apply to different types of contracts and for specific sectors. In an effort to address confusion that these requirements may create among businesses and consumers, the Ministry proposes to implement a single set of core rules. The core rules would apply to most consumer contracts, for example, direct, remote, internet, future performance, and credit repair service contracts. Additional rules would be considered for certain contracts (timeshare, direct sales, etc.) as needed.

The Ministry also proposes broad provisions that would require businesses to disclose specified information before a consumer agrees to a contract. While similar rules currently exist for each contract category, this streamlined approach is intended to be easier for consumers and businesses to understand.

Contract Amendment Rules

The Act currently permits consumer contracts to be amended where certain conditions are met. To better protect consumers against unilateral changes, the Ministry proposes to require explicit consent to contract amendments and continuations to most contracts, with some exceptions. Amendments may be made by notice: (i) where a supplier does not reduce its obligations or increase a consumer's obligations; (ii) when an amendment is required to comply with a new law and notice of such change is given to the consumer; and (iii) for indefinite term contracts that allow consumers to cancel at any time without termination costs other than contract-end charges permitted under the Act. It is proposed that notice amendments would need to be provided to the consumer at least 30 and not more than 90 days before the amendment takes effect.

Addressing Unfair Practices

To strengthen protections for consumers from unfair practices, the Ministry proposes to list (on a non-exhaustive basis) examples of prohibited unconscionable conduct and examples of prohibited false, deceptive or misleading representations. This is in contrast to the current Act where with respect to unconscionable representations, it is to be considered whether the person knows or ought to have known. The Paper goes on to provide illustrative language to this effect, including examples of what would be considered to be an unconscionable act. Where an unfair practice occurs (whether the unfair practice happens before, during or after the contract was entered into), the Ministry is proposing that consumers will have a right to rescind the contract or seek recovery within one year from the date the contract is entered into, or one year after the unfair practice occurs, whichever is later. Under the current Act, the consumer may only rescind in the period that is within one year from the date the contract is entered into.

Consumer Rights & Prohibited Contract Terms

Although a consumer's substantive and procedural rights under the Act cannot be waived, consumers may not be aware of these protections and may thus be mislead by vague contractual terms. The Ministry proposes to clearly prohibit businesses from including contractual terms that appear to waive important consumer rights or that infringe on consumers' rights to make fair public reviews or comments. Under the proposed reforms, any contract that contains terms and/or acknowledgements from a prohibited list would be void and could be cancelled by the consumer for one year after it is entered into. The Ministry also proposes to ban contractual limits on monetary liability where there has been a breach of implied warranties and conditions.

Refusing to Provide Statutory Refunds

In order to deter businesses from withholding consumers' refunds that they are entitled to under the Act, the Ministry proposes to introduce a provision providing that, if the consumer is successful in bringing a legal action to obtain a refund, they could recover three times the refund amount (in addition to any damages a court may award).

Compliance Orders

The Ministry is proposing to extend the Director's order-making power to include any business that facilitates another business' contravention of the Act, which under the current Act, is limited to compliance orders only being issued to businesses that contravene the Act, not intermediaries. For example, this would prevent companies used for billing services from charging fees or other amounts contrary to fair practices.

Revised and New Proposals

Price Escalation Clauses

The Act currently allows for price escalation where charges paid by consumers can increase over the length of the contract, meaning that charges may be increased annually without additional notice to the consumer. In the previous consultation paper, the ministry considered "allow(ing) price changes under contracts only if the consumer explicitly consents to them as amendments to the contract (in writing if the initial contract needed written consent) or if the contract also gives the consumer a right to cancel cost-free at any time." After considering the feedback and the complexity of the issue, the Ministry is contemplating addressing price escalation amendments at a later stage of the process (i.e., through regulations).

Delivering Required Information to Consumers

The Ministry proposes to require that necessary disclosures be provided or delivered in a way that is likely to come to a consumer's attention, which is intended to improve their ability to retain the disclosed information.

Exiting Subscription-Based Contracts

The Ministry is considering how to better protect consumers from contracts that cannot be exited in the same way that they are entered into, such as, for example, subscriptions or memberships and where the channels to exit a contract are more limited than those available to enter into a contract.

Sector-Specific Protections

Contract-Breaking Services

The Ministry proposes to prohibit advance payments for services that undertake to help consumers break or exit contracts and would only permit payment once the consumer has received, at minimum, the outcome specified in the contract (for example, the promised refunded amount or savings). The Ministry also proposes that consumers have a 10-day cooling-off period after entering into such a contract during which they may cancel such contract.

Timeshare Owners

To prevent consumers from being locked indefinitely into timeshare arrangements, the Ministry proposes to provide timeshare owners who have held their interest for at least 10 years with the right to exit the timeshare upon giving notice. This right would apply to both new and existing timeshares. Further, it is proposed that the cost to exit a timeshare be capped at a maximum equal to one-and-a-half times its annual fees.

Long-Term Leases

The Ministry proposes to define a category of lease where the total amount payable under the lease exceeds 90% of the leased good's retail value (a "purchase-cost-plus lease"), and to prescribe additional rules that would apply to such leases, including: (i) allowing for a cooling-off period permitting consumers to, for any reason, cancel the lease within 10 days; (ii) requiring new, prescribed disclosure; and (iii) limiting termination costs if a consumer chooses to end the contract early.

Notices of Security Interests

Finally, the Ministry proposes to clearly identify obligations for businesses to discharge notices of security interests ("NOSIs"), which are registered by businesses in the Land Registry System against title to real property when a contract is terminated, cancelled or rescinded. More specifically, if a consumer rescinds or cancels a contract in accordance with the Act, or if a consumer terminates a purchase-cost-plus lease, the supplier is required to discharge the NOSI within 15 days of termination, cancellation or recission. The Ministry is also proposing to have an alternative process where the NOSI is not discharged, whereby the consumer could seek a compliance order from the Director ordering the business to discharge the NOSI, or failing that, a process by which the Director could provide the consumer with a document with which the discharge could be registered. This is in contrast to the current process whereby the consumer is required to seek a court order.

There are several other issues with respect to NOSIs and the Ministry is proposing to include regulation making authority with respect to NOSIs.

Next Steps

Feedback on the proposed changes can be provided to consumerpolicy@ontario.ca by March 17, 2023.*

*The authors gratefully acknowledge the contribution of Brittany Vanword, Articling Student.

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