1. 1. What are high-cost credit products? Are there different types?
The new legislation designates each of the following as a type of high-cost credit product:
Loans of money which have an annual interest rate exceeding 32%;
Loans of money which have a principal amount under $5000, a term of less than two years and which require the payment of interest and any high-cost credit fees and are not secured by a pledge of personal property;
Loans of money which are secured by personal property where the security interest is registered under The Personal Property Security Act, require the payment of any high-cost credit fees, and the funds advanced by the loan were not used to purchase the secured property.
Lines of credit which have an annual interest rate that exceeds 32%;
Lines of credit which do not exceed a credit limit of $5000, have specific repayment terms, require the payment of any high-cost credit fees, and are not secured by a pledge of personal property; and
Lines of credit which are secured by a pledge of personal property where that security interest is registered under The Personal Property Security Act, require the payment of any high-cost credit fees and the funds advanced by the loan are not used to purchase the secured property.
2.Are there any credit products not covered by the legislation?
The proposed legislation does not apply to loans issued by banks or credit unions. Mortgages on real property, credit cards and margin loans are also exempt from the new rules.
Lenders who offer, arrange or provide high-cost credit products must comply with the proposed regulation. The new rules do not apply to those lenders who are otherwise regulated (e.g., licensed payday lenders, banks and credit unions).
The legislation also does not apply to non-profit organizations.
4. What is the fee for a high-cost credit grantor licence?
High-cost credit grantors must be licensed with the Consumer Protection Office in order to offer, arrange or provide high-cost credit products. The annual fee for licensing will be $5,500. A company that wishes to offer, arrange or provide high-cost credit products at more than one location must apply for a separate licence for each location.
5. What changes are being made to the Manitoba Payday Borrowers'
Literacy Fund?
The existing Manitoba Payday Borrowers' Financial Literacy Fund is continued as the Manitoba Borrowers’ Financial Literacy Fund. It will be funded by high-cost credit grantors as well as payday lenders.
6. Will high-cost credit lenders be required to contribute to the Manitoba
Borrowers' Financial Literacy Fund?
A high-cost credit grantor must pay an annual financial literacy support levy of $500.00 to the Manitoba Borrowers' Financial Literacy Fund for the purpose of funding programs and activities designed to improve the financial literacy of borrowers and potential borrowers.
7. What are some of the new rules that will apply to lenders who offer high-cost credit products?
High-cost credit lenders must:
be licensed in order to offer, arrange or provide a high-cost credit products;
post signage, visible to a borrower upon entering the location, disclosing information about the high-cost credit products being offered in each licensed location; and
prior to a borrower entering into a high-cost credit agreement, provide borrowers with an information disclosure document that sets out important details including, but not limited to:
the type of high-cost credit product
APR
interest rate
total cost of credit
any fees or charge or penalty that may be payable by the borrower
The borrower’s right to cancel the high-cost credit agreement within 48 hours
The applicant must also provide a detailed description of each proposed high-cost credit product and a sample completed high-cost credit agreement for each so the Consumer Protection Office can ensure that none of the products offered exceed the criminal interest rate of 60% per annum.
8. Will licensed high-cost credit grantors be required to post signs about their products in each location?
Yes. Signs must be prominently posted at each location (visible to a borrower upon entering the location) that high-cost credit products are offered, arranged or provided. They must:
Clearly state this a product is a high-cost credit product
Separately list each cost component of the high-cost credit product, including:
interest rate
total cost of credit
each fee, charge, penalty or other amount that may be charged
9. Will the proposed legislation apply to high-cost credit products offered over the Internet?
Yes. Internet lenders will be required to be licensed and must comply with the same disclosure requirements and cancellation rights as those who offer, arrange or provide high-cost credit products from brick and mortar locations.
The website or mobile application must be designed in a manner that indicates in a clear, understandable and prominent manner that the borrower is entering into an agreement, and the agreement must be made accessible to the prospective borrower.
A borrower may cancel a high-cost credit agreement within 48 hours – excluding Sundays and other holidays – after entering into the agreement. Or at anytime if the borrower was not notified by the lender of his or her right to cancel within 48 hours, of if the lender did not properly disclose information to the borrower.
11. Can borrowers prepay their loans in full or make partial prepayments without being charged a penalty by a high-cost credit grantor?
High-cost credit grantors are prohibited from charging a fee, charge, penalty or other amount when a borrower makes a makes a loan prepayment in full or in part under a high-cost credit agreement.
12. What are the penalties for non-compliance under The Consumer Protection
Act?
Businesses who fail to comply with the new legislation will be subject to administrative penalties ranging from $1,000 to $5000 for individuals and $5,000 to $20,000 for corporations.
They may also be subject to penalties that can range from fines of up to $300,000, imprisonment for a term of not more than three years, or both.
13. Who should consumers contact if they have questions regarding high-cost
credit products or high-cost credit grantors?
Consumers who have questions about high-cost credit products or high-cost credit grantors should contact the Consumer Protection Office via telephone at 204-945-3800 or 1-800-782-0067 (toll-free within Manitoba) or by email at consumers@gov.mb.ca.
