Before entering into any credit contracts with you, merchants are required to evaluate whether you can reimburse this credit. They are also required to do so before increasing your credit limit (e.g. for a credit card).

A merchant who fails to carry out this evaluation is not allowed to have you pay any credit charges, and is even required to reimburse any you may have already paid.

The law considers that banks and financial services cooperatives fulfill this evaluation obligation. The information that follows therefore concerns you if you do business with a financing company or a company that offers "alternative" financial services.

Information that may be used

Merchants are deemed to have satisfied this obligation where they have taken certain information into consideration in their evaluation. Among other things, this includes your income, monthly expenses incurred for housing, monthly payments required by other credit contracts, etc.

Results of the evaluation

In the case of a "high-cost" credit contract, merchants are required to give you a document that presents the results of their evaluation.

Merchants responsible for the evaluation

This evaluation is the responsibility of the merchant that enters into the credit contract with you. The merchant may also assign the contract to another merchant. If the latter is the merchant that approved the contract, that merchant is responsible for conducting the evaluation.

Example: Merchant A, from whom you are purchasing a swimming pool, offers you financing. The merchant, however, proposes that you finance the purchase through credit company B. In such a case, it is the merchant with company B that must evaluate your ability to reimburse the credit.

Exemption

The merchant is not required to carry out this evaluation in the case of a pawnbroking or repurchase agreement under the following condition: the amount of the loan (net capital), considering the contract entered into and all others entered into within the previous 30 days, is $500 or less.

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Last update : August 25, 2020

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The information contained on this page is presented in simple terms to make it easier to understand. It does not replace the texts of the laws and regulations.