Any merchant who enters into a credit contract with you must follow certain rules. If the contract has a high credit rate, the merchant has additional obligations.
What is high-cost credit?
Whether a credit contract is “high-cost” can be determined by taking the Bank of Canada’s Bank Rate and adding 22 percentage points.
A credit contract is high-cost if its credit rate, calculated in accordance with the Consumer Protection Act, is higher than the result obtained.
The Bank Rate to be used in this calculation is the one in effect 2 days after it is announced by the Bank of Canada. This rate is indicated on the Statistics Canada website.
Types of contracts that can be high-cost
Any type of credit contract can be “high-cost” including the following:
- contracts for the loan of money;
- open credit contracts (e.g. credit cards);
- instalment sale contracts;
- contracts with credit other than for instalment sales.
Example of a high-cost credit contract
A used car dealer offers you an instalment sale contract with a credit rate of 25%. The official Bank Rate in effect at this time is 2%. You are therefore offered a high-cost credit contract, as the credit rate is higher than 24% (2 + 22).
Last update : October 23, 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.