First of all, it is important to clarify that a loan agreement between a consumer (i.e., an individual who obtains a good or service for personal use) who borrows money from a merchant (i.e., a person who carries on a business professionally with a view to making a profit) is governed by the Consumer Protection Act.
Checks to do before signing a loan agreement
Before signing a money loan contract with a professional lender, it is important to be careful and carry out several checks to ensure the legality of the clauses of the said contract. Unfortunately, all too often, people who are in urgent need of funds are fooled by unscrupulous lenders, abusing their vulnerability.
In particular, a dishonest lender could fail to include certain fees in the calculation of the credit rate, making it appear to be much lower than it actually is. By law, the credit rate is the annual percentage expression of credit charges, which include all the amounts you have to pay in addition to the amount borrowed. The Act sets out a non-exhaustive list of charges that constitute credit charges, including but not limited to interest and administration costs. It is on the basis of the credit rate that the maximum credit charges that can be charged to you are calculated. The credit rate must be the same for the entire term of the contract, unless the contract is a variable rate.
Recently, a private lender, operating under the name Crédimatik, Prêt Instant or Prêt Express 911, was convicted of falsely indicating, in contravention of the law, a credit rate of 29% in several loan agreements, when the rates calculated in reality could exceed 200%. This huge difference between the contracted rate and the actual rate is, of course, due to the fact that the lender had failed to take into account several credit charges in the calculation of the credit rate, which artificially lowered the percentage of this rate. The Consumer Protection Act requires that the actual credit rate, which takes into account all credit charges, be set out in a money loan agreement.
Remedies for high rates
The Criminal Code makes it a crime to have a credit rate in excess of 60%. In addition, the Office de la protection du consommateur considers a credit rate of more than 35% to be abusive.
If the credit rate of your money loan contract is higher than 60%, it is possible to contact the police directly. If it is less than 60% but more than 35%, you could have legal recourse. The Consumer Protection Act provides that the borrower may request, at his or her option, the cancellation of the contract, the cancellation of credit charges or the return of the portion of the credit charges already paid. However, it should be noted that the court will not grant your application if the lender proves that you have not suffered any prejudice as a result of the fact that the credit rate was not set in accordance with the requirements of the law.
The Civil Code of Québec, which also applies to consumer contracts, provides that the unfair term of a consumer contract may be set aside or the resulting obligation (the payment of credit charges) reduced. In particular, a term is unfair if it places the consumer at an excessive and unreasonable disadvantage.
If the lender imposes an illegal credit rate on you, it is possible to file an appeal individually, but also in the form of a class action if other people are in the same situation as you. The class action will thus allow the entire group to obtain justice.
If you are concerned that your rights will not be respected, please do not hesitate to contact us to find out what your options are.
Cancellation Fees