High-Cost Credit Businesses

Overview

Effective June 1, 2024, high-cost credit grantors must be licensed to operate in Newfoundland and Labrador.

Until the new legislation and regulations come into effect, amendments to the Consumer Protection and Business Practices Act (the Act) establishing the framework for licensing and regulation of high-cost credit grantors as well as the new Regulations are available through the links below:

As defined in legislation, a high-cost credit grantor is a person who offers, arranges, provides or facilitates high-cost credit products to or for consumers in Newfoundland and Labrador.

Through credit agreements, including product lease agreements, credit is extended by way of a high-cost credit product where the annual percentage rate (APR) exceeds the prescribed rate as set out in the High-Cost Credit Product Regulations.  That prescribed rate is obtained by increasing the current Bank of Canada interest rate by 22 percent.

High-cost credit lenders are distinct from banks, credit unions and payday lenders. The cost of borrowing may include additional fees and compounding interest.  These financing arrangements are commonly used for lease-to-own home furnishings, renovations, or vehicle purchases.

Fixed Credit Products

Fixed credit is defined in Section 45 of the Act as credit under a credit agreement that is not for open credit.

Fixed credit products may include installment loans, secured loans, rent-to-own agreements, and leases, and are to be primarily used for personal, family, or household uses.

A high-cost fixed credit product is defined in Section 83.12 of the Act as a fixed credit product that has an APR that exceeds the APR prescribed by regulation.

Open Credit Products

Open credit is also defined in Section 45 of the Act as credit under a credit agreement if the credit agreement: (i) anticipates multiple advances that are to be made when requested by the borrower in accordance with the agreement; and (ii) does not establish the total amount to be advanced to the borrower under the agreement although it may impose a credit limit.

Open credit products may include lines of credit, credit cards, or home equity lines of credit, and are to be primarily used for personal, family, or household uses. A high-cost open credit product, as defined in Section 83.12, has an annual interest rate that, calculated in accordance with the Regulations, exceeds the annual interest rate prescribed by regulation.

How to Apply for a High-Cost Credit Licence

To operate a high-cost credit business in Newfoundland and Labrador, a licence application must be made to the Director of Consumer Protection and Business Practices with the Department of Digital Government and Service NL.

An application for a High-Cost Credit Business Licence can be completed and submitted online through the Consumer Services Licence Application Portal.

The High-Cost Credit Business Application Fee Schedule is set out below:

  • High-Cost Credit Business Application………………………………….………………TBA
  • High-Cost Credit Branch Application……………………………………….……………TBA

Along with the completed application, an applicant must submit the following documentation for approval:

  • The standard high-cost credit agreement for each product offered – see the High-Cost Credit Agreement Checklist for assistance,
  • A sample high-cost credit agreement for $20,000.00 for 72 months, showing all fees and charges,
  • The rate structure for a high-cost product, including interest and permissible fees and charges,
  • The cancellation notice form,
  • The receipt for a high-cost credit product cancellation,
  • The receipt for payments made by a borrower,
  • The receipt for the return of a cash card,
  • A copy of the signs which a high-cost credit grantor must prominently display at each location where the grantor offers, arranges, or provides high-cost credit products, and
  • Surety Bond, as required.

Inquiries may be directed to:

Consumer and Financial Services Division
149 Smallwood Drive, Mount Pearl
P.O. Box 8700, St. John’s, NL A1B 4J6
Telephone: (709) 729-2600
Facsimile: (709) 729-6998
Email: appsconsumeraffairs@gov.nl.ca

Licence Holder Responsibilities

Licence holders are required to display their licence at each location for which a licence is issued, and, in accordance with Section 10 of the High-Cost Credit Product Regulations, licence holders shall prominently display signs at these locations which:

  • State that the offered product is a high-cost credit product,
  • List each and every cost payable to the high-cost credit lender, including the APR and any associated fees,
  • State, for each and every cost payable, the amount owing and the date it is due, and
  • Clearly state that the borrower has the right to cancel the agreement in accordance with Section 83.16 of the Consumer Protection and Business Practices Act.

Where the licence holder engages in high-cost credit business by means of the Internet, the information listed above shall be prominently displayed on the introductory page of the business’s webpage.  Where the high-cost credit business is conducted by way of telephone, this information shall be conveyed verbally to the borrower before the borrower enters into a high-cost credit agreement.

Licence holders are required to notify the Director of Consumer Protection and Business Practices of any:

  • Change in the address for the service of documents, or a change in the partners, in the case of a partnership, or the directors, in the case of a corporation,
  • Change in the addresses of the location to which the licence applies,
  • Change in the high-cost credit agreements or the rate structures,
  • Amendments to any documents previously submitted to the Director, and
  • Intention to engage in business at an additional location, in which case a new High-Cost Credit Branch Application must be submitted.

Compliance

Pursuant to Section 93 of the Consumer Protection and Business Practices Act, the holder of a High-Cost Credit Business licence is required to file annual returns with the Director. The required content of the annual report is set out in the High-Cost Credit Business Reporting Requirements.

High-cost credit lenders should familiarize themselves with the following legislation and regulations governing the general practice of businesses in Newfoundland and Labrador, and in particular, the practice of high-cost credit businesses:

Of particular significance, high-cost credit lenders should be aware of the following specific sections:

  • Prohibited practices set out in Section 5 of the High-Cost Credit Product Regulations
  • Creation, protection, and retention of documents and records set out in Sections 7, 8 and 9 of the High-Cost Product Licensing Regulations