Difference between revisions of "Getting a Credit Card"

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{{REVIEWEDPLS | reviewer = [http://www.leighco.ca/wendy-andersen Wendy Andersen], Digby Leigh & Company, and [http://www.consumerprotectionbc.ca/ Laura Cox], Consumer Protection BC|date= October 2017}} {{Dial-A-Law TOC|expanded = money}}
When you buy “'''on credit'''”, you buy now and pay later. This can range from taking out a loan for a new car to using a credit card to buy groceries. Your rights can differ in important ways depending on how you buy on credit.


{{Dial-A-Law TOC|expanded = credit}}
==Understand your legal rights==
Many people can’t pay cash for consumer goods like a new car or a major appliance. They get a loan or use a credit card so they can buy now and pay later. But if they can’t make their payments, they face legal problems and their credit rating is often affected. People also worry if their credit card is lost or stolen and used by others. This script discusses these issues.


==What does it mean to buy something on credit?==
===Your rights to what you buy can vary===
Say you want to buy a piano, so you agree with the seller to pay for it over two years, with interest. You get the piano immediately, but the seller still owns the piano until you make all the payments. Or say that you want to buy a new car, but the dealer won’t finance it or you want to deal with your own bank. So you apply for a bank loan and sign an agreement where the bank pays the dealer for the car, and you pay the bank back for the cost of the car, plus interest, over a certain number of months. In both cases, you are buying something on credit.
Buying on credit means you get something now in exchange for a promise to pay later. Your rights to the item you buy can vary depending on the terms of the promise.


==When you buy something on credit, you typically sign a “security agreement”==
In some cases, you might not own the item until you finish paying for it. Say you want to buy a piano. You might agree with the seller to pay for it over two years, with interest. You get the piano immediately. But the seller might have you sign an agreement saying the seller still owns the piano until you make all the payments.  
The specific agreement may be called several things, like a “conditional sales agreement” or a “chattel mortgage” or a “lease with an option to purchase”. But the type and name of agreement aren’t important because they all work in a similar way. Basically, the agreement will say that you give the seller or lender a “security interest” in the goods as security for what you still owe—like when you give the bank a mortgage on your house.


The only exception is where you have a true lease, usually relating to a car or a large piece of equipment, where you pay monthly for the right to use it. In this case, you have no ownership rights in the item at all, and under the lease agreement, you would have no right to buy the item at the end of the term, although you do have the right to use the car during the lease term.
In other cases, you might own the item right away, but the seller or lender gets special rights to it. Say you want to buy a new car. You might get a loan from your bank, and agree to pay the loan back (plus interest) over a certain time period. The bank might have you sign an agreement saying if you default on the loan (such as by missing a payment), the bank can take the car to cover what you owe.


==What rights does the seller or lender have under a security agreement?==
===When you buy with a credit card===
Generally speaking, a lender can take back the item secured, sell it and still look to be paid any deficiency. But “consumer goods” are treated differently. Consumer goods are things used or bought for use primarily for personal, family or household purposes. If you default (or stop making payments) on a security agreement for consumer goods, the seller or lender generally has to choose either to seize (take) the goods or sue you for what you owe. The seller can’t do both.
When you buy something with a '''credit card''', you similarly buy now and pay later. But when you buy with a credit card, you own the item right away. And the credit card company can’t take the item if you don’t make a credit card payment.  


==What can the seller or lender do if you’ve paid most of your debt and then default?==
So if you buy that piano (or that new car) with your credit card, you own it right away. You have to pay the purchase price to the credit card company (plus interest if you don’t pay off your purchase with your next payment). But the credit card company can’t take the piano if you fail to make your payments. (They can [[Collecting a Debt (No. 250)|collect the debt]] in other ways, however.) For more on your rights relating to credit cards, see our information on [[Credit Cards (No. 247)|credit cards (no. 247)]].
With consumer goods, after you have paid back two-thirds of the loan, the lender cannot seize the goods. In BC, once a consumer has paid back two-thirds of the total value of a loan (excluding a mortgage), then the lender or creditor is no longer entitled to seize the item without going to court and obtaining a court order.


==What happens if the seller or lender seizes the goods?==
===If you sign a security agreement===
Consider the piano example, where you’ve agreed to pay for the piano over two years. After one year, your employer lays you off and you can’t make the payments. The security agreement lets the seller come to your home and seize the piano. The seller chooses to seize the piano but, by law, cannot sell it until giving you 20 days “notice of disposition” and waiting until the end of the 20 days. Section 59 of BC’s ''[http://bclaws.ca/civix/document/id/complete/statreg/96359_01 Personal Property Security Act]'' lists all the information the seller must give you in the notice.
When you buy something on credit, you typically sign a '''security agreement'''. This agreement may be called various names (such as a “conditional sales agreement” or a “lease with an option to purchase”). But they all work in a similar way. Basically, it will say you give the other party a '''security interest'''. This is a property interest you give them to ensure you pay the money you owe them. The property is called '''collateral'''. The debt becomes a “secured debt” and the other party becomes a “secured creditor”.


In response (and assuming the goods seized are consumer goods), you may bring your account up to date, or “reinstate” the security agreement, by paying, within 20 days, the amount in arrears plus the seller or lender’s reasonable costs of seizure. If you reinstate the security agreement, you get the piano back. You also have the right in any situation to pay the balance of your full debt to get the piano back.
====If you default====
If you default on a secured debt (such as by missing a payment), a secured creditor can take the collateral and sell it. This is also called “seizing” or “repossessing” the collateral. They can also sue you for the amount owing on the debt.


But if you don’t pay the amount due in the seller’s notice within 20 days, the seller can either sell the piano or keep it.
====If the collateral is “consumer goods”====
Under the [http://canlii.ca/t/8495 law in BC], two rules kick in to protect you if the property you put up as collateral is “'''consumer goods'''”. This is property that’s “used or acquired for use primarily for personal, family or household purposes”.  


If the seller chooses to sell the piano, then they owe a duty to you to use commercially reasonable means to get a reasonable price from the sale of the piano. This doesn’t mean they have to advertise in every paper from here to Calgary, but they must use reasonable efforts to try and sell the piano for a fair market price. After the sale, any amount left over after the seller is paid must be returned to you.
For this type of collateral, if you default, the secured creditor can seize the property. Or they can sue you for the amount owing on the debt. But they can’t do both. This is called the “'''seize or sue rule'''”. It means the creditor has to decide whether to seize the collateral or take you to court.  


==Four important points about seizures:==
The “'''two-thirds rule'''” comes into play if you’ve paid back at least two-thirds of what you owe on a secured debt relating to consumer goods. In this case, the secured creditor needs a court order before seizing the collateral. If you’ve paid back less than two-thirds, the creditor can seize the collateral without going to court.  
*If you’ve paid at least two-thirds of the total price, a seller needs a court order before seizing the property.
*Sellers who seize property must give you a “notice of proposal” if they plan to keep it. You then have 15 days to give them a “notice of objection” if you don’t want them to keep the property, and they must then sell it.
*A seller who seizes and sells the property but doesn’t recover the full amount you owe, cannot sue you for the rest of what you owe (if the goods are consumer goods).
*From the sale money, the seller can keep the amount you owe, plus reasonable costs to seize, store and sell the property, but must then return any left-over money to you, or in some cases, to your other creditors.


==What about credit cards—what law protects you?==
===If a secured creditor seizes goods===
BC’s ''[http://bclaws.ca/civix/content/complete/statreg/1944036832/04002/969908263/?xsl=/templates/browse.xsl Business Practices and Consumer Protection Act]'' protects the public in two ways. The Act controls unsolicited credit cards—the ones sent to people who didn’t apply for them—and it also limits the responsibility of people whose cards are lost or stolen.
If a secured creditor seizes collateral under a security agreement, they must follow a procedure set out [https://www.canlii.org/en/bc/laws/stat/rsbc-1996-c-359/latest/rsbc-1996-c-359.html#sec59_smooth under the law].


==You don’t have to accept credit cards you never asked for==
====If the creditor wants to sell the collateral====
If you get this type of card, you don’t have to accept it, and if you don’t, you aren’t responsible for it. However, if you use an unsolicited credit card, you are telling the sender that you’re accepting it, and you’re then responsible for what you buy with it.
The secured creditor must give you at least 20 days’ written notice before selling the collateral. The notice must include the amount required to pay off the debt, as well as the amount in “arrears”. Arrears are payments that were due but have not yet been paid.


==What happens if you lose your credit card or it’s stolen?==
If the collateral was “consumer goods”, the notice must spell out that as long as you pay off the arrears plus the creditor’s expenses of seizing the property, you may '''reinstate''' the security agreement. The creditor must then return the seized property.
The ''[http://bclaws.ca/civix/content/complete/statreg/1944036832/04002/969908263/?xsl=/templates/browse.xsl Business Practices and Consumer Protection Act]'' says that you don’t have to pay for anything bought with your lost or stolen credit card after you tell the card issuer, such as VISA or MasterCard, that it’s lost or stolen. You can tell the issuer by phone or by registered mail. If someone uses your card before you report it lost or stolen, the Act limits your liability to $50—even if your agreement with the credit card issuer says differently. In cases of theft, many card issuers don’t even charge the $50, in the interest of good customer relations.


==What if you let someone use your credit card?==
If you don’t pay the amounts set out in the creditor’s notice, the creditor can proceed to sell the collateral. If they do, they must use commercially reasonable means to get a reasonable price for it. This doesn’t mean they must advertise in every paper from here to Calgary, but they must use reasonable efforts to get a fair market price.  
If you let someone use your card, then later change your mind and say they can’t use it, things are different. For example, say you give your card and personal identification number or PIN to a friend or relative to pay your bill at a bank machine. Later, without your authorization, that person uses your credit card and PIN to get cash advances from a bank machine. You’re responsible for this debt.


==Bank and debit cards are treated differently from credit cards==
After the sale, the creditor must pay you any amount left over after they are fully paid.
Bank and debit cards aren’t covered by the ''[http://bclaws.ca/civix/content/complete/statreg/1944036832/04002/969908263/?xsl=/templates/browse.xsl Business Practices and Consumer Protection Act]''. So you’re not protected by the $50 limit if someone steals your bank or debit card and PIN and uses them to get money from your account.


==What about credit reporting agencies (sometimes called credit bureaus)?==
====If the creditor wants to keep the collateral====
BC has two laws that regulate the use of personal credit information. Both the ''[http://bclaws.ca/civix/content/complete/statreg/1944036832/04002/969908263/?xsl=/templates/browse.xsl Business Practices and Consumer Protection Act]'' and the ''[http://bclaws.ca/civix/document/id/complete/statreg/03063_01 Personal Information Protection Act''] control how credit bureaus handle personal credit information (such as your marital status, approximate income, and assets and debts owing) and also protect your privacy by controlling access to that information.
A creditor who plans to keep collateral they seized must give you written notice of their proposal to do so. You then have 15 days to give them a “notice of objection” if you don’t want them to keep the property. If you do so, the creditor must then sell the collateral, following the rules described above.


==No one can ask for a personal credit report on you without your consent==
==Common questions==
Normally, when you seek credit, you agree that the lender can get your credit report—even if you don’t realize you’re agreeing to this. Application forms for loans, credit cards and jobs usually have small print saying that you authorize any credit bureau to give a credit report on you. But there are situations where your credit information can be released to law enforcement agencies, the courts (by court order) or the director of credit reporting without your apparent consent.


==Two major credit bureaus in Canada: Equifax and Trans Union Canada==
===What happens if I make a late payment?===
Both these credit bureaus collect personal credit information and sell it to banks, department stores, employers and others, and you have the right to know what information they have on you. Usually, both agencies have similar information, so if you want to check your credit rating and history, you probably need to check the records of just one of them. You can call [http://www.consumer.equifax.ca/home/en_ca Equifax] toll-free at 1.800.465.7166. [http://www.transunion.ca/ca/personal/personal_en.page Trans Union Canada]’s toll-free phone number is 1.800.663.9980.
Credit agreements must say what fees and interest charges you will have to pay if you make a late payment or a partial payment. If a creditor accepts a late or partial payment, it doesn’t change your obligations for future payments.
==Get help==


==Some kinds of information can’t be included in a credit report==
===If you’re concerned with the cost of buying on credit===
A credit report can’t show information about:
When you borrow money to buy something, there are laws [https://www.canlii.org/en/bc/laws/stat/sbc-2004-c-2/latest/sbc-2004-c-2.html#sec57_smooth requiring creditors to disclose] all borrowing costs. '''Consumer Protection BC''' oversees these laws.
*a criminal offence (unless you’ve been convicted of it)
:Toll-free: 1-888-564-9963
*a criminal conviction, once six years have passed since the conviction or since your release or parole if you were in prison
:Web: [http://www.consumerprotectionbc.ca/ consumerprotectionbc.ca]
*race, religion, ethnic origin or political affiliation
*a bankruptcy, if it’s been more than six years since the discharge, unless it’s a second bankruptcy
 
==You can correct any inaccurate information in your credit file==
If you think something in your file is wrong, you can send a letter about the error, and the credit reporting agency must take reasonable step to check the information and respond to you within 30 working days. If you’re right, they have to correct it as soon as possible. They also have to send a correction to everyone who received a report on you in the past year. If the agency doesn’t make the correction you asked for, they have to make a note to your file that you asked for the information to be corrected, so anyone who gets a future report will see this note. Also, if there’s anything in your file that you think should be explained, you have the right to place a statement of up to 100 words on the file, to be given to anyone who obtains a future report.
 
==More information==
*See the [http://www.legalaid.bc.ca/publications/pub.php?pub=17 manual Consumer Law] and Credit/Debt Law published by the [http://www.legalaid.bc.ca/ Legal Services Society]. This manual is for paralegals, legal information counsellors, and lawyers with clients who have consumer/debt problems.
*You can also contact [http://www.consumerprotectionbc.ca/ Consumer Protection BC]. Call 1.888.564.9963 toll-free.
 
 
[updated April 2015]
 
 
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===If you’re struggling with debt===
The '''Credit Counselling Society''' is a non-profit society that helps people better manage their money and debt.
:Toll-free: 1-888-527-8999
:Web: [http://www.nomoredebts.org/ nomoredebts.org]


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Revision as of 21:59, 29 March 2019

This information applies to British Columbia, Canada. Last reviewed for legal accuracy by Wendy Andersen, Digby Leigh & Company, and Laura Cox, Consumer Protection BC in October 2017.

When you buy “on credit”, you buy now and pay later. This can range from taking out a loan for a new car to using a credit card to buy groceries. Your rights can differ in important ways depending on how you buy on credit.

Understand your legal rights

Your rights to what you buy can vary

Buying on credit means you get something now in exchange for a promise to pay later. Your rights to the item you buy can vary depending on the terms of the promise.

In some cases, you might not own the item until you finish paying for it. Say you want to buy a piano. You might agree with the seller to pay for it over two years, with interest. You get the piano immediately. But the seller might have you sign an agreement saying the seller still owns the piano until you make all the payments.

In other cases, you might own the item right away, but the seller or lender gets special rights to it. Say you want to buy a new car. You might get a loan from your bank, and agree to pay the loan back (plus interest) over a certain time period. The bank might have you sign an agreement saying if you default on the loan (such as by missing a payment), the bank can take the car to cover what you owe.

When you buy with a credit card

When you buy something with a credit card, you similarly buy now and pay later. But when you buy with a credit card, you own the item right away. And the credit card company can’t take the item if you don’t make a credit card payment.

So if you buy that piano (or that new car) with your credit card, you own it right away. You have to pay the purchase price to the credit card company (plus interest if you don’t pay off your purchase with your next payment). But the credit card company can’t take the piano if you fail to make your payments. (They can collect the debt in other ways, however.) For more on your rights relating to credit cards, see our information on credit cards (no. 247).

If you sign a security agreement

When you buy something on credit, you typically sign a security agreement. This agreement may be called various names (such as a “conditional sales agreement” or a “lease with an option to purchase”). But they all work in a similar way. Basically, it will say you give the other party a security interest. This is a property interest you give them to ensure you pay the money you owe them. The property is called collateral. The debt becomes a “secured debt” and the other party becomes a “secured creditor”.

If you default

If you default on a secured debt (such as by missing a payment), a secured creditor can take the collateral and sell it. This is also called “seizing” or “repossessing” the collateral. They can also sue you for the amount owing on the debt.

If the collateral is “consumer goods”

Under the law in BC, two rules kick in to protect you if the property you put up as collateral is “consumer goods”. This is property that’s “used or acquired for use primarily for personal, family or household purposes”.

For this type of collateral, if you default, the secured creditor can seize the property. Or they can sue you for the amount owing on the debt. But they can’t do both. This is called the “seize or sue rule”. It means the creditor has to decide whether to seize the collateral or take you to court.

The “two-thirds rule” comes into play if you’ve paid back at least two-thirds of what you owe on a secured debt relating to consumer goods. In this case, the secured creditor needs a court order before seizing the collateral. If you’ve paid back less than two-thirds, the creditor can seize the collateral without going to court.

If a secured creditor seizes goods

If a secured creditor seizes collateral under a security agreement, they must follow a procedure set out under the law.

If the creditor wants to sell the collateral

The secured creditor must give you at least 20 days’ written notice before selling the collateral. The notice must include the amount required to pay off the debt, as well as the amount in “arrears”. Arrears are payments that were due but have not yet been paid.

If the collateral was “consumer goods”, the notice must spell out that as long as you pay off the arrears plus the creditor’s expenses of seizing the property, you may reinstate the security agreement. The creditor must then return the seized property.

If you don’t pay the amounts set out in the creditor’s notice, the creditor can proceed to sell the collateral. If they do, they must use commercially reasonable means to get a reasonable price for it. This doesn’t mean they must advertise in every paper from here to Calgary, but they must use reasonable efforts to get a fair market price.

After the sale, the creditor must pay you any amount left over after they are fully paid.

If the creditor wants to keep the collateral

A creditor who plans to keep collateral they seized must give you written notice of their proposal to do so. You then have 15 days to give them a “notice of objection” if you don’t want them to keep the property. If you do so, the creditor must then sell the collateral, following the rules described above.

Common questions

What happens if I make a late payment?

Credit agreements must say what fees and interest charges you will have to pay if you make a late payment or a partial payment. If a creditor accepts a late or partial payment, it doesn’t change your obligations for future payments.

Get help

If you’re concerned with the cost of buying on credit

When you borrow money to buy something, there are laws requiring creditors to disclose all borrowing costs. Consumer Protection BC oversees these laws.

Toll-free: 1-888-564-9963
Web: consumerprotectionbc.ca

If you’re struggling with debt

The Credit Counselling Society is a non-profit society that helps people better manage their money and debt.

Toll-free: 1-888-527-8999
Web: nomoredebts.org
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