Direct Sales, Future Performance, and Time Share Contracts (11:V)
Since the BPCPA has replaced the Consumer Protection Act, the BPCPA covers door-to-door sales, payday loans, credit cards, income tax refund services (although the federal Tax Rebating Discounting Act, RSC 1985, c T-3 regulates the actual amount which can be refunded), food plan contracts, unsolicited goods, and similar activities. The primary remedy for consumers in the BPCPA regarding these types of activities is the right to avoid or cease contracts for direct sale or for future services, after giving notice in the manner required by the statute. A single contract may fall under more than one category, and in that case, will attract the requirements and cancellation provisions of each applicable section.
- NOTE: When exercising cancellation rights under the BPCPA consumers should be apprised of ss 27 and 28. In most cases, the contract is effectively rescinded by the cancellation; goods must be returned undamaged and payment must be refunded in full.
A. Direct Sales
When consumer is approached by a salesperson, instead of making a conscious decision to seek out a product or service, they may be taken unawares and can be vulnerable to being taken advantage of. The BPCPA recognizes this risk by imposing disclosure requirements and allowing a consumer to cancel the contract in ways the common law of contract does not permit.
A direct sales contract is defined in s 17 as:
...a contract between a supplier and a consumer for the supply of goods or services that is entered into in person at a place other than the supplier's permanent place of business, but does not include any of the following:
- (a) a funeral contract, interment right contract or preneed cemetery or funeral services contract;
- (b) a contract for which the total price payable by the consumer, not including the total cost of credit, is less than an amount of $50 (Consumer Contracts Regulation BC Reg 272/2004 s 4 [CCR]);
- (c) a prepaid purchase card;
The BPCPA sets out a lengthy list of requirements under ss 19 and 20 for the content of direct sales contracts, such as the name, address, and telephone number of the seller, the name (in a readable form) of the individual who signs the contract on behalf of the supplier, a detailed description of the goods or services to identify them with certainty, the price, and a detailed statement of the terms of payment. When credit is extended, there also needs to be a description of the subject matter of any security interest. This is not an exhaustive list; please consult the BPCPA and regulations.
Under s 5 of the CCR, there are several exemptions to the applicability of the BPCPA to direct sales contract. Such exemptions include certain classes of direct sellers who are selling goods or services for which they are licensed, registered, or incorporated (s 5(4)), and direct sales contracts that are entered into in certain places, such as agricultural shows or fairs, trade shows, and craft fairs. Direct sellers are also exempt if the seller attends the place following a request that was made at least 24 hours in advance by the consumer or a friend or relative of the consumer who is not an associate of the direct seller. For a full list of exemptions, please consult the CCR.
1. Right of Cancellation - Direct Sales
Under s 21 of the BPCPA,
- (a) the purchaser may cancel the contract within 10 days after receiving a copy of the contract. The purchaser need not offer explanations for his or her decision. The vendor then has 15 days after the date of cancellation to refund all money without deduction.
- (b) if a delivery date is specified in the contract and not all of the goods/services are delivered/performed within 30 days of this date, the purchaser may cancel the contract within one year after the date a copy of the contract was received, provided that the purchaser has not accepted or used the goods/services;
- (c) if the contract does not contain information required under s 19 and 20(1) of the Act, the buyer may cancel within one year of the date of the contract.
A direct sale is unenforceable by the seller if the buyer is required to make a down payment in excess of a prescribed amount (BPCPA, s 20(3)(b)). Section 4(2) of the CCR sets the amount of down payment prescribed under s20(3)(b) as either $100 or 10% of the total price.
- NOTE: Whether the purchaser has accepted goods is determined by the definition in the Sale of Goods Act (s 39).
The BPCPA does not make oral executory contracts unenforceable. However, s 20(3) requires that the seller give a written copy of the contract to the buyer at the time of signing. Otherwise the contract is not binding on the buyer.
Section 54 requires that the buyer provide notice of cancellation to the seller, and declares that it may be delivered by any method that permits the cancelling party to produce evidence that the contract was cancelled. Notice by registered mail, electronic mail, personal delivery, and fax is explicitly permitted. Nowhere does the BPCPA explicitly state that a notice of cancellation shall be in writing, but a buyer should be cautious and deliver written notice. The section explicitly permits that the notice can be given to the seller directly, or to the postal, fax, or electronic mail address of the seller shown in the contract. When a buyer rescinds a contract under s 21, that section also provides that the goods may be retained until all of the money paid is refunded.
In Woodward v International Exteriors (British Columbia) Ltd (1991), 53 BCLR (2d) 397, 1 BLR 254 (CA) at para 10, verbal notice of termination of an agreement was sufficient for the consumer to terminate this form of contract. Note that verbal notice may not be sufficient in all instances and written notice remains advisable.
B. Future Performance Contracts
A future performance contract is defined in s 17 as:
...a contract between a supplier and a consumer for the supply of goods or services for which the supply or payment in full of the total price payable is not made at the time the contract is made or partly executed, but does not include:
- (a) a contract for which the total price payable by the consumer, not including the total cost of credit, is less than a prescribed amount of $50 (CCR' s 6);
- (b) a contract for the supply of goods or services under a credit agreement, as defined in s 57 (definitions), if the goods or services have been supplied;
- (c) a time share contract; or
- (d) a prepaid purchase card.
Future services contracts are subject to some important statutory requirements under Part 4, Division 2 of the BPCPA.
The BPCPA sets out a long list of requirements under ss 19 and 23 for the content of future services contracts, such as the name, address, and telephone number of the seller, a detailed description of the goods or services to identify them with certainty, the price, supply date, and a detailed statement of the terms of payment. When credit is extended, there also needs to be a description of the subject matter of any security interest. This is not an exhaustive list; please consult the Act.
Under s 23(4), a future performance contract is not enforceable by the seller if a rebate or discount is given on the condition of some event occurring after the time the buyer agrees to buy (usually a referral selling scheme whereby the purchaser aids the seller in making a further sale).
If the future performance contract does not contain the required information (ss 19 and 23), then a consumer may cancel the contract by giving notice of cancellation to the supplier within one year of the date that the consumer receives a copy of the contract (s 23(5)). Section 54 sets out the required form and procedure for giving notice. (See Section V.A.1).
C. Continuing Services Contracts: Gym Memberships, Travel or Vacation Clubs
These contracts are called continuing services contracts because, while you may pay now, the contract extends into the future. This type of contract is often used when one joins a karate club or a dance studio, or buys a membership in a vacation club.
Continuing services contracts must not exceed 24 months in duration. However, a contract can allow the consumer to renew in writing within one month of its expiry, and if the consumer exercises this option, the contract can continue past 24 months (s 24(3)). If a contract does exceed 24 months in duration, there are remedies available under s 24(6).
1. Right of Cancellation
Because they are often sold at high-pressure presentations, under s 24 these contracts are subject to a 10 day right of cancellation from the date the consumer receives a copy of the contract (s 25(6)). Section 26(3), which also gives a 10 day right of cancellation, applies to time-share interests not covered by the Real Estate Development Marketing Act, SBC 2004, c 41, such as resorts or condominiums.
Contracts for continuing services can also be cancelled if there is a material change in circumstances of the buyer or the seller, and where the buyer or seller gives notice of cancellation (s 25). When alleging a material change in circumstances as the basis for cancelling, the reason must be specified in the notice (s 25(2)).
Material changes in circumstances include, but are not limited to:
- the buyer’s death; and
- permanent disability or permanent relocation further than 30 km further from when the consumer entered into the contract.
Material changes in circumstances of the seller include:
- through the partial or entire fault of the seller, the services are not completed, or at any time the seller appears to be unable to reasonably complete the services in the time frame set out in the contract for the completion of services;
- the services are no longer available because of the seller’s discontinued operation or substantial change in operation; and
- the relocation of the business of the seller 30 km from the buyer without provision of equivalent service within 30 km.
Section 54 sets out the required form and procedure for giving notice. (See Section V.A.1)
D. Unsolicited Goods or Services
Under s 11, unsolicited goods or services means goods or services that are supplied to a consumer who did not request them, other than:
- (a) goods or services supplied to a consumer who knew or ought to have known they were intended for delivery to another person;
- (b) goods or services for which the supplier does not require payment; or
- (c) a prescribed supply of goods or services.
Under s 12, a recipient of unsolicited goods has no legal obligation to the sender unless the recipient gives notice of an intention to accept them, or unless the recipient knew or ought to have known that the goods were intended for delivery to another person.
If however, a consumer does pay for unsolicited goods or services, under s 14 the consumer may give to the supplier a demand, in writing, for a refund from the supplier within 2 years after the consumer first received the goods or services if the consumer did not expressly acknowledge to the supplier in writing his or her intention to accept the goods or services.
- NOTE: If a consumer is being supplied with goods or services on a continuing basis and there is a material change in the goods or services or in the supply of them, the goods or services are deemed to be unsolicited goods or services from the time of the material change unless the supplier is able to establish that the consumer consented to the material change.
E. Distance Sales
Under s 17, a “distance sale” means “a contract for the supply of goods or services between a supplier and a consumer that is not entered into in person and, with respect to goods, for which the consumer does not have the opportunity to inspect the goods that are the subject of the contract before the contract is entered into”. This definition encompasses all forms of commerce where the parties are not face-to-face, such as catalogue sales, sales over the internet, or sales over the telephone. Section 48 stipulates that a supplier must give a consumer a copy of the contract within 15 days after the contract is entered into, and also sets out a list of requirements for distance sales contracts. Section 46 sets out what information must be disclosed to the consumer prior to the consumer entering into the distance sales contract. For example, the supplier must disclose a detailed description of the goods, the currency, delivery arrangements and the cancellation policy, if any. This is not an exhaustive list; please see the Act.
Section 47 includes additional requirements for contracts that are in electronic form. Specifically, the supplier must make the information from s 46 available in a manner that the consumer can access, retain and print. The supplier must also give the consumer the opportunity to correct errors and accept or decline the contract.
Section 49 provides consumer rights concerning cancellation of distance sales contracts. These provisions are an attempt to deal with sales done over the internet. Note that there are different time restrictions on cancellation rights on distance sales depending on which provisions the supplier does not comply with. Once a consumer gives notice to the supplier of the cancellation, the supplier has 15 days to refund to the customer all monies paid in respect of the contract and any related consumer transactions. If the supplier fails to do this, the consumer may have recourse under s 52 if the consumer charged to a credit card all or any part of the total price under the contract.
F. Credit Transactions
Part 5 of the BPCPA deals with the disclosure of the cost of consumer credit.
The Acts set out disclosure requirements, as well as advertising requirements for both fixed and open credit. The basic distinction between fixed and open credit is that open credit involves multiple advances and does not establish the total amount advanced under the agreement. However, open credit can be subject to an overall credit limit. Fixed credit is a credit arrangement that is normally based on a fixed initial advance and a predetermined payment schedule. Under s 105 of the BPCPA, the creditor is obliged to compensate borrowers for contraventions of the Act.
The rules for credit transactions under the BPCPA are:
- Under s 66, lenders are required to furnish debtors with a written statement of disclosure. Consult ss 66-93 for the specific requirements pertaining to your client’s situation.
- Under ss 59 to 64, certain requirements flow from the advertising of certain aspects of credit, such as interest-free periods, interest rates, and cost of credit.
- Under Division 4 of Part 5, a borrower has certain rights, such as being able to choose an insurer and to cancel optional services.
- Under s 99, where a credit card is lost or stolen, the holder is not liable for any charges incurred after notice in person or by registered mail has been given to the issuer of the card. In the case of purchases made before notice is given, an individual is only liable for $50 or up to the credit limit remaining on the card, whichever is less. This protection does not extend to unauthorized use of a card to get cash from an ATM where the cardholder left his or her PIN number in the wallet with the card, and it is stolen (see Plater v Bank of Montreal (1988), 22 BCLR (2d) 308 (Co Ct)).
1. Notice Required for Increased Interest Rates
Under s 98, there is a notice requirement for increasing credit card interest rates.
2. Unsolicited Credit Cards
Section 96 provides that a credit card issuer must not issue a credit card to an individual that has not applied for one. This does not affect the ability of a credit card issuer to provide a renewal or replacement card that has been applied for.
Sections 56.1-56.5 regulate the terms of prepaid purchase cards. A prepaid purchase card is a card, written certificate or other voucher with a monetary value that is issued or sold to a person in exchange for the future supply of goods or services. These include gift cards or gift certificates. Section 56.2 prevents any cards from being issued with an expiry date. Prepaid Purchase Cards Regulation, BC Reg 292/2008 contains exemptions from the expiry date prohibition. These include cards issued for a specific good or service, cards issued for a charitable purpose, and cards issued to a person who provides nothing of value in exchange.
G. High-Cost Loans (Payday Loans)
1. Criminal Code
Section 347 of the Criminal Code prohibits loans that charge a criminal rate of interest, which is defined as an annual rate that exceeds 60 percent.
Loans offered by payday lenders, if calculated according to the Criminal Code, may charge rates that exceed the amount permitted under the definition. In 2006, the federal government amended the Criminal Code to exempt payday loan agreements from the criminal interest rate provision.
Under s 347.1, payday loan agreements are defined and are exempted from s 347 provided that the following three conditions are met:
- i) the loan must be for $1500 or less and for 62 days or less;
- ii) the person must be licensed or specifically authorized under provincial/territorial law to enter into that payday loan agreement; and
- iii) the province must be designated by the Governor in Council (which will happen in the province has adequate measures to protect recipients of payday loans)
2. Payday Loans
Section 2 of Payday Loans Regulation, BC Reg 57/2009 designates payday lenders as a “designated activity” under s 142 of the BPCPA. A payday lender "means a person who offers, arranges, provides or otherwise facilitates payday loans to or for consumers" and includes "a person who, for compensation, arranges, negotiates or facilitates an extension of credit". Section 143 requires anyone who participates in a designated activity to carry a license. A payday lender must carry a separate license for each operating location. They must have a sign at each location displaying this license number, the maximum charges permitted in BC (15% of principal), the amount they charge, the total cost of borrowing $300 for 14 days, and the annual percentage rate they charge.
The regulations also set limits on the amount of interest that can be applied, mirroring s 347 of the Criminal Code.
- i) The maximum amount that can be charged on a payday loan is $15 for every $100 borrowed including all charges and fees.
- ii) In addition, a payday loan cannot exceed 50% of the borrower's net pay to be received during a single pay period within the payday loan term.
- iii) If the repayment amount is not paid, default fees cannot exceed 30% per annum on the outstanding principal.
Thus, payday loans in BC are permitted under Criminal Code section 347.1, as long as they follow the provincial requirements.
These requirements do set out a number of additional restrictions on payday lenders (s 112.08). Notably, a payday lender may not:
- (a) sell insurance to or for the borrower, or require or request that the borrower insure a payday loan;
- (b) issue a new payday loan to a borrower who already has a payday loan issued by the lender;
- (c) require, request or accept consent from a borrower to use or disclose the borrower's personal information for a purpose other than offering, arranging, providing or otherwise facilitating a payday loan;
- (d) require, request or accept any undated cheque;
- (e) require, request or accept any post-dated cheque, pre-authorized debit or future payment of a similar nature, for any amount exceeding the amount to repay the payday loan by the due date, including interest and permissible charges (although, a one-time fee of $20 is allowed for a dishonoured cheque or pre-authorized debit);
- (f) require or request any payment from the borrower before it is due under the loan agreement;
- (g) grant rollovers (i.e. charge a fee to extend a loan’s due date);
- (h) require, request or accept an assignment of wages from the borrower (and if they do the assignment of wages is not valid);
- (i) require, request or accept from the borrower or any other person, as security for a payday loan, any personal property, real property, or documentation that could be used to transfer title in personal property or real property;
- (j) discount the principal amount of a payday loan by deducting or withholding from the initial advance an amount representing any portion of the total cost of credit;
Additionally, there is a mandatory period set out in the regulations where a consumer is allowed to return the money and cancel the payday loan. This period begins on the date that the borrower receives the first advance and expires at the end of the second day that the payday lender is open for business after that first advance.
3. High-Cost Credit Products
Legislation designed to protect consumers from lenders who offer loans with high interest rates, but are not payday lenders, received royal assent in May 2019, but requires regulations to be passed before coming into force.
High cost credit products are loans or lines of credit that charge high interest rates and/or various fees. The formal definition of a High-Cost Credit Products is:
- (a) a fixed credit product that has an APR (annual percentage rate) that exceeds the prescribed APR and meets other prescribed criteria,
- (b) an open credit product that has an annual interest rate that, calculated in accordance with the regulations, exceeds the prescribed annual interest rate and meets other prescribed criteria,
- (c) a lease that has an APR that exceeds the prescribed APR and meets other prescribed criteria, or
- (d) a prescribed product through which credit is extended by a high-cost credit grantor to a borrower primarily for a personal, family or household purpose,
but does not include a payday loan, mortgage on real property or prescribed credit product;
Once the regulations are passed, a new part (Part 6.3) will be added to the Business Practices and Consumer Protection Act that creates restrictions on high-cost credit products. The new regime limits a credit grantor to a prescribed rate (or the criminal rate if none is prescribed), requires certain terms to be in high-cost credit agreements, and requires that the credit grantor not charge, require, or accept any amount not allowed (such as a fee for making a payment before it is due), not disclosed, or that exceeds the high-cost credit agreement.
H. Remedies and Sanctions
In addition to the remedies already mentioned that are available to consumers, the BPCPA provides for further sanctions:
1. Fines or Imprisonment
Section 190 establishes a summary conviction offence with penalties of imprisonment up to one year and fines of up to $10,000 for individuals and $100,000 for corporations, for any contravention of the BPCPA.
2. Investigation and Search Powers
Part 10 gives the Director the power to investigate and request information where there are reasonable and probable grounds to believe that a person has contravened, is contravening, or is about to contravene the BPCPA or an order made under it.
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