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A Garland For Consumers?
In October of 1998, the Supreme Court of Canada found that the Late Payment Penalties (LPP) charged by Consumers’ Gas may constitute a criminal interest rate contrary to section 347 of the Criminal Code. The decision, in Garland v. Consumers’ Gas, was unexpected insofar as the LPP had been continuously approved by the Ontario Energy Board since its adoption in 1975. It also brings in its wake, however, an important opportunity to revisit the need to provide safeguards for vulnerable consumers.
The decision is an illustration of how consumers, who possess little bargaining power, may be protected from exorbitant usurious penalties and charges for late payment. After all, such punitive transaction costs often catapult the customer into further default. As many consumers simply cannot pay, rising debt threatens their access to commodities which are vital to the maintenance of their standard of living.
Further, the conclusion that the Garland case may have only a limited impact on consumer credit protection, raises a host of ancillary issues concerning the billing practices of utilities. This discussion, therefore, goes beyond the examination of the legal decision and its policy implications. It also attempts to recognize the need for the creation of consumer credit protections, implemented within a comprehensive framework.
Chapter One will assess the scope of section 347 of the Criminal Code by describing the legislative history surrounding its adoption, and the actual construction of the section. Canadian case law will also be detailed, with a particular emphasis on the Supreme Court’s reasoning with respect to the LPP in Garland. Chapter Two will briefly compare and contrast the Canadian experience with how consumers in the United States and the United Kingdom are protected from usurious charges. Chapter Three will focus on the policy implications of Garland, from a consumer standpoint. In turn, Chapter Four will look at industrial implications by examining the policies of specific companies in a variety of industries. In conclusion, the study will recommend actions which may be taken to further protect consumers from exploitive credit arrangements. Although Garland is clearly a step in the right direction, its application is not a sufficient response to the needs of consumers.