Ministry of Consumer and Corporate Relations
Consumer Protection Consultation
250 Yonge St., 35th Floor
Toronto, Ontario M5B 2N5
Re: Consumer Protection Consultation
Thank you for the opportunity to comment on proposals for reform of Ontario’s consumer protection legislation.
The Public Interest Advocacy Centre (PIAC) is a national, non-profit organization which has been representing the interests of ordinary consumers in matters to do with public utility regulation (telecommunications, energy, transportation), financial institutions, broadcasting, Internet access, consumer privacy, and consumer protection generally, since its formation in 1976. PIAC is run by a distinguished Board of Directors from across Canada, and has organizational members who themselves represent millions of Canadians. PIAC has developed a strong reputation nationally for its effective consumer advocacy in these areas.
As a preliminary matter, PIAC would like to commend the Ontario government on this timely initiative. We agree that Ontario’s consumer protection laws are in need of modernization for the reasons set out in the Consultation Paper. We also agree with the three guiding principles of Fairness to Consumers, Responsiveness to both Businesses and Consumers, and Flexibility to Adapt to Future Needs. In general, we support the proposals for reform, with the qualifications identified below, and in many cases, we strongly support the proposals. In some cases, such as electronic commerce, however, we feel that more legislative action is needed to address existing or potential problems.
Issues Not Addressed in the Consultation Paper
The discussion paper requests suggestions on additional consumer protection issues that should be addressed in the revision and consolidation of the Consumer Protection Act. There are two important areas that the government should seriously consider taking action on: fringe banking and “white label” ATMs.
- The “Fringe Banking” Sector*
The fringe banking sector is currently unregulated, making consumers who use these fringe services easy targets for unscrupulous operators. Issues include: excessively high fees and interest rates, inadequate disclosure of fees and rates, and unfair collection practices. We understand that all the provincial governments are co-operating with the federal government to develop a national approach to this problem. It is appropriate to wait until this federal-provincial exercise is complete to take any action, but would like to see a government commitment to address fringe banking through legislation in the near the future. Also, as we suggest later in our comments, fringe creditors should be subject to the same collection practices rules as collection agencies.
- Generic (“white label”) ATMs*
Unregulated “white label” ATMs also pose serious consumer concerns, considering that:
“White label” ATM operators enter into contractual relationships with financial institutions, but are not financial institutions themselves. Therefore, while the federal government can regulate bank fees under the Bank Act, the activities of “white label” ATM operators come under provincial jurisdiction. We urge the government to seriously consider taking action on this growing problem for consumers.
Questions Posed in the Consultation Paper
1. Scope of Consumer Protection – type of transactions
PIAC agrees that consumer protection laws should be expanded to apply to a wider range of transactions, as proposed.
2. Scope of Consumer Protection – Small Businesses
PIAC does not oppose expanding the scope of protection to include small business consumers as proposed in the paper.
3. Protection re: Services as well as Goods
PIAC strongly supports the application of consumer protection laws to the sale of services as well as goods. The lack of similar protection for consumers of services vs. goods has been a growing problem that we have confronted on numerous occasions, as the marketplace becomes increasingly centered around services rather than goods. This is an overdue reform. The current asymmetry as between good and services can no longer be rationalized and must be corrected.
4. Electronic Commerce Transactions
We support the government’s proposal as set out in the Consultation Paper, but submit that it does not go far enough.
Ontario recently passed Bill 88, The Electronic Commerce Act, which gives electronic contracts the same legal validity as contracts concluded via non-electronic methods. Yet, a large proportion of consumers in Ontario are not yet fully conversant with this new medium of contracting. Many do not have Internet access from home, and of those that do, many are not yet computer or Internet “literate”. By assuming a level of consumer knowledge and ability which does not in fact exist, the new law risks creating a situation by which unscrupulous businesses can take advantage of those consumers who are not yet Internet savvy.
Delivery of Legally Required Notices and Binding Communications
Ontario’s new Electronic Commerce Act permits contractual notices and other binding communications to be made via email. Often, such notices specify a time period after which action will be taken adverse to the consumer’s interest. Such messages are considered to be received when they enter the “information system” of the addressee and become “capable of being retrieved and processed by the addressee” (subs.22(3)(a)).
This works for people who have private email addresses and who check their email daily. However, it fails to accommodate the current reality, in which email addresses are often shared, infrequently accessed, or otherwise used by consumers in a manner which is not appropriate for binding communications. For example,
- People don’t necessarily check their email daily. Checking email typically requires much more effort (e.g., firing up a computer, connecting by modem, etc.) and cost than does checking a regular mailbox. Email is often ignored for days in a way that regular mail is not.
- Particularly where two people share an email address (a common practice in multi-person households), a message may be entirely missed by the intended recipient, although it has been actually received by the recipient’s computer.
- Email is used by consumers for many more “light” purposes, and to a much great degree for such “light” purposes (e.g., light personal correspondence, networking; discussion groups) than is regular mail; hence it is generally viewed as a “lighter” medium, and it can be difficult to identify a serious binding communication amongst all of the unimportant messages;
- Online consumers often receive dozens of emails daily (much of it spam), and simply can’t cope with the quantity – to a much greater extent than with regular mail.
These are just some examples of material differences between email and regular mail. Such differences must be taken into account when designing rules for today’s marketplace. Until we have progressed further in terms of commonly understood protocols for email use, rules which create liability on the basis of a higher standard of care than is the current practice are premature. Certainty of receipt is too important in certain cases. It is inappropriate to establish laws which assume a higher degree of email “literacy” than actually exists, where such laws make consumers even more vulnerable than they already are.
It is particularly important that any electronic notices, failure to reply to which will lead to loss of service or property, actually reach the consumer. Unlike receipt of mail via Canada Post or courier service, receipt via email requires access to a working computer with Internet access. Home internet access remains a luxury service for many consumers, and is likely to be one of the first services discontinued when a household without such access runs into financial difficulty. In such situations, the customer’s failure to respond to the creditor’s email notice should trigger a requirement that the notice be provided in paper form. We therefore recommend establishment of a rule that:
- in respect of notices of impending default by or penalty to the consumer, electronic delivery is legally effected only where the consumer recipient (and not just the consumer’s information system) has actually received the notice
At a minimum, Ontario’s consumer protection laws should put the onus on vendors to ensure that binding communications sent by them to consumers have actually been received by the consumer. One possible approach is simply to apply the rule for presumed receipt set out in subs.22(3)(b) – i.e., “when the addressee becomes aware of the information or document in the addressee’s information system and it becomes capable of being retrieved and processed by the addressee” – to all consumer transactions, unless the consumer has specifically elected to receive binding communications from the vendor electronically.
This does not solve the problem for all consumers, however. Merchants may simply add a term to their standard form contracts stating that the consumer elects to receive any future communications by email. Such election is clearly not meaningful, but may nevertheless be upheld by courts as a contractual agreement. In any case, leaving the question of when consumer consent to electronic disclosures and records is binding to a case-by-case determination by the courts will create uncertainty and necessitate costly litigation. It is also fundamentally unfair to vulnerable consumers who do not have the means to litigate in the first place.
For these reasons, Ontario’s consumer protection laws should specify that:
- electronic delivery of legally required notices, and of any information that is required by law to be in writing, is permitted only where the consumer transaction is negotiated electronically, or where the consumer’s consent to receive such information electronically originates from the consumer’s email address to which the electronic records will be delivered.
In this way, disputes over the validity of standard form consents to electronic communications will be limited, and consumers will be clearly protected from unintentional consent in the most egregious situations (e.g., when the consumer does not even own a computer, or does not have Internet access). It is important to note in this respect that approximately half of Canadian households still do not have Internet access, and that three-quarters of low income households remain unconnected.
Paper disclosures required by law are designed to provide consumers with information critical to making informed choices in the marketplace, to understanding their rights and obligations during commercial transactions, and to enforcing their rights when transactions go sour. Consumers can benefit from receiving information electronically, and should be permitted to do so, but the law should not create a situation in which consumers without the ability to receive electronic communications may be required by contract to do so.
Another, related, problem with reliance on electronic records in consumer transactions occurs when consumers find that they are unable to access or print the electronic record in question. This can happen as a result of computer breakdown, or incompatible software programs, for example. It is important in such situations that consumers be able to obtain paper copies of the records in question. For this reason, we recommend statutory requirements that:
- regardless of the terms of the contract, the consumer is entitled to receive paper copies of electronic records upon request, for which providers may charge no more than their actually incurred costs of accommodating this request.
Consequences of Refusing to Deal Electronically
It is likely, assuming passage of laws based on the UECA, that businesses rely increasingly on electronic communications. Indeed, given the low cost of electronic communications as opposed to paper communications, it is likely that businesses will take various measures to encourage consumer acceptance of electronic communications, including preferential pricing for those consumers who agree to deal electronically.
While such pricing strategies are understandable in light of underlying cost considerations, they will in effect penalize unconnected consumers (disproportionately low income) and will tend to further marginalize those who cannot afford to deal electronically in the first place. Such implications of the UECA need to be seriously considered in the overall policy context.
At a minimum, consumers transacting non-electronically should always be entitled to refuse electronic receipt of contractual records and statutorily required notices without incurring extra charges as a result. Until Internet household penetration has reached the level of telephone penetration, it is premature to establish laws and policies which assume electronic capability. There is no compelling policy reason to favour consumers with electronic access over those without, in respect of important commercial disclosures.
Integrity of Electronic Signatures
Electronic commerce requires the development of reliable methods of verifying the identity and capacity of contracting parties. The UECA provides electronic signatures the same legal status as handwritten signatures and leaves it up to each enacting jurisdiction to decide whether or not to establish regulations regarding the reliability of electronic signatures. Moreover, the UECA does not attribute liability for losses arising from good faith use of electronic signatures.
In deciding how to address this issue, it is important to recognize, first, that different forms of electronic signatures will have different levels of security and that the standard of care for the use of electronic signatures is unclear at this early stage of development. At the same time, most consumers using electronic signatures will have no sophistication in electronic security procedures, and could unwittingly expose themselves to liability despite due diligence and good faith.
Second, businesses have access to information about electronic commerce-enabling technologies and the ability to limit and plan for the risks created by electronic commerce. Consumers, in contrast, have neither the access to information nor the expertise necessary to evaluate the reliability of a given technology.
Third, unless fraud and error losses associated with online transaction technologies (and not attributable to carelessness on the part of the consumer) are allocated to technology providers and online vendors, there will be little incentive for investment in the further improvement of authentication technologies.
For all these reasons, Ontario legislation should clearly place the responsibility and liability for technology failures on certificate authorities, manufacturers, and/or the businesses dictating the authentication technology to be used. In particular, consumers should be protected against liability for losses arising from misuse or failure of security mechanisms which misuse or failure was not the fault of the consumer.
A good baseline model to consider in this respect is the Canadian Code of Practice for Consumer Debit Card Services, prepared by the Electronic Funds Transfer Working Group in 1992, and revised in 1996. This voluntary code outlines the respective responsibilities of industry players and consumers in the use of debit cards.
Ontario’s consumer protection legislation should clearly establish that consumers are not liable for electronic transactions in which:
a) The transaction was not authorized by the consumer;
b) The product delivered was not as described by the vendor;
c) The vendor failed to provide relevant information about the product;
d) The product was not delivered in the time specified, or at all; or
e) There was no adequate opportunity for the consumer to cancel an inadvertent transaction where the consumer acted reasonably.
In these circumstances, consumers should also be entitled to refund of any payment made, upon return, where applicable, of the product in question to the vendor in good order and within a reasonable time.
5. Standards for Ecommerce
Yes, as technology and the marketplace evolve, modernized consumer protection legislation should also evolve so as to ensure ongoing adequate protection of consumers. New technologies pose new problems for consumers and create new opportunities for unscrupulous merchants. They may also exacerbate previously existing problems, which were until then rare enough to justify inaction. In either case, governments should be able to move quickly and decisively to protect consumers from bad actors.
In addition, even those businesses who wish to operate in full compliance with the law can run into trouble in such a rapidly evolving marketplace. New technologies and marketplace practices can create uncertainty as to the threshold of acceptable business practices. Privacy is a good example of this: technology and market forces have surged far ahead of laws, pushing business practices beyond what consumers consider acceptable. Similarly, standards of information disclosure, contract formation, liability and redress in electronic commerce need to be clearly established. In such cases, it is incumbent on government to provide leadership in the marketplace by legislating minimum standards of behaviour.
6. Application of Consumer Protection Legislation in cases where other regulatory regimes apply
General consumer protection legislation should always apply where it offers greater protection to consumers than does the specialized regulatory regime. If the specialized regime provides the same or greater protection to consumers, then it should take precedence. Essentially, consumers should benefit from the highest level of protection that exists, whether via specialized or general regulatory regimes.
Excluding the application of general consumer protection legislation in respect of transactions governed by other regulatory regimes will result in a “patchwork” of differing consumer protection regimes, precisely the opposite of what the Consultation Paper suggests is a key goal of this initiative. It is essential that consumer protection be as streamlined, consistent, and effective as possible across all marketplace sectors. Permitting some sectors a lower level of consumer protection than others is inappropriate and risks marketplace distortions.
If specialized regulatory regimes are to take precedence over general consumer protection legislation, it is essential that they offer at least the same level of consumer protection as does the general legislative regime. The proposed standard of “adequacy” is insufficient.
Remedies and Enforcement
Yes, consumers who are affected by a violation of consumer protection legislation should be entitled to cancel the contract, receive a refund and pursue damages through civil action. As well, consumers should not be liable in such cases (e.g., for unauthorized contracts).
8. Yes, we agree that consumer legislation should contain a consistent set of enforcement powers and a uniform limitation period. 9. We strongly support the establishment of consistent and effective fines and other penalties for wrongdoers. It is essential that judges have the power to set fines which are proportionate to the gains achieved through the malpractice, and that such fines constitute a meaningful deterrent.
We also strongly support clear statutory authority for restitution orders.
10. Future Performance Contracts
We strongly support the proposals to clarify and improve existing legislation regarding executory contracts.
11. Advance Payment Schemes
We support the proposal to allow for regulation-making authority to prohibit specific advance payment schemes, and to use this authority to limit the activities of credit repair companies. The consultation paper proposes that credit repair companies be required to disclose to consumers their right to correct inaccurate information in a credit file. We would support such a measure, as long as the disclosure is clear and useful to the consumer. It should state how to contact the major credit bureaus, what service standards to expect, and what recourse to take in the event of a dispute.
We would note, however, that while the discussion paper states that credit repair companies sell the service of correcting inaccurate information to consumers, in fact, credit repair companies do offer some legal techniques of removing accurate information on a credit report. Specifically, credit repair companies dispute accurate credit information, which requires credit bureaus to remove the information if it can no longer be substantiated by its source. Also, credit repair companies may attempt to create “split” credit reports, by having the consumer alter their name slightly, and/or remove their SIN number from the file.
Generally, we would support prohibiting these methods of getting around the credit reporting system, but currently, we are uncomfortable with the idea of further restricting consumers’ rights because of serious unresolved consumer protection issues in the sector. For instance, there are no provisions in the Consumer Reporting Act for disclosure to the consumer of his or her rights to correct inaccurate credit information. If consumers’ knowledge of their rights is so low as to necessitate this type of disclosure by credit repair companies as is being proposed, why are similar disclosures not required at other times, such as when a credit file is created about an individual?
The consumer reporting sector does not fully disclose its practices to consumers, and makes little effort to ensure that consumers are aware of how their personal information is used. In addition, there are reports of problems with credit bureau practices in disclosing reports to consumers and correcting credit information. In this context, consumers may legitimately need representation to protect their interests. It is very unfortunate that consumers have turned to unethical companies for this representation, but prohibiting these unethical practices will not solve the underlying problems with the credit reporting system. The most important step that needs to be taken is to subject credit bureaus to comprehensive privacy legislation.
12. Timeshare Marketing
We strongly support the proposal to apply a 10 day cooling off period for timeshare marketing, and to require certain disclosures on the part of timeshare marketers.
13. Implied Warranties on Services
We strongly support the proposal to make consumer services subject to an implied warranty of acceptable quality, similar to that applicable to goods. There is no justification for exempting services from such a requirement.
14. Plain Language
We strongly support the proposal to interpret contracts in the consumer’s favour where the language of the contract is ambiguous. This is a simple, fair, and potentially effective way of encouraging plain language in consumer contracts without creating a burden on businesses.
We support the proposals to modernize the regulatory regime for private bailiffs.
We are pleased to see that the government is proposing to extend the protections from harassment in debt collection, and require testing for debt collectors. However, consumers could benefit from further protections in two areas:
a) Greater Application of Prohibitions on Harassment
The consultation paper argues that creditors generally “want to acquire and retain customers” which “discourages them from treating customers badly”. However, creditors usually do not want to retain customers who are badly in debt, and in fact conduct credit checks to identify and avoid such consumers. It is very doubtful that there is “natural” incentive on the part of businesses to treat debtors fairly as the paper suggests, and therefore little rationale for not requiring all creditors to comply with collection standards. No consumer should ever be subject to the tactics prohibited by the Collection Agencies Act, and indeed, no ethical company would engage in these practices. Compliance with the law, therefore, would not be a problem for legitimate businesses. We strongly recommend that the government seriously apply collection standards to all cases of debt collection.
In particular, the government should ensure that the legislation applies to the “fringe” banking sector. This sector has been implicated in coercive collection practices in the United States, and there is reason to be concerned that the same type of practices occur in Canada. Collections and repossessions tend to be a very important aspect of fringe banking, specifically, rent-to-own businesses, second hand dealers, sub-prime lending and payday lending. Consumers who use these services tend to be low income and already in debt, and thus are particularly vulnerable and in need of protection from harassment.
b) Limitations on Use and Disclosure of Personal Information
The Consumer Reporting Act allows credit report reports to be accessed for the purposes of collecting a debt without give notice to the consumer. Similarly collections activities are exempt from the requirements of proposed Ontario Privacy Act. These exemptions are necessary to allow for debt collection, but consumers should still be protected from unnecessary and unwarranted privacy invasions. Therefore, the new Consumer Protection Act should ensure that collections standards include suitable limitations on how personal information that is obtained without consent in the course of collecting a debt may be used and disclosed.
Specifically, creditors and collections agencies should not be permitted to use any of the information they collect in the course of a collection for secondary purposes (purposes other than collecting the specific debt). They should not be permitted to disclose such personal information to a third party (such as telling someone’s family or employer about the debt). Also, collection agencies should not be permitted to disclose information to a credit bureau, as it is not necessary to do so in order to carry out a collection.
All of which is respectfully submitted,
Philippa Lawson Angie Barrados