Strengthening Financial Consumer Protection in Canada: The Evolutionary Path Towards a National Consumer Credit Code

Abstract

With the exponential growth and greater accessibility of consumer credit, households in Canada are experiencing increasing levels of indebtedness and financial distress. Despite the permeation of credit in our everyday lives, vulnerable financial consumers are often victims of predatory and abusive lending practices of the consumer credit industry, leading to overindebtedness and even bankruptcy. To encourage and inspire legislative reform to better protect financial consumers and modernize the regulatory framework, this dissertation critically analyzes the evolution of consumer credit regulation in its historical, social and economic context.

The research reveals a rich history of consumer credit federal statutes since Confederation. Despite their questionable effectiveness to protect financial consumers, statutes regulating pawnbroking, money-lending, small loans, consumer loan companies and banks framed the evolution of the consumer credit industry until the 1960s. Future reforms were tempered by the restrictive constitutional interpretation given by the Supreme Court of Canada to the federal jurisdiction over interest in 1963, which created uncertainty in Parliament’s authority to regulate the industry and resulted in the gradual abandonment of federal consumer credit regulation. Filling this void, provinces progressively enacted a vast array of provincial consumer protection legislation to regulate the consumer credit industry and protect vulnerable consumers. Federal legislation was limited thereafter to the enactment of a criminal interest rate and the regulatory framework of federally regulated financial institutions and the consumer credit products and services they offered. The research further revealed gradual regulatory reforms of the financial services industry and the recent strengthening of federal consumer protection provisions and the mandates of federal consumer protection authorities.

The thesis confirms that the consumer credit regulatory framework in Canada remains an ineffective and fragmented patchwork of statutes and regulations divided among 3 levels of governments in 13 jurisdictions. With Parliament’s refusal to legislate to the full limit of its power in relation to consumer credit, the thesis further confirms the federal constitutional jurisdiction to regulate this growing industry and proposes a new comprehensive national legal framework regulating the entire consumer credit industry as well as enhanced consumer protection provisions to better protection financial consumers and prevent consumer overindebtedness.