Dear Stakeholder:

I am pleased to provide you with a copy of three draft regulations dealing with disclosure of the cost of borrowing for the purpose of consultation. Draft regulations are being issued for consideration under the Credit Unions and Caisses Populaires Act, 1994, the Insurance Act, and the Mortgage Brokers Act.

The draft regulations propose mandatory disclosure requirements for consumer loans and other disclosure requirements relating to statements and advertisements. The draft regulations also describe how the cost of borrowing under a loan is to be calculated.

These regulations are intended to harmonize Ontario's cost of borrowing disclosure provisions with those of other jurisdictions across Canada. They reflect the federal-provincial-territorial harmonization agreement that was created through a process of public consultation and intergovernmental negotiation. If implemented, businesses will be able to use the same procedures, credit advertisements and disclosure statements in all parts of the country. Compliance costs will be reduced and uniform consumer protection will be provided across Canada.

Ontario is considering how to handle two issues on which the federal government has varied its approach from that of the harmonization agreement. For provincially regulated lenders, often the single most important sector of comparison is the federally regulated banks. Therefore, your input on these issues is specifically sought.

Under the Bank Act's Cost of Borrowing Regulations, the federal government has already adopted the harmonization agreement. However, these regulations deviate from the harmonization agreement on whether open credit, such as a line of credit, should disclose the annual percentage rate (a rate that includes non-interest charges) , and on whether a borrower must receive independent legal advice before being able to waive the two-day cooling-off period for mortgage loans.

To ensure that provincial financial institutions are able to compete on a level playing field with their federally-regulated counterparts, we propose harmonizing Ontario's draft regulations under the Credit Unions and Caisses Populaires Act, 1994, Insurance Act, and Mortgage Brokers Act with the Bank Act approach on these two issues.

Your views are important and will assist in finalizing the regulations in this area. We welcome the input of consumers, the affected financial services sectors and others in this process.

The enclosure contains information on how you can submit comments on these proposed regulations.

Thank you for taking the time to consider these draft regulations. I very much appreciate your input into this important review.

Yours sincerely,

Philip Howell
Assistant Deputy Minister and Chief Economist
Ministry of Finance