Loan Articles

Customers’ credit card rights are protected under the Bank Act, which ensures that borrowers are informed of the requirements for borrowing and the costs involved. Customers applying over the phone are read a disclosure regarding the billing cycle, associated fees, interest rates, and other important information. Lenders are also required to send this in writing, and customers should receive a copy of the credit card agreement.

Cardholders should be informed of the specifics related to payback, including the grace period, impact of late payments, prepayment rules, annual fees and other fees, etc. Any changes in the terms and conditions should be communicated in writing.

Generally, cardholders have the right to information when they apply for and get a credit card. Both the credit card agreement and credit card application should have an information box outlining key information. This box may be in a related document or at the beginning of the credit card agreement. The information box should contain details regarding the interest-free grace period, annual interest rate, determination of interest, and minimum payment. In addition, the box must contain information regarding foreign currency conversion fees, the annual fee, if any, and other fees. Among these are fees for over the credit limit, cash advances, extra copies of monthly statements, and balance transfers.

Issuers are required to send cardholders a statement every month. They may offer an electronic statement or a written statement depending on whether the client consents to receive the statement in electronic format. Both the paper statement and electronic statement must include the client’s outstanding balance, which has to be fully paid before the due date. Thus, when making new purchases, the cardholder benefits from the grace period. The statement must also include an estimate of the time required to repay the balance if only the minimum amount is paid. In addition, the statement should contain a description of all transactions during the period the statement covers. Finally, the statement must contain information regarding the amount charged or credited for purchases made, all non-interest fees charged, interest charged, payments made, and cash advances received. Credit card issuers are not required to send clients a statement in case there is no outstanding balance or the cardholder has defaulted on his payments. The issuer has to notify the cardholder that the agreement has been cancelled or suspended.

Notably, tied selling is prohibited. This is when a lender requires that customers buy certain financial product as to be approved for another. Financial institutions, for example, should not require that clients get a credit protection service in exchange for extending financing.

Under the Canadian Code of Conduct, merchants also have credit card rights, aiming to encourage competition and choice. Merchants are given the freedom to choose the credit card network they will use. Thus, they can control and manage costs, and savings are passed on to customers. In compliance with the Code, merchants should receive information on interest rates and fees, and they should receive advance notice of any fee increases and new fees. Merchants have the right to cancel their contracts in case new fees are introduced or fees rise. No penalty should apply in this case. Finally, credit card issuers should offer merchants tools to facilitate competition. Such is the freedom to use a particular network without having to accept debit payments.