Memorandum on the Disclosure of Cost of Consumer Credit 1995


  1. For convenience, I will speak in this memo as if the CMC is a monolithic entity that speaks with one voice on any given matter. In fact, the views I attribute to the CMC are not necessarily shared by each member of the CMC. This is also true of later references in this memorandum to the views of the CMC working group.
  2. In some jurisdictions some form of APR disclosure is also required for certain types of open credit.
  3. The difference between the APR and the AIR is reasonably analogous to the difference between the yield and coupon rate on a marketable bond.
  4. I say "essentially" proposed to abandon the APR because the Principles Paper was not as clear on this point as it could have been. The Principles Paper still required disclosure of the APR, but anyone who pid close attention to the arguments in the paper would have realized that the APR was essentially the interest rate, and that permitted non-interest charges would not have been included in the APR. In retrospect, the Principles Paper should have been blunter about this point and abandoned "APR language" altogether. This did not occur until CCDA 2 and the Commentary on CCDA 2 were circulated in early 1993.
  5. Coincidentally enough, most members of the CMC working group were also members of the working group organized by the ULCC in the spring of 1994.
  6. The Toronto meeting was attended by representatives of the federal government and every province except for Newfoundland and P.E.I.
  7. The other alternative that was contemplated was for the Consultation Paper to describe the two approaches but not take a position on them. But the working group ultimately decided to take a position favouring disclosure of the APR for fixed loans.
  8. The Interest Act is mentioned in the AIT as one of the federal statutes coming within the scope of the commitment to harmonize cost of credit disclosure legislation.
  9. In fact, PIA 2.0 itself contemplated that the "balance calculation method" would be determined by regulations.
  10. CCDA 3.2, section 8 would allow caps to be prescribed by regulations. However, such caps were regarded as a backstop that would be resorted to only if experience suggested that disclosure and market forces would not keep flat charges at reasonable levels.
  11. A non-interest charge is defined in CCDA 4.1 as charge payable to the lender, an assignee, or an associate of the lender or assignee. It would not include an amount payable to an "unassociated" third party.
  12. The position under CCDA 4.1 is discussed below in section II.E.1.
  13. This is an incentive program, usually but not necessarily associated with the marketing of automobiles, in which consumers are offered a choice between low-rate financing and a cash rebate.
  14. You will recall that we decided not to deal with cooling-off periods of that type in this project.
  15. CCDA 4.1's general prepayment right would not provide for the refund of any portion of a flat charge imposed at the outset of a loan.
  16. This was the only situation where CCDA 3.2 would have required disclosure of an APR.
  17. When I refer to a drafting error in the Consultation Paper, I will have brought it to the attention of the drafter.


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